Thinking About Collision Coverage? Let’s Take A Look At What This Insurance Can Offer You
While minimum liability insurance is mandatory in most states so that you can drive legally, comprehensive and collision insurance are not.
Despite the fact that comprehensive and collision coverage are not essential, it is estimated that around 75% of drivers purchase collision coverage across the United States.
If you only have minimum liability coverage at the moment, you may be wondering whether it is worth the time, effort, and money to buy collision coverage.
In this article, we take a deep dive into what collision insurance is and provide you with all the information you need to make the right decision for your needs and budget.
What Is Collision Coverage?
Collision coverage is a type of insurance that will help you pay for damages to your vehicle—or even pay for the replacement of your car—if you are involved in an accident with another vehicle or object.
This means that, unlike minimum liability insurance, you can use this coverage whether you are at fault or not.
Key Point: What Is Minimum Liability Insurance?
Minimum liability insurance is the least amount of insurance coverage you will need to have in place for any damages that you cause in a collision, or when you are at fault in an accident.
This insurance usually includes three numbers that relate to:
There are limits to what your insurance company will pay out and they would typically be listed on your insurance document as follows: 25/50/20 or $25,000/$50,000/$25,000.
The first number refers to the bodily injury liability per person. In other words, this is the maximum that the insurer will pay out per person injured in the accident.
The second number refers to bodily injury per accident. This is the maximum amount that the insurer will pay out for all injuries in an accident.
Note that bodily injury does not include your injuries if you were at fault in an accident, but rather the injuries of the other party.
The third number refers to the property damage liability coverage. This insurance covers the damages to the other driver’s property.
Some examples of instances when you may need collision coverage could be:
- You swerve to avoid hitting an object or an animal in the road and end up damaging your car on a fence.
- You park your car to run an errand and when you come back, you find that someone has hit your parked car.
- You brake too quickly and end up slipping on a wet road into a telephone pole.
Unlike some insurance coverages, you will not need to select a limit for collision coverage.
Rather, collision insurance covers the actual cash value of your car.
Key Point: What Does “Actual Cash Value” Refer To?
Actual cash value, which is also often referred to as the ACV, is the actual amount of money that an insurer will pay you if your car is totaled.
ACV should not be confused with the replacement cost, which typically represents 100% of the cost of a new car.
The ACV is generally calculated by subtracting depreciation from the vehicle’s original purchase price.
If you are leasing or financing your car, your lender will typically require you to have collision cover in place.
Once your car has been paid off, or if you own your car outright, collision insurance is an optional coverage that you can include on your auto insurance policy.
What Is a Collision Car Insurance Deductible?
Usually, collision insurance requires a deductible. A deductible is a set amount of money that you will need to pay out of pocket before your insurer will pay for the cost to repair your vehicle.
Typically, you can choose a collision deductible of between $500 and $1,500.
For example, let’s say that while you were driving, you swerved to avoid hitting a deer and accidentally hit something on the side of the road, like a barrier, instead.
If you have a deductible of $1,000, your insurance company would pay for the cost to repair your car, minus the $1,000.
If the cost of the damage to your car was less than your $1,000 deductible, you would not want to claim, as your insurer will not pay anything out to you.
If you did claim in this case, they would likely raise your insurance premium for having submitted a payout request.
If you hit the deer and your car was destroyed in the process, your insurer would subtract the $1,000 deductible from your car’s estimated value before the accident, and send you a check for the remaining amount.
How do I choose my collision deductible?
When you are deciding on the deductible that you are willing to pay, it’s good to consider:
- The amount that your car is worth.
- The potential cost of repairs to your car.
- Your willingness to pay for repairs lower than the deductible.
If you have a higher collision deductible and therefore pay a lower insurance premium, there’s a good chance that you will be able to cover more of the cost of repairs to your vehicle.
In addition, with a lower monthly insurance premium—while this will be convenient in the short term—it could be difficult to manage financially if you do have an accident and need to claim.
For example, if you have a $1,000 deductible on your collision coverage, it will not be worth paying for this insurance on a vehicle that is worth $1,000 or less.
If you can’t remember your insurance premium, you can check your auto policy’s declaration page and you will typically find the figure on one of the first pages.
What Is the Difference between Collision and Comprehensive Insurance?
With collision cover, you are insured against an accident involving objects or other cars. However, you may be wondering about other types of damage to your car.
What if a storm blows a tree down and it lands on your car, or you hit a deer while driving at night? In these cases, you will need comprehensive coverage.
Comprehensive and collision cover are usually taken together to provide you with what is known as full car insurance coverage.
While collision coverage helps pay for accidents that involve other cars or objects, comprehensive insurance covers everything else.
Damages to your car from theft, hitting an animal, natural disasters, and civil disturbances will all be covered under comprehensive insurance.
What Kind of Accidents Does Collision Insurance Cover?
