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The purpose of car insurance is to protect drivers against the high cost of vehicle repairs, medical expenses, and lawsuits that can occur as a result of a motor vehicle collision. Some car insurance types are mandatory, such as liability, and some are optional, such as comprehensive or collision coverage.

Collision coverage is one type of car insurance that covers physical damages to a driver’s vehicle if they are involved in a collision with another vehicle, object, or person, if it is considered to be their fault. Collision coverage requires the driver to pay a set deductible out of pocket if they make a claim. Once this deductible has been paid, then the insurance company will pay for the remaining damages. You can lower your collision premiums by increasing the amount of your deductible, but you must ensure that you can afford to pay the higher amount should you file a claim. If the damages prove to be more than the vehicle is worth, then the insurance company will deem the vehicle as a total loss and offer the driver a cash payout instead.

Collision coverage is usually an optional car insurance type, but in some cases, it is mandatory. For example, if you have just purchased a new vehicle and are financing it or leasing it through a financial institution or other lender, they will require you to purchase both collision and comprehensive insurance. This is because the lender wants to recover their portion of the funds if the vehicle is completely damaged in an accident.

There are times, however, when purchasing collision insurance may not be beneficial and may actually cost more in the long run. If you own an older vehicle and you are in an accident, chances are that any damages sustained will cost more to repair than the vehicle is worth. The insurance company will likely deem your car a write off and pay out a small cash amount. So, you’re paying premiums for collision insurance and you cannot really use the coverage. Even if the insurance company agrees to pay for repairs, the deductible you pay may be more than the value of your vehicle.

If you have an older vehicle and you are shopping around for car insurance, make sure that you compare all car insurance types that are offered. Not all coverages are mandatory and not all coverages are beneficial for everyone. Collision coverage will certainly help pay for physical damages to your vehicle, but in some cases, the deductible you pay may cost you more than your vehicle is worth. Always ask your insurance agent if you are not sure which coverages are best for you and your vehicle.