Getting insurance on your vehicles can sometimes be complicated. With all the different types of plans and coverage, it can be confusing as to which is best.
So, what is the auto collision insurance, and why do you need it?
The collision insurance definition is coverage that will help you to repair or replace your car that gets damaged in an accident. It could be an accident with another vehicle or with an object such as a tree or fence. Coverage is voluntary if you own your car and can easily get added to your regular insurance policy. However, collision coverage is compulsory if it is still under financing or a lease.
Let’s explore collision insurance further and the things to consider before purchasing it.
What Does Collision Insurance Cover?
Collision insurance covers costs to your car from repairs or replacement. These damages result from the following:
- A collision between you and another vehicle
- It covers a single-vehicle collision with an object such as a tree or a roadsign. The cover also includes driving over a pothole).
- A single-vehicle accident where your car rolls over.
- Another car hits your car – they don’t have any or enough insurance to cover costs for damage, and you don’t have any underinsured/uninsured motorist property damage coverage. Underinsured/uninsured motorist coverage fills the gap between your costs and the 3rd party’s ability to pay.
If there is an accident and the other driver is at fault entirely, their property damage liability insurance will pay for the cost to your car.
Liability insurance helps pay for any damage to the other driver’s vehicle if you cause the accident. Collision insurance, regardless of who’s at fault, will cover the damage to your car.
When buying collision coverage, a deductible can get chosen. The deductible is the total amount paid by you before the insurance policy pays the remaining cost, which is up to a limit. If the deductible is higher, the insurance premium will be lower, and vice versa. The most common deductible amounts are $250, $500, or $1,000.
Collision coverage limits depend on the type of policy you have. The limits are the highest amount that will get paid on a claim that’s approved.
If your car is repairable, your collision coverage will pay the cost of repairs, minus the $250 deductible that you pay. The cost of repairs is up to your coverage limits.
Is Collision Insurance The Same As Full Coverage?
To define full coverage auto insurance, we need to define comprehensive coverage as well. Comprehensive insurance covers theft, vandalism, or other damages that don’t result from an accident. Comprehensive vs. collision – comprehensive covers non-accident damages while collision covers accidents.
So, collision insurance and comprehensive coverage with your state’s minimum insurance requirements are considered full coverage.
State laws require that you have full coverage insurance if your vehicle gets leased or financed.
What Is Not Covered By Collision Insurance?
Collision coverage won’t pay for:
- Any damage caused to your vehicle that isn’t related to driving, such as hail, or theft will not get covered.
- If you damage someone else’s vehicle, the insurance won’t cover it.
- Neither you nor the 3rd parties medical bills will get paid.
How The Collision Insurance Deductible Works?
Most insurance policies consist of a deductible. This means you have to pay a certain amount before the insurance company pays the money from your claim. When purchasing your collision insurance, you can choose what you want your deductible to be – the higher premium you select, the less of a deductible you will have.
Typically, insurance companies will have different deductible options, usually $0, $500, or $1,000. If you decide to go with a higher deductible, your premium will be lower. The deductible will go towards any car repairs, and it gets paid out of pocket.
If your deductible is $500 and your car gets damaged, you will need to pay $500 for the rest of the policy to payout. Since deductibles can range from $250 and $1,000, You should keep in mind what your car is worth. For example, if your vehicle’s value is only $1,500, you wouldn’t want to have to put in $1,000 in the event of an accident.
What Are Collision Coverage Limits?
There is a limit on collision coverage. This limit is the maximum amount that the insurance policy will pay. Your auto collision coverage limit is usually your vehicle’s cash value – the value minus the depreciation.
If your vehicle gets deemed unroadworthy, the insurance company will pay for the car’s depreciation minus the deductible. It may not be likely that your car will get replaced with a newer model, and the rest will come out of pocket.
Reducing Or Waiving Your Collision Deductible
Even if the accident isn’t your fault, your collision deductible still applies. The collision deductible waiver comes in when you don’t have uninsured motorist coverage and the other driver doesn’t have enough coverage. The collision deductible waiver ensures you don’t have to pay for the deductible if an uninsured driver causes the accident. It will get paid by your collision insurance.
Your collision insurance deductible can get lowered with the addition of “disappearing deductibles.” Also referred to as a vanishing deductible, you can use it to get your insurance costs reduced by up to 20%.
There are benefits to adding a disappearing deductible:
- You can save on your premium.
- Your costs will get lowered automatically on an annual basis when you sign up.
- By filing an at-fault accident, less money can get paid out of pocket.
There are some disadvantages to a disappearing deductible:
- You will pay extra for it to get added to your plan.
- Not all drivers qualify for it.
- All car insurance companies do not offer this incentive.
If you avoid a ticket or accident, your collision deductible can get reduced by up to $100 through your insurance company.
Do I Need Collision Insurance?
There are a few factors that you need to consider when deciding if collision insurance will benefit you.
- Whether you own your car
Do you own your car? If your vehicle is still under a loan or lease, you will need to have collision insurance. It is optional for you if you own your car.
- Your car’s value
What is the value of the car? If you drive a newer model that you plan to drive for some time, collision insurance will help you cover significant damages caused by the accident. If you have an older vehicle and the value has depreciated, it is better to avoid collision car insurance coverage.
The yearly annual cost, the collision coverage deductible should get weighed against the value of the vehicle. If both the deductible and insurance premiums are higher than your car, you will save money not getting the coverage.
How Much Does Collision Insurance Cost?
