{"id":6812,"date":"2024-10-28T07:50:25","date_gmt":"2024-10-28T07:50:25","guid":{"rendered":"https:\/\/finderica.com\/do-i-need-collision-insurance-5-car-coverages-you-may-not-need\/"},"modified":"2024-10-28T07:50:25","modified_gmt":"2024-10-28T07:50:25","slug":"do-i-need-collision-insurance-5-car-coverages-you-may-not-need","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=6812","title":{"rendered":"Do I Need Collision Insurance? 5 Car Coverages You May Not Need"},"content":{"rendered":"\n
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\"ScoreCard<\/p>\n

The cost of owning a car goes well beyond the sticker price at the dealership. There are fuel costs, routine maintenance and, of course, car insurance<\/a>.<\/p>\n

The seemingly endless options for car insurance can be overwhelming, so many drivers opt for coverage they don\u2019t actually need.<\/p>\n

Liability coverage is the most basic form of car insurance and is absolutely necessary. Should you be deemed at fault for an accident, liability coverage will take care of the medical costs for other people injured and costs of repairs for other vehicles \u2014 but not yours. Some states require additional types of coverage beyond liability.<\/p>\n

However, there are certain types of coverage that you can and potentially should opt out of. This depends on the value of your car, your current finances, your health insurance policy and more.<\/p>\n

So what is collision insurance? Do you need it? And what types of car insurance can you skip?<\/p>\n

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When Insurance Falls Short\u2026<\/h3>\n

Unfortunately, insurance doesn\u2019t cover everything<\/em>. These resources<\/a> can help you manage those unexpected expenses.<\/p>\n<\/div>\n

What Is Collision Insurance?<\/strong><\/h2>\n

Collision insurance covers damage to your car in the event of an accident, whether you were at fault or not. Comprehensive insurance instead covers damage to your car outside of an accident, like flood damage due to a hurricane<\/b>, vandalism, theft or fire.<\/p>\n

Do I Need Collision Insurance and Comprehensive Coverage?<\/h2>\n

If your car is worth a lot of money, you should absolutely carry both collision and comprehensive coverage. In fact, if your car is financed, your lender may require you to. Both can save you thousands of dollars in repair costs if you happen to get in an accident.<\/p>\n

When to Skip Collision Insurance<\/h3>\n

But you may be wondering: Do I need collision insurance, especially if my car is old?<\/p>\n

If your car is old or you paid a small amount of cash for a used car that may only last for a few months, you\u2019d be wasting your money to get collision and comprehensive.<\/p>\n

One caveat: Be prepared to pay out of pocket to fix the car or, more likely, to purchase a replacement vehicle. But if your vehicle is only valued at $1,000, it may be better to put money each month into savings for a replacement vehicle than to shell out money for coverage on that low-value vehicle.<\/p>\n

\u201cYour reward is diminished greatly once your vehicle has depreciated over the course of time,\u201d said Melanie Musson, insurance writer for CarInsuranceComparison.com<\/a>. \u201cSo, if you\u2019re paying monthly for coverage that\u2019s going to provide you with minimal payment should you total your vehicle, and then you\u2019ll face higher rates after making a claim, it\u2019s just not worth it.\u201d<\/p>\n

Chris Tepedino, also of CarInsuranceComparison.com, warns that bundling uninsured motorist and collision is often a mistake.<\/p>\n

\u201cUninsured motorist protects your car if it\u2019s hit by someone who doesn\u2019t have insurance,\u201d he said. \u201cCollision, well, protects your car. Don\u2019t be suckered into thinking you have to buy both. Overlapping generally doesn\u2019t help.\u201d<\/p>\n

Other Insurance You May Not Need<\/h2>\n

Collision car insurance isn\u2019t a smart choice for everyone. Likewise, there are other types of car insurance you may not need. Learn more about these insurance options before committing.<\/p>\n

GAP Insurance: But It Depends on Your Down Payment<\/h2>\n

Vehicle depreciation can be a major detriment to your finances, especially if you wreck your vehicle shortly after financing it.<\/p>\n

Because a car loses about 20% of its value<\/a> when you drive it off the lot, insurance will only cover 80% of the initial sticker price should you get in an accident on your way home. With the average new vehicle costing $47,401<\/b><\/a>, that could mean you lose out on nearly $9,500.<\/p>\n

