When shopping around for auto insurance, you may be a bit confused by all of the options you have available for your policy.  One of the options you will have is to add what is referred to as “collision” coverage to your policy, but what exactly is collision coverage and how do you decide whether or not this type of coverage is right for you?

Understanding Collision Coverage

Carrying collision coverage on your auto insurance policy is often referred to as carrying “full coverage” insurance when added along with comprehensive coverage. This is because collision coverage provides you with reimbursement if your vehicle is damaged in an accident, even if you were at fault for the accident.  If your vehicle is damaged to the point that repairing it will cost more than replacing it, the insurance company will consider it to be “totaled” and will reimburse you for the cost of replacing the vehicle.

Deciding if Collision Coverage is Right for You

Not surprisingly, adding collision coverage to your auto insurance policy will increase the cost of your monthly premiums.  Therefore, you need to decide whether or not the extra cost is worth the trade off.  In order to come to this determination, you need to take a closer look at the value of your vehicle compared to the amount of your deductible.  In addition, you need to consider your financial situation and whether or not you would be able to afford to replace or repair your vehicle if it is involved in an accident.

Generally speaking, older vehicles or other vehicles that are not very valuable do not warrant carrying collision coverage.  If your vehicle is valued at $2,000 and you have a $1,000 deductible, for example, the $1,000 you would receive in actual payments if you filed a claim probably isn’t worth the added premium costs.  If your vehicle is still valued at several thousand dollars, on the other hand, the extra cost of collision coverage will certainly be worthwhile.