Should I carry comprehensive and/or collision coverage on my car?

The fire along Interstate 90 this weekend that burned several cars in a parking lot that made me think about auto insurance coverage. I get this question a lot in my day-to-day routine and so thought I should share my opinion on the matter.

First, how old your car is has no bearing in my opinion on whether or not you should carry comp and/or collision. The real question is if something happened to your vehicle, do you have enough money to go buy a similar replacement vehicle? If not, then you really should consider carrying the coverage via your insurance policy.

Second, to determine what kind of money the carrier might pay you in the event your vehicle is damaged beyond repair (or repairs would cost more than the car is worth), you need to determine your car's market value. The best source will be local used car dealerships as sometimes a specific vehicle type might have a higher value in that area. You can also use Kelley Blue Book (www.kbb.com) and NADA (www.nadaguides.com) to get a value range. If you don't have that money in your account to buy a replacement, then you should get a quote on what the insurance will be so that you can pay a smaller amount over time.

There are two types of physical damage coverage to your auto. We call them comp & collision. "Comp" means comprehensive coverage and in your policy is likely called "other than collision". This is the coverage we look to for non collision accidents (hitting a deer, fire, theft, vandalism, falling objects, etc.). Collision means it covers damage from collision with another object (another vehicle, sign post, light pole, etc.). Collision coverage can kick in whether the accident was your fault or the fault of another driver who doesn't carry any insurance to repair your vehicle (which industry experts believe is likely higher than 1 in 7 drivers on the roadway without insurance).

The coverage is not necessarily all that expensive. For example, I am looking at a customer's file who has a 2004 Chevy pickup and comprehensive coverage costs $51 per year and collision coverage costs $255 per year (both with a $500 deductible). This customer made the decision that spending just over $300 premium per year for the coverage and a $500 deductible meant at most they were going to pay $800 out of pocket rather than come up with the potential replacement cost of a similar truck that could be up to $9,500. Plus it is a lot easier for friends and family to help you raise the money towards your deductible than it is towards another vehicle.

So if you don't have the money in savings to go buy yourself a used vehicle replacement (or the money to make payments on a new one), you really should price out what the coverage costs as it might be affordable for you to make monthly payments to your insurance carrier to have something to start the shopping process if you are unlucky enough to have your vehicle burn in a random grass fire along the Interstate or have a tree fall on it from a windstorm or be stolen or be in an accident with another vehicle.