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Collision Insurance: What is it and What does it Cover?

Collision Insurance: What is it and What does it Cover

What Is The Difference Between Liability Coverage and Collision Insurance Coverage?

One day, you become involved in a car accident or collision with another driver. You were at fault; you didn’t see the other driver’s vehicle 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, but cost of repairs for your own car is not covered by this auto policy.

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 auto accidents would be able to pay the damages done to the other driver’s vehicle. However, there is still the question of your auto repair costs. That’s when collision car insurance comes into play.

What is Collision Insurance Coverage?

Enter collision insurance, an optional coverage for your auto you may purchase in addition to your liability insurance from your auto insurance company. If you lease or rent your car, you may already be familiar with this car insurance coverage as leasers often require it.

If you’re ever involved in an auto accident or collision with a roadside object, collision insurance can be applied to a wide range of car accidents and covers car repairs and replacement -even if the accident or collision was your fault.

Collision insurance is primarily based on car actual cash value with a customizable collision deductible. For many drivers, the collision policy is the missing piece to their complete car insurance coverage. But for others, it may seem like an unnecessary add-on to their car insurance.

Not only will we discuss what collision insurance covers and how much collision coverage premiums cost, but whether or not collision coverage 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 or collision that was your fault. While your personal liability insurance covers the cost to the other driver’s car, with collision insurance you won’t have to pay any out-of-pocket cost 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 an auto collision with another driver’s vehicle, 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 insurance claim. The accident itself was still your fault, so it’s all the same for the car 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 or a natural disaster. 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 auto accident between another driver’s vehicle and yours. Even in cases where your car is damaged, collision coverage may not pay for the repairs of your auto.

Here are instances where collision insurance wouldn’t cover the policyholder’s vehicle damage:

  • 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, you’d need a comprehensive coverage for that.
  • 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 insurance.
  • Medical costs - Collision insurance never covers medical costs or bills after an auto accident or collision. Medical expenses would be covered under a personal injury protection 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. Collision insurance 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 accident or collision, then comprehensive insurance will cover it and not collision insurance. Items in the car are not covered.

Why Is Collision Coverage 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 car insurance coverage may also be required, especially for expensive vehicles.

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 car insurance coverage for a limited time while you pay your loans. Keep in mind that collision insurance can raise the cost of your car insurance 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 car insurance coverage plans which can drive your auto insurance coverage monthly premium cost up to more than it would be for the minimum required car insurance.

Insuring a leased car would offer lower monthly vehicle insurance premium rates in comparison to a fully financed car. The leaser may also set a car insurance deductible amount which has a direct effect on your auto insurance premium 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 coverage is about $382. Some customers can pay as low as $250 or as high as $500. The price of your collision coverage would be added to your legally required auto liability insurance.

Liability insurance is where the bulk of the car insurance cost comes from, as liability coverage can cost anywhere between $1,500 to $2,000 based on the state’s minimum liability coverage limits. Your vehicle insurance premiums 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 auto 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 car insurance rates will be.

The state you live in is also a significant factor since they each have their own vehicle insurance requirements. You do have control over how much you pay with your fully adjustable car insurance deductibles and customizable auto insurance policy limits.

How Does the Value of My Car Affect My Collision Coverage?

The value of your car determines your collision coverage deductible and collision insurance premiums rates. Not when you bought the collision coverage, but the current value. The collision insurance payout you’d receive under a collision coverage plan is the exact value of the car. Keep your car’s value in mind when looking at collision coverage premiums.

A good rule of thumb when purchasing collision coverage for your vehicle is the following calculation :

First, subtract your collision coverage deductible from your car’s current value.

If the amount of collision coverage deductible can easily be paid out of pocket, then the extra collision coverage may not be worth it. If you are unable to pay the amount of collision coverage deductible, then take the amount of collision coverage deductible and subtract your collision insurance policy’s cost.

Note that the collision insurance policy cost is what you pay every six months. If you have the annual collision coverage amount, divide the annual collision coverage amount by two since you are making the payment for your collision coverage twice in a single year.

If that results in a negative value, then collision insurance may not be necessary. If it’s positive, then collision coverage 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 collision coverage may begin to lose its value.

How Does a Collision Insurance Deductible Work?

Deductibles are a regular part of collision insurance. If you were to get into an accident or collision and file a collision insurance claim, the collision deductible amount of your collision coverage would be taken off the vehicle repair costs.

A collision coverage deductible can range between $250 to $1000, but there are instances where collision coverage deductibles are higher.

Collision insurance claims should also not be filed too often since insurance claims could negatively affect your collision coverage deductibles. Your car insurance payout for the damages also concerns collision coverage deductibles.

Once you receive a collision insurance payout equal to your car’s value, the collision coverage deductible will be subtracted from it. You have the ability to choose your collision coverage deductible amount –anywhere between $500 to $1,500. A smaller collision coverage deductible means you’ll personally pay less for your vehicle damage repairs.

Does Collision Coverage Include a Vanishing Deductible?

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 collision insurance policyholder saves $100 on their collision coverage deductible. With enough safe driving, you would be able to effectively “vanish” your collision coverage deductible for the year.

If you set your collision coverage deductible to $500, it would take five years to cover your collision coverage deductible effectively. If you were to get into an accident or collision and need to file a collision insurance claim, then the vanishing deductible reward would be reduced to $100.

Is Collision Insurance Right for My Vehicle?

73% of vehicle drivers purchase collision coverage because they want their car to be insured for repairs in the event of an accident or collision they cause. Auto repair average costs can often be high, and no one wants to be stuck with those vehicle repair fees.

These are all circumstances where you would purchase or pass up on collision insurance:

  • Local drivers lack liability coverage - 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 auto damages if they’re at fault in the case of a collision or auto accident. Or, maybe you’re a resident of New Hampshire where liability insurance isn’t required.
  • Drive a high-value car - The car 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 auto insurance payout will usually be high. As your car ages and decreases in value, the car insurance 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 auto repairs out of pocket - You’ve done the car insurance cost calculation and found that you can’t pay the value of the collision insurance 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 collision car insurance quotes from regional and national insurance companies.

Remember to lead with your car value and driving record when asking an auto insurance agent about collision insurance. You’ll want the collision insurance payout to be proportionate with the car value and to begin with a low collision coverage deductible.

If you’re unfamiliar with your car’s value, try consulting Kelly’s Blue Book.

Get A Car Insurance Quote with Great Rates from Insurance Navy

Here at Insurance Navy, we offer a budget cost with our collision insurance plan. We, like other insurance companies, also offer collision insurance in full auto coverage bundled with comprehensive car insurance. Get in contact with one of our agents and receive a collision coverage quote today.

Updated: November 2023

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