What is Collision Insurance & What Does It Cover?
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Drivers across the nation are required to carry liability coverage. But as you shop around for the right car insurance, you may find you need a bit more protection for your vehicle beyond the minimum. One of those options is collision insurance.
Collision coverage could be the right addition to your insurance policy – here’s a closer look at collision coverage and why it might be a good fit for you.
What Does Collision Insurance Cover?
Collision insurance helps pay for damage to your vehicle that results from an accident with another vehicle or object while your car is in motion – hence the term collision.
If you hit someone’s car, or if someone hits you, you’re covered. If you crash into a house, you’re covered. If you drive off a cliff, you’re covered (but we recommend not doing that). Single-car accidents — like if you go off the road or roll over — are covered, too.
If your car is totaled — that is, damaged so badly it can’t be repaired for a reasonable cost — then your collision insurance can pay for its depreciated value. That means you get a check for what the vehicle is worth (not what it would cost to buy a new one).
So, essentially, collision insurance covers damages to your car inflicted by your own driving. If another driver hits you, they will be found at fault. With that, the other driver’s mandatory liability insurance should step in to pick up the tab.
What Isn’t Covered?
Collision coverage offers more financial protection than minimum liability policies. But, not every incident is covered.
Here are a few things that not covered by collision insurance:
- Damage to your car from wind, rain, fire, hail, storm, or floods.
- Physical damage to your car from a natural disaster.
- Damage to your car if you hit a deer or other animal.
- Damage to your car if a tree or other object falls on it while it’s parked.
- Theft or vandalism.
- Acts of terrorism.
- Damage to other people’s vehicles.
- Acts of God.
- Your medical expenses resulting from an accident.
- Medical bills for injuries caused by an accident.
- Roadside assistance and towing
Is Collision Insurance Required by Law?
No. Laws regarding auto insurance vary from state to state. But collision insurance is not required by any state law.
That’s because it exists to protect you, the vehicle owner, from losing a ton of money if your car gets damaged or totaled. It’s not intended to help other drivers on the road you might hit.
Now, if you have a car loan or a car lease, most lenders require you to maintain collision insurance coverage as part of the terms of the lease or loan. You will most likely have to provide proof of coverage.
Most drivers — 75 percent — do carry collision insurance coverage in addition to liability.
But if you’re driving an older car, or you don’t mind owning a car with a big dent or missing bumper, you have the option to drop your collision coverage. This can save you money on your car insurance, but if your vehicle is damaged in a collision that you’re liable for, you’ll have to pay for the repairs.
That’s right: the insurance company pays you nothing. Instead, the entire bill comes out of your pocket. (If another driver is liable for the collision, then their property damage liability insurance would pay for it.)
What’s the Benefit to Drivers?
No one wants to get in a car accident. A bad accident can wreck more than your vehicle. You could be on the hook for a major vehicle repair bill. And that’s not to mention potential injuries you could face.
Collision coverage solves one of those potential problems for you. The main benefit offered by collision coverage is that you can protect your finances while out on the road.
If you run into an object or vehicle, you won’t be stuck with a big repair bill. Instead, you’ll simply pay the collision insurance deductible for your repairs and the insurance company will pick up the rest of the tab. Since it is no secret that car repairs add up quickly, collision insurance can really come in handy.
How Do I Choose My Collision Deductible?
When choosing a collision car insurance policy, you should seek out an option with a deductible that fits your budget.
A deductible is a set amount of money you’ll pay if you need to file a claim before the insurance company kicks in. A lower monthly premium payment will come with a higher deductible. Although it’s convenient to have a lower premium, choosing a deductible that’s too high could leave you in a financially precarious situation.
You don’t want to choose a deductible higher than what you could afford to pay. For example, let’s say that you have a $500 deductible. It’s a good idea to save $500 in an emergency fund just in case you get in an accident and need to file a claim.
Want more guidance on choosing between a high or low deductible? Check out this full piece on how to decide which is best for you.
When Should I Drop Collision Coverage?
If you have collision insurance, there are a few points to consider if you want to drop this optional coverage.
First, let’s say you’ve been paying off an auto loan. While the lender still had a financial interest in the vehicle, you were likely required to carry collision insurance. With that, you can’t drop collision coverage until you repay the loan.
You’ll need to run some numbers for your unique financial situation to determine if it’s a smart move to drop the extra coverage. You need to weigh the cost of collision coverage against the value of your car.
In the past, people have advised using your car’s age as the major factor in this decision. But looking at the actual cash value of your car is a more appropriate metric.
So, start by determining the value of your vehicle. Then consider the cost of your collision insurance and the deductible attached to the policy.
For example, let’s say your vehicle is worth $5,000. And the cost of your collision insurance is $750 per year with a $1,000 deductible. At that point, it could be worth it to keep collision insurance. But if the vehicle was worth $1,500, then it would make sense to drop the extra coverage.
Where to Get Collision Insurance
If you’ve decided that collision insurance is the level of protection you need, the next step is to shop around for the right provider. After all, not all insurance companies are created equally and you want to track down the best available rate.
The good news is shopping around for the right car insurance policy is easy with Compare. We can help you find the best rate in just a few minutes.
What are you waiting for? Cross car insurance off your to-do list today.
Frequently Asked Questions About Collision Insurance
Is it worth it to get collision coverage?
As we’ve mentioned, collision insurance isn’t required by law. However, it offers invaluable financial protection if you are in an accident.
To find out if collision insurance is worth it, weigh the costs of this extra coverage with your car’s value. Plus, consider whether or not you can afford to cover a big repair cost on your own. If your finances are tight, paying extra for car insurance won’t help your monthly budget, but if you are involved in a collision, you’ll be glad you have it.
What is the difference between collision and comprehensive insurance?
Collision coverage offers protection if you hit an object or vehicle.
Comprehensive coverage takes things a step further. It provides coverage if your vehicle is stolen or damaged by falling trees or bad weather. So, if you are looking for a complete package, then a comprehensive policy is the right move.
Does collision insurance cover rental car accidents?
The answer depends on your insurance policy. In some cases, your collision coverage will extend to a damaged rental car. But make sure to check with your insurer to determine whether or not this is an option for your insurance policy.
Does collision insurance cover hit-and-run accidents?
A collision insurance policy may or may not cover hit-and-run accidents. The type of accident and your policy’s covered events will determine the answer. But in most cases, damage sustained to your vehicle through a hit-and-run would be covered by collision insurance.
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