If you own a car, you are required by law to have liability insurance coverage on that car. This means that if you are in a car accident, and you are either at fault or partially at fault, your insurance company is going to pay for the damages you are liable for. They will pay to repair the other person?s car or for any medical expenses incurred by people in that car. Or if your accident wasn?t with another car, but was with an object like a fence or a pole, then they will pay to repair the fence or pole.
What liability auto insurance does not cover is damage to your own car as a result of that accident. That?s what you need Collision coverage for. Liability coverage pays for THEIR car, Collision coverage pays for YOUR car. If you have liability only, they will get paid. You will not. Without Collision, repairing or replacing your own car is going to be your own financial responsibility. This is why most car dealers and auto financing companies will require you to have Collision coverage if you have a car loan. If the car is damaged, they want their loan to be paid.
Collision coverage has a deductible associated with it. The deductible is the portion you pay, and then the insurance company pays the rest. Typically, the higher the deductible, the less the coverage will cost. So you should choose a deductible that you are comfortable with paying out of your pocket were your car to need repair.
Collision coverage will usually only pay up to the value of your car. If the cost to repair your car exceeds that value, your car will be totaled. See our previous post What Does ?Totaled? Mean? If you have a loan on the car, and the car?s value is less than what you owe, you should also consider purchasing Gap Insurance.
Where Collision covers your car hitting, or colliding with, another car or (non-animal) object, Comprehensive coverage also covers YOUR car, but will cover it against things that aren?t a collision. In fact, it is sometimes called Other Than Collision coverage.
Comprehensive coverage will cover your car against losses such as fire, theft, vandalism, hail, flood, hurricane, and ?collision? with an animal. Similar to Collision coverage, it is required by a lender when there is a lien on the car, and it also has a deductible associated with it. And like Collision, Comprehensive coverage will only pay up to the fair market value of your car.
The cost of both Collision and Comprehensive coverage are influenced by many factors. The year, make, and model of the car, the age and experience of the driver, where the car is garaged or driven, how far it is driven?these all have an effect.
Since Collision and Comprehensive coverages will only pay the fair market value of a car, you can save some money on your car insurance by dropping these coverages on an older car. A good rule of thumb to use is 10 years. If the car is 10 years old or older, it likely is more economical to save the money on your insurance premiums?and then replace the car if it is damaged. As long as the car doesn?t have a loan on it, either Collision or Comprehensive coverage, or both, are no longer required. You should review how much your car is worth vs. how much Collision and Comprehensive coverages cost to see if it makes sense to drop them. Or simply contact any agent here at American Advantage ? IFS, and we can review your current insurance situation with you and help you to make an informed decision.
Source: http://insurancewisconsin.biz/552
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