If you cause an accident, liability only pays for the damage to
other vehicles. To cover your vehicle, you need collision coverage.
You can receive reimbursement for repairs up to the value of your
vehicle. Don't confuse this with the replacement cost for the
vehicle. This is the actual cash value (ACV) which is determined by
claims adjusters based on depreciation.
Collision insurance is the most expensive part of an auto
insurance plan. You can reduce your premiums by increasing your
deductible. For example, you will pay more in monthly premiums for a
$500 deductible than you will for a $1000 deductible. But you must
have the money for your deductible in order to make repairs to your
vehicle.
Insurance companies will declare your vehicle "totaled" if the
cost of the repairs exceed a percentage of the car's worth. This
percentage can range from 55% to 90%, depending on the company.
Comprehensive coverage protects your car from damages not caused
by an auto accident. These damages include theft, vandalism, fire,
natural disaster or hitting a large animal. Comprehensive coverage
has a deductible and is limited to the ACV of the vehicle at the
time of the damage.
You should know approximately what your vehicle is worth. If you
are paying more for collision and comprehensive coverage than your
vehicle is worth, you should consider only carrying liability. Put
money in savings to self-insure your vehicle in the case of an
accident. This is much cheaper for you.
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