That\u2019s where gap insurance (guaranteed asset protection) comes in. It covers the difference between what you paid for a new car and how much your regular insurance is willing to pay for the totaled vehicle.<\/p>\n

But depending on how much you put down for the car versus how much you financed and how much that car is worth, you might not need gap insurance.<\/p>\n

\u201cGap coverage isn\u2019t necessary if you\u2019re able to financially handle the risk of paying the difference between what you owe and what your vehicle is worth when you\u2019re upside down on a vehicle loan,\u201d Musson said. \u201cIf you make a 20% or greater down payment, your risk for needing the coverage is greatly lowered, and you may be able to forgo that coverage.\u201d<\/p>\n

Similarly, you don\u2019t need gap coverage if you\u2019ve paid off your vehicle. Or, if you purchase an old vehicle that won\u2019t depreciate as quickly, Tepedino said.<\/p>\n

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If Money\u2019s Heavy on Your Mind\u2026<\/h3>\n

We all know the state of our finances can significantly impact our well-being. Are you struggling to cope with financial stress? First, take a deep breath.<\/p>\n

Then, take a look at our roundup of resources to help you manage your stress and your money. You got this.<\/p>\n<\/div>\n

Rental Car Reimbursement: Probably Not Worth It<\/h2>\n

A luxury option you can add to your policy is rental car reimbursement. If your vehicle is damaged and must be repaired, this coverage gets you a rental car to use while your vehicle is out of commission.<\/p>\n

However, the cost of paying for this each month would likely exceed the cost of a rental vehicle. That is, unless you crash frequently or need a rental for multiple weeks.<\/p>\n

Even then, you may be better off relying on friends and family for temporary transportation, if possible. If you live in a two-vehicle household, consider getting by on one vehicle temporarily instead of opting for this coverage.<\/p>\n

Roadside Assistance: Check Your Warranty First<\/h2>\n

Similarly, you can opt for roadside assistance for help with jump-starts, flat tires and more serious problems that leave you stranded. However, many new cars come with roadside assistance, often throughout the length of the warranty.<\/p>\n

\u201cYou can skip roadside assistance, as long as you realize you\u2019ll have to pay for a tow out of pocket,\u201d Musson said. \u201cYou may even be able to find it cheaper from AAA or a similar service.\u201d<\/p>\n

If you live paycheck to paycheck, this additional insurance expense is one to avoid.<\/p>\n

MedPay: Depends on Your Health Insurance<\/h2>\n

Medical payments coverage, also known as MedPay, is an optional coverage that assists with medical expenses after an accident. However, if you have decent health insurance, you can likely skip this coverage.<\/p>\n

Want to Save Money on Car Insurance? Proceed With Caution<\/h2>\n

The cost of your insurance is proportional to the deductible and coverage limits you choose. The lower your deductible and higher your coverage limits, the more you\u2019ll pay in insurance premiums.<\/p>\n

\u201cThis is a little dangerous, but if someone is wanting to save money, going with lower coverage limits may help,\u201d Tepedino said.<\/p>\n

But Tepedino warns that this is a risky way to save money. \u201cThe average cost of an accident with property damage alone is $7,500,\u201d he said. \u201cThat number obviously jumps with a death or severe injury, so go at your own peril.\u201d<\/p>\n

Brent Weiss, a certified financial planner and chief evangelist and co-founder of Facet Wealth<\/a>, believes there are some types of coverage you can consider avoiding, but he urges caution when you\u2019re shopping for car insurance.<\/p>\n

\u201cI am not a fan of simply meeting state minimums,\u201d Weiss said. \u201cIt puts too many families at risk of a financial loss they cannot cover. In general, I recommend having liability coverage for bodily injury and personal property, underinsured and uninsured motorists, and collision and comprehensive coverage for most cars. There are some personal injury coverages that may be required, but limits are typically low. The bottom line is that you want to get the right coverage with the right limits and not simply shop for the lowest premium. You often get what you pay for.\u201d<\/p>\n

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Timothy Moore is a personal finance writer and Certified Financial Education Instructor. He covers banks, loans, insurance and taxes for The SS. Find his work on sites such as USA Today, Business Insider and Forbes.<\/em><\/p>\n<\/div>\n<\/div>\n

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