Paul's Story: The Reality of No Collision

I’m sure you’re familiar with collision insurance; but for those who aren’t, it’s a coverage for an auto insurance policy that protects you in case an accident is your fault.  Although collision is an optional policy, lenders and lien holders will often require you to have this coverage, since they “own” the car and want this additional protection. If you own your car, however, collision can be easily ignored or removed.  While this might save you money by having a lower premium, there's a good reason to keep this coverage.  And I hope this story demonstrates how vital the policy is to your financial well-being.

A Guy Named Paul

Paul is a motivated 25-year-old who frequently thinks about his finances.  He was able to budget well and quickly saved up enough to buy a car in cash (Dave Ramsey would be proud!).  Since he owned the car, collision was optional. He thought: “I can save $50/month by not getting collision and put that money into my IRA.”  Thinking the risk of an accident was low--because Paul considered himself a good driver--he decided to skip collision.

The $5,100 Lesson

One late night, Paul was driving home from a friend’s house.  He came to a two-way stop. Looking to the right, Paul didn’t see a car.  To the left, no car in sight. As Paul accelerated forward, a car to the right was approaching the intersection.  His eyes must have tricked him, but it was too late. He crashed right into the car. Although no one was injured, the damage was severe.  Maybe you can relate--even small crashes can cost a fortune! Paul’s accident cost him $5,100 in damage to his car. Since he didn’t have collision, poor Paul had to pay the full amount.  The $50/month in savings was peanuts in comparison to this huge bill. It crippled Paul’s savings and made him realize how important collision coverage is for people to have. It was a $5,100 lesson Paul will not forget.

Do You Need Collision?

There’s a reason why lenders and lien holders require drivers to get collision coverage.  They want to protect their vehicle from the risk of an accident. All it takes is one mistake, one slip--and a crash can end up costing you a lot.  Paul learned his lesson. Hopefully, you won’t have to learn the hard way!