The average cost for collision coverage is $596 per year, although this cost varies by state. Some factors can influence the prices of collision insurance:
- Past claims – If you have had previous accidents or a bad driving record, your insurance company can raise the rates.
- Your zip code – Where you live can play a significant role in your auto collision insurance cost. If you live in the city, rates will be higher. For people who live in more rural areas, prices are lower. Even something like areas that experience destructive hail can have higher rates.
- Vehicle value – The value of the vehicle will also influence the cost of collision insurance. If you total the vehicle, you will get the actual cash value (ACV).
- Insurance companies – The price will vary according to the insurance company where you choose to get coverage.
- Loans or lease – If you are still paying for your vehicle or are leasing it, your rates can get affected.
Collision car insurance coverage will often cost more than comprehensive insurance because collisions happen more often. Comprehensive insurance costs, on average, $192.
What Is The Difference Between Comprehensive And Collision Insurance?
Legally you don’t have to carry comprehensive and collision insurance, but they are essential and can help you out when you need it the most. While collectively, they will both pay to fix or replace your vehicle, it will not pay for damages to someone else’s property.
Comprehensive vs. Collision – the main difference is what they cover.
Comprehensive car insurance coverage
- Damage to your vehicle from severe weather such as hail or tornadoes
- Falling objects
- Hitting an animal with your vehicle on the road, such as a deer
Collision car insurance coverage
- Damage occurring to your vehicle in an accident that you caused
- Hitting an object such as a road sign or fence
- Someone else hitting your car
Collision car insurance coverage can be beneficial for you in the long run if the value of your vehicle far exceeds your deductible. Don’t get stuck with heaps of vehicle repair bills from a collision. Remember that if you drive an old car, collision and comprehensive insurance coverage are not necessary.
Collision Insurance Coverage FAQs
Do I need both comprehensive and collision?
Insurance companies usually prefer that you purchase both collision and comprehensive coverage, but it’s unnecessary for all customers. If you have leased your car or have an outstanding auto loan, you need to have both. If you own your vehicle and don’t have a loan, you can choose to pay for collision and comprehensive coverage. In the event of losing your car due to an accident, you don’t need both coverages if you can repair or replace your vehicle. You will need comprehensive and collision car insurance if you live in an area with a high rate of car theft, severe weather, vandalism, or animal collisions.
Should I carry collision insurance on an older car?
If your car is still being leased or is still under financing, it is essential to have collision insurance. If you aren’t able to pay your vehicle costs out of pocket after an accident, you should carry collision insurance. If your car is old, consider canceling collision insurance and putting the money into a savings account to buy a new car. If you use the 10% rule and your collision and comprehensive cover costs $250 or more annually, then it’s time to consider getting rid of the coverage.
Do I need a collision deductible?
If you still owe money on your vehicle or are leasing it, you have to have collision insurance coverage. If something should happen to the car while under a loan, then you will be entirely liable for all costs involved. These costs include the ones incurred by the other party involved in the accident. If you own your vehicle, you don’t have to carry collision car insurance coverage. While you may not need it, it can still help you when you out of a difficult situation where you would need to pay out of pocket.
How much collision deductible should I get?
It makes sense to go with a higher deductible due to collision insurance costing more. Because insurance costs increase, many people increase their deductibles to $500 on comprehensive coverage and $1,000 on collision coverage. For example, if you were to increase your deductible from $200 to $500, you can get your collision and comprehensive coverage reduced by 30%. If you increase your deductible from $200 to $1,000, you can save 40%. But beware, as you want to avoid paying unaffordable costs out-of-pocket.
Is It Better To Have Collision Or Comprehensive?
Comprehensive insurance coverage will cover any damage to your vehicle that gets caused by events such as vandalism or theft. Collision car insurance coverage will pay for any damage to your car that gets caused by a collision with someone else’s and their vehicle. It is better to have collision car insurance coverage because accidents are more likely to occur than property damage by an individual.
When should you not have collision insurance?
It’s a general rule of thumb to drop your collision insurance when your annual premium exceeds 10% of your car’s value. If your car is old and isn’t worth much, then collision insurance might not be necessary. For example, if you pay $100 for your collision insurance and your car is only worth $1,000, drop the coverage. This will be due to your car’s value being too close to your insurance payments.
How long does a collision Stay on insurance?
An at-fault vehicle accident can stay on your driving record for anywhere from three to five years. Your insurance rates, on average, can be affected for about three years. Some states differ. You may see your insurance rates increase in states such as New York and Florida for a period that the insurance company deems necessary. They can even set the period for five to ten years.
What if you don’t have collision insurance and get hit?
If someone hits you and you don’t have collision insurance, the other driver’s liability insurance will cover all your expenses. Unfortunately, if an uninsured or underinsured driver hits you and you do not have collision insurance, out-of-pocket repairs will get paid by you. If these repair costs are close to the car’s value, it might be time to replace the car instead of getting it fixed.
What Do You Do If Your Car Is Totaled And You have No Collision?
If you don’t have collision coverage and the accident is your fault, then the best thing to do is sell your car in its current condition. You’ll get to recoup something through the salvage value, which is what a salvage yard will pay for the frame and parts. But if the accident’s not your fault, then the driver who is at fault will cover the cost of your loss through their property damage liability, up to their policy’s limits. You will still get the value of your car reimbursed even though you don’t have collision insurance.
When Should You Drop Collision Coverage?
If your yearly insurance premium is equal to 10% of your vehicle’s value, it is time to drop your collision coverage. If, for example, your car’s value is $1,000 and the yearly cost for collision insurance is $100, you should drop the coverage as it won’t be worth it.