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.

With today’s economy, it has never been more important to find ways to lower your auto insurance costs.  After all, every dollar must be stretched to its absolute fullest.  While there is no way to completely eliminate the cost of auto insurance without giving up your driving privileges, you will be happy to know that there are several things you can do to help get your costs lowered.  Here’s a look at the three most important steps you can take to lower your costs without sacrificing coverage.

Shop Around

The most important step you can take toward lowering your auto insurance costs is to simply shop around.  You may be shocked by the difference in price quotes you will get from one insurance company to the next.  Taking the time to do a bit of comparison shopping is certainly worthwhile for those who are looking to save money on their car insurance premiums.

Make Changes to Your Policy

Making a few simple changes to your car insurance policy will help you continue to have the coverage you need without paying unnecessary extra expenses.  Simply increasing your deductible can help you save a substantial amount of money on your premiums.  Remember, the deductible is the amount you are responsible for paying if you need to file a claim.  Therefore, unless you are someone who is prone to accidents, the odds are good that you won’t find yourself needing to pay out the deductible.  Therefore, increasing the deductible by a few hundred dollars in order to save yourself a few hundred dollars in annual premiums is a profitable tradeoff.

In addition to increasing your deductible, you might also want to consider reducing the amount of coverage you have in place.  While you certainly don’t want to decrease your coverage to the point where it will leave you in a financial bind if you need to file a claim, there may be some coverage that really is not necessary.  For example, if you have a $1000 deductible and your vehicle is only worth $1,500, carrying full coverage may not be worthwhile.

Consider Your Vehicle Purchase

If you are in the market for purchasing a new or used vehicle, you should also carefully consider the vehicle you will purchase. Those vehicles that are most commonly stolen, those that are more regularly in need of repair and those that are considered to be sports vehicles will be more costly to insure than other vehicles.  Before you buy a new or used vehicle, contact your insurance company to make certain insurance coverage will be within your budget.