In general, collision cover will insure you when your vehicle collides with another object. This will typically include damage resulting from a collision with the following:
- Another vehicle (whether parked or in motion).
- Telephone poles.
- Guard rails.
- Road signs.
- Trees and shrubs.
- Homes and other buildings.
Depending on the state in which you live, you could also put in a collision claim to repair or replace damaged parts of your car if you flip your vehicle, are involved in a hit-and-run, or sometimes even if you hit a pothole.
If you are considering buying collision insurance, we recommend that you have an in-depth chat with your insurance agent. They will confirm what will and will not be covered under a collision insurance policy.
To get the cheapest rates on collision insurance, you can simply head to the top of this page and enter your zip code.
This will bring up a wide range of insurance companies and their rates. Once you have settled on a quote that works for you, you can contact your preferred insurer to discuss your collision insurance details further.
What Accidents Are Not Covered by Collision Insurance?
Although collision insurance pays for damages to your vehicle even if you are at fault, there are times that you won’t be able to put in an insurance claim.
Your collision coverage will not pay for:
- Damage to another driver’s vehicle.
- Damage from an accident with a pedestrian or an animal.
- Damage due to a natural disaster such as bad weather, fire, or theft.
- The bodily injury costs for anyone injured in your car or another vehicle.
If you want insurance coverage that protects you financially against other incidents, you will need minimum liability coverage.
This insurance will help you to pay for costs related to physical damage and bodily injury if you are at fault in an accident.
You will also need comprehensive insurance to cover you against natural disasters, weather damage, and theft.
Do You Need Collision Coverage?
As your car devalues over time, your collision coverage will become less necessary.
If you own your car outright and do not have a loan on it, having collision coverage will not necessarily be beneficial to you.
Remember, to decide whether collision coverage will be useful for you, you will need to determine the value of your car and measure it against the deductible that you would need to pay if you were involved in an accident and needed to claim.
The following instances are examples of where you may need collision coverage:
You have a car on lease
As mentioned earlier in this article, if your car is on lease or you have a car loan, you will be required to purchase collision coverage for your car.
Collision coverage is definitely worth the money—even if you don’t have your car on lease—because you will receive a payout from your insurance if your car is damaged or totaled.
You own a new car
If you own an expensive or newer model car outright, and the cost to repair or replace the vehicle will cost more than the deductible that you’d need to pay, then collision cover may also be a good idea.
You have an older model car
As we mentioned earlier, if you have an older car it may not pay to have collision insurance.
If the cost of the collision and its deductible equal more than your car’s value, there will be no benefit to you financially if your car is totaled, which is the worst-case scenario for this type of coverage.
In summary, it is a good idea to do a regular review of your budget, the value of your car, and your insurance policy premiums to evaluate whether collision insurance is necessary for you.
You should consider the following factors when you are deciding whether collision coverage is worth it for your vehicle:
- The value of your vehicle: If your vehicle is new or worth a lot of money, then collision insurance will help you pay for expensive repairs and replacement if it is damaged or totaled.
- Ability to pay for repairs out of pocket: If your financial situation prevents you from paying for repairs or a replacement vehicle out of pocket, it is a good idea to consider collision insurance.
- If your vehicle is in storage: If you are storing your car and it won’t be used for a period of time, it may not be worth carrying collision insurance while it is in storage.
What Does Collision Coverage Cost?
There is no specific way to determine the cost of your collision coverage as your insurance premium will depend on a few factors that we have already mentioned in this article.
To recap, your collision insurance rate will depend on the following factors:
- The car’s value.
- Your vehicle’s year, make, and model.
- The deductible you would need to pay.
Remember, the lower your deductible, the higher your car insurance premium will be. On the other hand, the higher your deductible, the lower your car insurance premium is going to be.
Another important factor to consider when calculating the cost of collision insurance, is the fact that you will first need comprehensive insurance coverage in place before you can buy collision insurance.
These two insurance products go hand in hand, and together with minimum liability insurance, will provide you with what is known as full car insurance cover.
Based on your driving history and the length of time you’ve had unbroken insurance, your preferred insurer will provide you with a quote on your insurance needs.
Get Cheap Collision Car Insurance Today with CheapInsurance.com
Collision cover is generally inexpensive and will be well worth the money that you spend on the premium if you are worried about your car being damaged in a collision.
But it is essential that you shop around for cheap collision cover quotes to make sure that you are getting the best rate possible.
Finding a good insurer can be a time-consuming process. Fortunately, we are here to help you find the insurance coverage that you need—at the best price.
All you need to do is head to the top of this page and enter your zip code. You will find a wide selection of insurance quotes to choose from.
Once you have an idea of the auto insurance premiums that you could be paying, it will be time for you to contact the insurers that are offering you the cheapest rates to get a formal quote.
Getting car insurance should be quick, simple, and stress-free, and you
At CheapInsurance.com, we’ve got you covered!