There are three main components to car insurance: liability, collision, and comprehensive. Liability is required by law, as this is what will pay for the damage done to the other person’s vehicle if you cause an accident. Collision covers damage done to your vehicle in an auto accident, and comprehensive covers your vehicle in situations like theft, flood, and other kinds of damage. You are not required to have either of these kinds of coverage. But you’d be crazy not to get them, right?
Well, maybe not. If you’re driving an older car, it often isn’t worth it to pay $300 to $500 extra for collision and comprehensive premiums every year. If you look up the value of your car today and find it’s worth a few thousand dollars, and you know your deductible is a thousand dollars, factor in the annual premiums and you might find you’re paying more to your insurance company than you’re ever going to see from them if your car is totalled.
Now, if you have a brand new or relatively new vehicle, that’s a different story–it’s a good idea to shell out extra for complete coverage. Just remember to keep checking the value of your vehicle every year before you renew your auto insurance, to see if it’s still worthwhile to be paying that much.