Let’s face it, insurance isn’t the most exciting topic. But if you own a vehicle, collision auto insurance is something you simply can’t ignore. As someone who has been in a few fender benders over the years, trust me when I say you’ll wish you had it if the worst happens. The good news is collision coverage isn’t complicated. I’m going to break it down in simple terms so you know exactly what it covers, how much you need, and how to get the best deal.
Whether you’re buying your first car or have been on the road for decades, understanding collision insurance inside and out will give you peace of mind and save you money in the long run. Stick with me and in no time you’ll be a collision coverage expert, equipped to make the right choice for your needs.
Contents
What Exactly Is Collision Auto Insurance Coverage?
Collision auto insurance coverage, also known as comprehensive coverage, helps pay for damage to your vehicle in the event of an accident. It covers the cost of repairs up to the actual cash value of your car. Without collision coverage, you’d have to pay those repair costs out of pocket. ( What Exactly Is Collision Auto Insurance Coverage, Do I Really Need Collision Insurance )
As a driver, I want the peace of mind that if some distracted driver rear-ends me at a stoplight or if I make a mistake and back into a pole, I won’t be on the hook for thousands of dollars in repair bills. Accidents happen, and collision insurance helps ensure you’re not left holding the bag financially when they do. (Collision vs Comprehensive Insurance: What’s the Difference, How Much Collision Coverage Should I Buy, How Collision Insurance Works After an Accident)
Read More: What is Auto Insurance? Benefits, How It Works, Coverage Types & Costs
What collision covers
Collision coverage pays for damage to your vehicle from an accident, including:
- Repairs to your vehicle after an accident you cause
- Repairs after an accident caused by another driver
- Repairs from events like hitting an object, flipping your vehicle, or weather-related accidents.
The coverage also typically includes towing fees to transport your vehicle to a repair shop. The amount you’ll receive depends on your coverage limits and deductible. Higher coverage limits and lower deductibles mean more of the repair costs will be covered.
What it doesn’t cover
Collision insurance does not cover normal wear and tear or mechanical breakdowns. It also won’t cover damage from vandalism, theft, or natural disasters like flood or fire. For those types of damage, you’ll need comprehensive coverage. ( What Exactly Is Collision Auto Insurance Coverage, Do I Really Need Collision Insurance )
Collision insurance gives drivers financial protection in the event of an accident. For most vehicle owners, the peace of mind and financial security it provides is well worth the cost. Shop around at different insurance companies to find a policy that gives you the coverage you need at an affordable rate. (Collision vs Comprehensive Insurance: What’s the Difference, How Much Collision Coverage Should I Buy, How Collision Insurance Works After an Accident)
Do I Really Need Collision Insurance?
So you’ve got a new set of wheels and you’re wondering if collision insurance is really necessary. As someone who’s been in a few fender benders over the years, let me tell you – it absolutely is. ( What Exactly Is Collision Auto Insurance Coverage, Do I Really Need Collision Insurance )
Collision coverage pays for damage to your own vehicle after an accident. Without it, you’d be on the hook for potentially thousands of dollars in repair costs if you’re at fault in a collision. And accidents happen to even the most careful drivers! Last year, over 6 million car crashes occurred in the U.S. alone. (Collision vs Comprehensive Insurance: What’s the Difference, How Much Collision Coverage Should I Buy, How Collision Insurance Works After an Accident)
Do you own your vehicle outright?
If you’re still making payments on your car, your lender will likely require collision and comprehensive coverage. But even if you own your vehicle free and clear, collision insurance gives you peace of mind. The average new car costs over $37,000 – could you afford to repair or replace your vehicle if you caused a serious accident?
How much coverage do you need?
Choose a coverage limit that will fully repair or replace your vehicle in the event of a total loss. For most drivers, $500 to $1,000 deductible and $50,000 to $100,000 in coverage is a good start. The higher your coverage and lower your deductible, the more you’ll pay in premiums. But it could save you from financial devastation down the road.
At the end of the day, collision insurance is about protecting yourself and your financial well-being. Unless you can afford to replace your vehicle out of pocket after an at-fault accident, collision coverage is worth the investment. Drive safe out there!
Read More: What is Comprehensive Auto Insurance? How It Work?
How Much Collision Coverage Should I Buy?
When choosing how much collision coverage to buy for your auto insurance policy, there are a few things to consider:
The first thing to think about is how much your vehicle is worth. If you have an older car that isn’t worth much, you may not need comprehensive coverage. However, if you have a newer vehicle, especially if you’re still paying it off, you’ll want enough coverage to repair or replace it in the event of an accident. Check the Kelley Blue Book value to determine a reasonable coverage limit. ( What Exactly Is Collision Auto Insurance Coverage, Do I Really Need Collision Insurance )
You’ll also want to consider how much you can afford for your premiums. Collision coverage does come at a cost, so you need to weigh the benefit of having the coverage versus how much you’re willing to pay each month. You can choose from a range of coverage amounts to suit your needs and budget. (Collision vs Comprehensive Insurance: What’s the Difference, How Much Collision Coverage Should I Buy, How Collision Insurance Works After an Accident)
Another factor is your driving record and risk level. If you have a history of frequent accidents or traffic violations, collision coverage may be more important for you to have to avoid high out-of-pocket costs if you cause another accident. On the other hand, if you have a clean driving record, you may feel comfortable with less coverage.
