Pennsylvania Car Insurance Basics (part 3) Collision Insurance Coverage
To continue our discussion, another type of Pennsylvania car insurance that you should purchase is collision coverage. When you cause an accident, your liability insurance pays for who or what you hit. Collision insurance coverage is what pays to repair the damage done to your vehicle.
While liability insurance is required in most states, comprehensive insurance coverage is optional. You don’t have to buy this coverage, but without it, you will have to pay the entire cost to repair your vehicle. If your vehicle is a total loss due to an accident, then the cost would include a new car plus the expense of paying off the loan on the totaled car, if it was financed. Most finance companies require that you carry collision coverage when you finance the purchase a new car.
Collision insurance comes with what’s called a deductible. The deductible is the amount of money that you need to spend out of pocket, before your collision coverage takes effect. When you are in an accident, you will need to file a claim and have the car examined by a mechanic. You’ll get an estimate for repairs; subtract the amount of your deductible, and the remainder of the cost will be paid by your insurance company. For instance, if the repair estimate is $1700 and you have a $500 deductible, then once you pay the first $500, the insurance company will pay the remaining $1200 to have your car repaired.
Generally, the higher your deductible is, the lower your premium will be. The premium is the monthly amount that you pay for collision insurance coverage. While opting-out of collision insurance may look like a good savings on paper, the short-term savings are not worth the risk in today’s market. Cars are a major financial investment and accident repairs can be prohibitively expensive. When deciding on what type of collision coverage you will purchase, you should take into account how high a deductible you can afford, and the age of your vehicle. In the event your car is a total loss, collision insurance will pay you the current “Blue Book” value of the car, not what it will cost you to replace it. The older the car, the lower the Blue Book value will be. Any car that has a Blue Book value over $4000 should have collision coverage. Once the Blue Book value of the car drops below $4000, it may be cheaper to purchase a new car, rather than pay the cost of the collision insurance premiums and repairs in the event of an accident.
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