If you hit another car and the accident is your fault, then collision coverage pays to repair your car. The policy might also pay for damage resulting from collisions with walls, fences, street signs, poles and other roadside objects.  

Your policy will usually compensate you based on your vehicle’s cash value and deductible limits.  

• The deductible is the cost of a claim that you must pay instead of your insurer. So, if your car sustains $3,000 in damage and you have a $1,000 deductible, then you must pay $1,000 of the repair costs. The insurer will pay the remaining $2,000 towards the claim.

• If the accident totals your car, then most collision coverage will compensate you for the vehicle’s value at the time of the wreck. This is not the cost of a new car or the cost of your remaining financing if you have any. You might be able to increase coverage by buying replacement cost value coverage or a gap insurance policy.

Collision insurance only pays for vehicle damage from collisions with objects. Comprehensive damage insurance pays for vehicle damage from other hazards, such as:  

One type of collision that comprehensive coverage will pay for, however, is if you hit an animal. It is best to have both collision and comprehensive coverage on your policy.  

If you choose to finance your vehicle, then your lender might require you to buy collision insurance. You’ll therefore be able to repair a car in which the lender has an investment. No state law requires drivers to have collision insurance.  

However, that doesn’t mean you won’t need this coverage. Since it helps you pay for vehicle damage, which can often be costly, think of it as a benefit that will protect your wallet if accidents occur.  

Cars depreciate relatively quickly. So, after several years, its value might not be worth much. Therefore, it might not seem financially responsible to keep collision coverage on a vehicle of low value. Still, if you want a settlement or assistance for any vehicle repairs, then definitely keep your collision coverage active. It might come in handy at any state of your vehicle’s life.  

If you don’t have collision insurance, then you will not have any help from your car insurance if you have a wreck. Therefore, you might have to pay for repairs out of pocket. This is often costly, and it is not something most of us want to fit into our budgets. Collision insurance provides you with an outlet.