All states but New Hampshire require liability automobile insurance coverage, and New Hampshire requires it for some classes of drivers. State laws do not require collision, comprehensive or uninsured and underinsured motorist coverage. The age and value of your vehicle and your driving record can help determine if purchasing collision, comprehensive or uninsured motorist coverage is wise.
Collision insurance covers your vehicle in case of accident. The other driver's insurance should pay if he is at fault, but collision coverage provides insurance on your vehicle even if you are at fault. Comprehensive auto insurance covers non-collision events such as fire and theft, glass breakage or a tree falling on your vehicle.
A car being older does not necessarily mean it is not valuable enough to insure. Some older cars are more valuable than new ones. Comprehensive and collision insurance usually have deductibles that you pay before the insurance company covers the damage. The deductible may be $100, $500 or even $1,000, and the payment for your loss will only be actual cash value as determined by the insurer. So consider what your care is worth. You might also consider how difficult it would be for you to replace your vehicle if it is a total loss. If you have liability insurance only and are involved in an accident, your insurer will not repair or replace your vehicle. The other driver’s insurance may repair your vehicle if he is at fault.
If you do not know the value of your vehicle, check kbb.com or a similar website to get an idea. Get an insurance quote for “full coverage” on your vehicle, including comprehensive and collision. Compare the value of your vehicle with the cost for a year of insurance, and remember the deductible. For example, if your car is worth $4,000, according to the Kelley Blue Book, and insurance is $500 a year with a $500 deductible, then you are getting $3,000 in value for the year of insurance. If the insurance cost is $1,000 a year and your vehicle is worth $3,000, you might be wiser to save the $1,000 toward purchase of a new vehicle if something happens to yours. Smart Money suggests that 10 percent is a rule of thumb: If the cost of comprehensive and collision with a high deductible is more than about 10 percent of the kbb.com value of your car, you might not want collision coverage.
If you cannot afford full coverage, consider uninsured and underinsured motorist coverage on yourself instead of collision coverage on an older car. It will pay medical bills not covered by health insurance and cover lost wages if an uninsured driver injures you. Review the terms for underinsured motorist coverage -- they vary from state to state. With the minimum liability limits very low in most states, medical bills often exceed the coverage of the other driver; your underinsured motorist coverage will cover your expenses.
In addition to covering damage to your vehicle, comprehensive insurance might provide for a rental car in case of accident. This can be a significant value to you if you are involved in an accident that is your fault or if your vehicle is stolen. Collision terms routinely include rental car insurance, reports the Kiplinger website. Check with your insurer or read the terms carefully.
- Alabama Cooperative Extension Service: What Your Auto Insurance Covers
- Kiplinger: Collision Coverage: Don't Take Chances
- State of New Hampshire: Insurance Department: Guide to Understanding Auto Insurance in the Granite State
- Insurance Information Institute. "Auto Insurance Basics—Understanding Your Coverage." Accessed Sept. 22, 2020.
- Insurance Information Institute. "Automobile Financial Responsibility Laws By State." Accessed Sept. 22, 2020.
- Nationwide. "Do I Need Collision Insurance?" Accessed Sept. 22, 2020.
- Consumer Financial Protection Bureau. "What Is Force-Placed Insurance?" Accessed Sept. 22, 2020.
- Progressive. "What Is Collision Coverage?" Accessed Sept. 22, 2020.
- Insurance Infomation Institute. "What Is Covered by Collision and Comprehensive Auto Insurance?" Accessed Sept. 22, 2020.
Linda Richard has been a legal writer and antiques appraiser for more than 25 years, and has been writing online for more than 12 years. Richard holds a bachelor's degree in English and business administration. She has operated a small business for more than 20 years. She and her husband enjoy remodeling old houses and are currently working on a 1970s home.