One day, you become involved in a car accident with another driver. You were at fault; you didn’t see them when you tried to beat that yellow light. Their car isn’t totaled, but the side is dented, and the door is broken. There’s some considerable front damage to your own car. Because the accident was your fault, your liability insurance would cover the damages to the other driver’s car. Everyone has to carry liability insurance. Except for those living in New Hampshire, where it isn’t legally required to have. Liability insurance exists so drivers involved in accidents would be able to pay the damages done to the other driver. However, there is still the question of the auto repair costs.
Enter collision insurance, an optional auto coverage you may purchase in addition to your liability insurance. If you lease or rent your car, you may already be familiar with this coverage as leasers often require it. If you’re ever involved in an auto accident or collision with a roadside object, collision insurance covers car repairs and replacement –even if the accident was your fault.
Collision insurance is primarily based on car value with customizable deductibles. For many drivers, it’s the missing piece to their complete insurance coverage. But for others, it may seem like an unnecessary add-on. Not only will we discuss what collision covers and costs, but whether or not it would be worth the money.
What does collision insurance cover?
Collision insurance lives up to its name by providing coverage for any repair costs to your car in the event of an accident that was your fault. While your personal liability insurance covers the cost to the other driver’s car, you won’t have to pay out of pocket to have your damaged car repaired.
Car accidents where your collision insurance would cover you would be:
- Car collision – As previously stated, if you were to cause a collision with another driver, your collision insurance would cover damages to your own car.
- Collision with a stationary object – If you were to crash into a parked car, tree, or any other roadside object, you would be able to file a collision claim. The accident itself was still your fault, so it’s all the same for the insurance company.
- Car becomes stuck – You can get your car stuck by steering it into a ditch, pothole, or perhaps a flooded road from a storm. Even if your car flips over, it would still be covered by collision insurance. These kinds of accidents are tricky because things like potholes aren’t visible until the last second.
- Hit-and-run – When a driver damages your car, their personal liability should cover those damages. But, say that the driver speeds away. Now, you wouldn’t be able to file a liability claim. Instead, you’re able to file a collision claim if the at-fault driver can’t be found.
What doesn’t collision insurance cover?
As great as it is, collision insurance has its coverage limits. The typical collision-covered situation would be an accident between another driver and yourself. Even in cases where your car is damaged, it may not pay for the repairs.
Here are instances where collision insurance wouldn’t cover the policyholder:
- Weather damage – Auto damages sustained in a thunderstorm, blizzard, or falling debris from a hurricane or wind storm aren’t covered by collision insurance. The best way to think about it is that “acts of nature” aren’t covered.
- Collision with an animal – You can think of animals as part of nature rather than other drivers. Because of this, hitting a deer or coyote won’t be covered by collision.
- Medical costs – Collision insurance never covers medical costs or bills after an accident. Medical expenses would be covered under a personal injury policy or Medpay in some form.
- Theft or vandalism – If your car is vandalized, stolen, or anything else that may happen when you’re away from it, then it isn’t covered by collision coverage. It wouldn’t reimburse you for a replacement either. Think of it this way: If your car is damaged by anything other than a car-on-car collision, then comprehensive insurance will cover it and not collision. Items in the car are not covered.
Why is collision insurance required for a leased car?
You’re not the owner of a car if you lease it –the leasing company is. Because of this, you’ll be required to carry collision coverage to protect their property. Additional plans for full coverage may also be required. Let’s say that your leased car has been totaled. You may be “underwater on an auto loan” in that event with thousands of dollars on your tab. In that event, the leasing company may offer gap insurance which temporarily drops your coverage for a limited time while you pay your loans. Keep in mind that collision insurance can raise the cost of your premiums, keeping your leased car insured.
There’s no difference in insurance costs between a leased car and an owned car. Leasing companies typically require more coverage plans which can drive your cost up to more than it would be for the minimum required insurance. Insuring a leased car would offer lower monthly rates in comparison to a fully financed car. The leaser may also set a deductible amount which has a direct effect on your rates.
How much does collision insurance cost?
