Let's say you're driving your car and you hit another vehicle, a tree, or another object that just happens to get in your way. Hopefully, none of those things will ever happen to you, but you should be prepared nonetheless. That's where collision insurance comes in.
Collision insurance protects car owners by helping to pay for repairs or replacement of the vehicle after colliding with an object (it also offers protection if a vehicle is unintentionally flipped or rolled). It differs from comprehensive insurance in that it doesn't cover damage caused by fire, natural disasters, theft, animals, falling objects, and glass breakage or cracks.
How much collision insurance do car owners really need? Usually enough to cover all repair or replacement costs of your car (minus your deductible). While no state requires the purchase of collision insurance, a couple of factors need to be considered:
Are you still paying off your car loan or lease?
If you've taken out a loan or lease to purchase your car, your auto loan lender or leasing company will require that you purchase collision insurance. If you fail to obtain collision insurance mandated by your lender or lessor, they'll buy it for you - which will cost you more in the long run, since the cost of the insurance is added to your loan or lease and the premiums are usually much higher (with more limitations on what's covered). So, it's a good idea to purchase your own collision insurance policy to cover the full cost of repairs or replacement of your vehicle.
Can you afford to pay for the repairs or replacement of your car?
If your car is paid off, and you can afford to pay for all repairs or the replacement of your vehicle out of your own pocket, then you can think about dropping collision insurance - but consider how much this will cost you if you get into a car accident. If you can't afford to pay for your damaged or irreparable car, then keep your collision insurance policy intact.
If you’re not convinced that you have the financial resources necessary to pay for repairs or completely replace your vehicle at any given time, or go without a vehicle until you can save enough money to replace it, it’s better to have peace of mind and keep (or buy) collision insurance.