Coverage

• Most states require that you purchase a minimum insurance policy. These liability policies cover the other driver involved in the accident. To cover your damages, you will need to purchase a separate policy. Collision insurance covers the cost of repairing or replacing your vehicle after an accident, regardless of who was at fault. Many leasing agencies require that you purchase collision insurance if you lease your vehicle. However, you have the option to purchase a policy to cover your own car.
  
  

Benefits

• Most drivers cannot afford to pay for the cost of damages to their cars after an accident. Even small accidents can lead to costly repairs. Larger accidents can total a vehicle, meaning that the cost of the repairs exceeds the value of the vehicle. Since collision insurance covers your cost after an accident, you know you will never have to go without a vehicle or face serious financial hardships. If you have an outstanding auto loan, you can benefit from a collision policy. If a car accident totals your new vehicle, you will still have to repay the loan. With collision insurance, you can purchase another vehicle.
  
  

Disadvantages

• Collision insurance increases your monthly auto insurance premium. If you file a claim under your collision insurance, you will have to pay a deductible before the insurance company will pay for the repairs. Filing a claim may also cause your monthly premium to go up. If you own an older model car with little financial value, paying a monthly premium may not make sense. If you own a newer model, car collision insurance may not cover the cost of actually replacing the vehicle. Since the car depreciates over time, collision insurance pays the current value of the vehicle and not the amount you paid for it. If you total the car, you may have to pay out of pocket to replace it.
  
  

Considerations

• Monthly premium rates vary by insurance provider. You can compare several providers to find the best deal. Many providers also offer discounts. For example, if you own a renter or homeowner's policy with an insurance company, you might be able to add collision insurance to get a multi-policy discount. If you go several months or years without an accident, you may also receive a discount. Ask the insurance agent about any discounts you qualify for before signing up for the policy.