If you’re like me, you probably spend more time shopping around for a car than for the insurance you need to protect it. Most states require at least a minimal amount of coverage to protect other drivers from bodily injury or property damage you might cause them while driving. But carrying your state’s minimum insurance requirements may not be enough. After all, it’s primarily designed to protect other drivers and their cars. What about you and your vehicle?
When it comes to car insurance options, there are many. To better protect yourself, you can decrease your deductibles, increase your existing coverage amounts, or add additional coverage, just to name a few.
Collision coverage is one such coverage that you’re not legally required to have, but many people find it extremely valuable nonetheless.
What Is Collision Coverage?
In short, collision coverage is a type of auto insurance that pays to repair your car when it’s damaged from hitting something, whether it’s a tree, a fence, or another car. This type of insurance is different from comprehensive coverage, which pays for the repair from other types of accidental damage unrelated to collisions, such as fire, theft, and falling objects. Even if the accident is your fault, your collision coverage will provide money to repair the car.
What It Covers
Remember, collision coverage only covers damage to your own car; it won’t provide coverage if you hit another person’s vehicle. This type of insurance, called property damage insurance, is part of your liability coverage, which is required for licensed drivers in virtually all states with some exceptions like New Hampshire.
It basically goes like this: If you’re at fault in a car accident and damage both your car and the other driver’s vehicle, your collision coverage pays to repair your own car, and your property damage coverage pays to repair theirs. However, if the other driver is at fault, their property damage insurance, and not your collision coverage, will pay to repair your car.
When an accident requires your collision coverage, all you need to do is pay your deductible and the insurance company will cover the rest of the cost of repairing the car up to the limits stated in your policy.
When You Should Purchase Collision Coverage
Collision coverage is especially important if your car is newer or expensive to repair. It may even be required by your lender if you took out a loan to purchase your vehicle.
For older or less expensive cars, on the other hand, it may not make as much sense to purchase this coverage because the cost can quickly amount to more than your car is worth. Since you’re not legally required to have collision coverage, whether or not to purchase it depends on how much it will cost to insure the car, the actual value of the car, and how much repairs will run you.
Considering Your Deductible
Also consider the size of the deductible you’re willing to accept. If your deductible is large (most insurance companies offer deductibles up to $1,000), your premium will be lower. But if you’re in an accident, that deductible must be paid first in order to get your car repaired.
In other words, choose a deductible you can afford and compare premiums. For example, would you rather pay $20 more each month to avoid paying an extra $500 in the case of an accident? The better your driving record and insurance claims history are, the more affordable a lower deductible (and insurance, in general) will be.
Cost of Collision Coverage
This can vary widely depending on a number of factors, including what kind of car you have, how old it is, how much it’s worth currently, your personal driving history, your age, and your gender.
If you have a poor driving history or have previously filed claims for damage to your car, the insurance company will probably price your collision coverage higher than someone else with the same car because they believe you are more likely to use it.
What Happens If the Car Is Totaled?
A serious accident can completely destroy a car to the point that repairing it would cost more than the car is worth, often referred to as “totaling” a car. If this happens, your collision coverage will still take care of you. Your car’s collision coverage insures the car up to its current cash value, which is typically determined by its model, age, and condition, minus the amount the car is worth as salvage.
An estimator from the insurance company will determine how much it would cost to fix the car or whether the car is too damaged to bother. For example, if your car was worth $5,000 before an accident and is worth $500 at salvage, the insurance company will generally repair it if the cost is $4,500 or less. If repairs will cost more than $4,500, the insurance company will give you a check for $5,000 (minus your deductible) and may sell the car for salvage themselves.
Collision coverage is something to think about. It might be right for you if paying to take a dent out would be financially difficult, but paying for coverage would not be. Moreover, it can provide you peace of mind that you’ll be covered regardless of whose fault the accident might be.
For example, my husband was recently backed into by someone who thought she was in “drive,” when she was actually in “reverse.” She decided to change her story, however, and told her insurance company that he rear-ended her. While the insurance companies work out who’s right and who’s wrong, his repairs were covered nonetheless because he carries collision coverage.
What are your thoughts on collision coverage? Do you have it as part of your car insurance policy?