Driving around without some kind of car insurance is illegal in almost every state, so if you own a vehicle you most likely will have to buy insurance. It protects you and others involved in an accident from bearing a steep financial burden, and is considered a social responsibility.

An insurance policy has many parts, and can be very confusing and intimidating. There’s liability and comprehensive, not to mention uninsured motorist. And what in the world is PIP? ( Personal Injury Protection ) Let’s take a few moments to examine one of these more closely.

Collision Insurance – Is it really necessary?

The short answer is maybe. Take a look at the points below to find out more about collision insurance. 

• It covers damage to your car, not the other vehicles involved in an accident
• Collision coverage is not mandatory in any state
• Most banks require collision coverage if you have a loan on the vehicle
• Collision usually has a deductible, and this can save you some money
• The money you get for repairing your car is the market value, if it’s totaled, or the cost of the repair minus your deductible amount

There are those that believe it’s a wise move to drop the collision coverage from their policy once a vehicle reaches a certain age. This can chop some money off your total insurance bill, but may not always be the best move. It’s a very personal decision, and here’s why. Everyone’s situation is different. Check out the points below to see if you should drop collision coverage.

• If you are looking to save money in every possible area, you may be tempted to drop your collision coverage as soon as you own the car outright
• A rule of thumb some people use is to drop collision when the cost of the coverage reaches 10 percent of your vehicle’s value. ( Example: Your car is worth $4000 and the cost of collision insurance is $400 or more )

Be aware that having comprehensive insurance coverage is not the same as having collision. Some people mistakenly believe that the insurance they are “required” to carry will also pay for the repairs to their car if they cause an accident. This is simply not true. If you don’t carry collision insurance, 100 percent of the cost of repairing your car will come out of your pocket if you caused the accident.

Because every vehicle is different, there is no set price for collision. You simply decide on the coverage you think you will need, and your insurance company looks at a few factors and then tells you the price. Your insurance provider should be able to make specific recommendations for you.

Some people feel that if they’re involved in an accident they can always sue the other person to receive funds to use to fix up their vehicle. This doesn’t always work out, however. What if the other party doesn’t carry any liability insurance? How about if you’re the only one involved in an accident?

Remember the important points to consider when deciding on collision insurance. If you’re looking to save some cash, think about increasing your deductible. Just make sure you have enough money on hand to cover the cost if you cause an accident. Additionally, you can drop your collision coverage altogether if you decide that your vehicle is not worth repairing. Dropping collision may seem like a simple decision, but there are many factors that come into play.