We’ll think about the total cost to keep your leased car insured as opposed to what the price sticker for collision insurance says. The average annual cost of collision insurance is about $382. Some customers can pay as low as $250 or as high as $500. This would be added to your legally required liability insurance. Liability insurance is where the bulk of the cost comes from, as it can cost anywhere between $1,500 to $2,000 based on the state’s minimum limits. Your rates depend on the car’s make and model. The most significant deciding factor in collision insurance is the value of your car. We’ll talk about that when we discuss why it’s worth it to buy collision insurance.
The cost of insurance doesn’t just depend on your car, but your history and habits as a driver. Factors like your age, sex, and even marital status can determine how much your insurance rates will be. The state you live in is also a significant factor since they each have their own insurance requirements. You do have control over how much you pay with your fully adjustable deductibles and customizable policy limits.
How does my car value affect my collision coverage?
The value of your car determines your collision deductible and rates. Not when you bought it, but the current value. The insurance payout you’d receive under a collision plan is the exact value of the car. Keep your car’s value in mind when looking at premiums. A good rule of thumb is the following calculation.
First, subtract your collision deductible from your car’s current value. If that amount can easily be paid out of pocket, then the extra collision coverage may not be worth it. If you are unable to pay it, then take that amount and subtract your policy’s cost. Note that the policy cost is what you pay every six months. If you have the annual amount, divide it by two since you are making the payment twice in a single year. If that results in a negative value, then collision insurance may not be necessary. If it’s positive, then it may be worth looking into. Usually, if you have a high-value vehicle, collision insurance may be a smart investment. As time goes on and your car gets older, the coverage may begin to lose its value.
How do collision insurance deductibles work?
Deductibles are a regular part of collision insurance. If you were to get into an accident and file a collision claim, the deductible amount would be taken off the repair costs. A deductible can range between $250 to $1000, but there are instances where they’re higher. Claims should also not be filed too often since they could negatively affect your deductibles. Your insurance payout for the damages also concerns deductibles. Once you receive a payout equal to your car’s value, the deductible will be subtracted from it. You have the ability to choose your deductible amount –anywhere between $500 to $1,500. A smaller deductible means you’ll personally pay less for repairs.
Collision insurance may also include what is called a vanishing deductible. A vanishing deductible is a way to save on your collision insurance yearly. For every year of safe driving, the policyholder saves $100 on their deductible. With enough safe driving, you would be able to effectively “vanish” your deductible for the year. If you set your deductible to $500, it would take five years to cover it effectively. If you were to get into an accident and need to file a collision claim, then the vanishing deductible reward would be reduced to $100.
Is collision insurance right for me?
73% of drivers purchase collision coverage because they want their car to be insured for repairs in the event of an accident they cause. Repair costs can often be high, and no one wants to be stuck with those fees.
Let’s review all circumstances where you would purchase or pass up on collision insurance:
- Local drivers lack insurance – If you live in an area where most drivers are driving uninsured, then collision coverage would seem like a must-have. They have no liability insurance to pay for their damages if they’re at fault. Or, maybe you’re a resident of New Hampshire where liability insurance isn’t required.
- Drive a high-value car – The insurance payout of collision coverage is equal to the current value of your vehicle, as previously mentioned. If you drive a high-value car, the insurance payout will usually be high. As your car ages and decreases in value, the payout may not be worth the investment. A good rule of thumb is if your car is less than $3,000, you won’t need collision insurance.
- Car is leased – If your car is leased, then you may be required to carry collision insurance to protect the company’s car. There may be other coverages you may be required to take on.
- Can’t pay repairs out of pocket – You’ve done the insurance cost calculation and found that you can’t pay the value of the collision claim yourself. At that point, you’d want to invest in collision insurance.
Here are car insurance shopping tips for collision coverage.
When shopping for collision insurance, it’s best to compare and contrast different quotes from regional and national insurance companies. Remember to lead with your car value and driving record when asking an agent about collision insurance. You’ll want the payout to be proportionate with the car value and to begin with a low deductible. If you’re unfamiliar with your car’s value, try consulting Kelly’s Blue Book.
Here at InsuranceNavy, we offer a budget cost with our collision insurance plan. We, like other companies, also offer collision insurance in a full auto coverage bundled with comprehensive insurance. Get in contact with one of our agents and receive a collision quote today.