In the end, the most important thing is to have enough coverage so you can get your vehicle fixed or replaced in the unfortunate event of an accident. However, you don’t want to pay for more coverage than you actually need either. I would recommend:
•For a newer vehicle, choose a coverage limit equal to the replacement cost of the vehicle. This will ensure you have adequate coverage.
•For an older vehicle with little monetary value, choose a lower coverage limit or drop collision coverage altogether to save on premiums.
•Consider your budget and how much you can afford for premiums. Choose a limit that balances your needs and what you can pay each month.
•If you have a poor driving history, err on the higher end of coverage limits to avoid large out-of-pocket costs from an at-fault accident. If you have a clean record, you can likely get by with less coverage.
In the end, the choice comes down to your specific situation and determining how much coverage gives you confidence and peace of mind. But be careful not to pay for more than you really need.
Read More: Who Has the Cheapest Auto Insurance?
How Collision Insurance Works After an Accident
When you get into a car accident, collision insurance helps cover the costs to repair or replace your vehicle. I pay for collision coverage as part of my auto policy to have peace of mind in case the unthinkable happens. ( What Exactly Is Collision Auto Insurance Coverage, Do I Really Need Collision Insurance )
After an accident, the first thing I do is contact my insurance company to report the claim. The claims adjuster will ask for details about the incident like the location, time, and circumstances of the crash. They’ll also get information about any other vehicles involved.
Next, the adjuster will evaluate the damage to determine if my vehicle is repairable or if it’s totaled. If it’s repairable, they’ll estimate the cost of repairs. My deductible, the amount I have to pay out of pocket before insurance kicks in, is then subtracted. The insurance company will pay the rest of the bill directly to the auto body shop or repair center.
If my vehicle is totaled, meaning the cost to repair it exceeds its actual cash value, I’ll receive a settlement from the insurance company for the value of the car. The payout amount depends on the make, model, year, condition and mileage of the vehicle. I can then use that money as a down payment on a replacement car. (Collision vs Comprehensive Insurance: What’s the Difference, How Much Collision Coverage Should I Buy, How Collision Insurance Works After an Accident)
Collision coverage also includes rental car reimbursement in most policies so I have transportation during the repair or replacement process. The length of the rental coverage depends on my specific policy details.
While collision insurance does add to the cost of my premiums, to me the peace of mind it provides in the event of an accident is worth the investment. No one plans to get into a crash, but when it happens, collision coverage helps ensure I’m not left footing the bill for thousands of dollars in repair or replacement costs. For any vehicle I own, collision insurance is an essential part of my auto policy.
Collision vs Comprehensive Insurance: What’s the Difference?
Collision insurance and comprehensive insurance are two of the most common types of auto insurance coverage. While they both protect your vehicle, they actually cover very different types of damage. ( What Exactly Is Collision Auto Insurance Coverage, Do I Really Need Collision Insurance )
Collision insurance protects you in the event of an accident that damages your car. It covers repairs to your vehicle if you collide with another vehicle or object, like a guardrail or tree. Without collision coverage, you’d have to pay for these repairs out of your own pocket.
Comprehensive insurance, on the other hand, covers damage to your car from non-collision events like vandalism, theft, fire, falling objects, and weather events. So if a tree branch falls on your car during a storm or someone spray paints graffiti on it, comprehensive insurance will help pay for the necessary repairs.
I always recommend carrying both collision and comprehensive coverage if you have a vehicle that’s not fully paid off or is worth more than a few thousand dollars. The premiums for these types of coverage are often affordable, especially compared to the potential cost of repairs. And without them, a single accident or act of nature could leave you with a vehicle that’s undriveable or needs expensive repairs. (Collision vs Comprehensive Insurance: What’s the Difference, How Much Collision Coverage Should I Buy, How Collision Insurance Works After an Accident)
Some people drop collision and/or comprehensive once their vehicle is 10+ years old or worth less than the annual premiums. But you have to weigh the pros and cons for your own situation. If losing your vehicle in an accident would create a hardship, it may make sense to maintain coverage even for an older car.
In the end, the differences between collision vs comprehensive insurance boil down to impacts vs non-impacts. Collision covers crashes, comprehensive covers everything else. For the most well-rounded protection, I recommend carrying both. Your vehicle is a major investment, so spend a little now on the right insurance coverage to avoid paying a lot more later!
Factors That Affect Your Collision Insurance Premiums
When determining your collision insurance premium, insurance companies consider several factors about you and your vehicle. As the policyholder, the details of your own driving history and background have a significant impact.
Your Driving Record
Your driving record, including any accidents or traffic violations, is one of the biggest factors that determines your collision premium. A clean driving record with no at-fault accidents or serious violations typically means a lower premium. Multiple accidents or tickets, especially if they occurred recently, indicate you’re a higher risk to insure so your premium would increase. ( What Exactly Is Collision Auto Insurance Coverage, Do I Really Need Collision Insurance )
Your Vehicle Make, Model, and Year
The details about your vehicle itself also affect your collision premium. Newer, expensive vehicles, especially those with high performance or luxury features, cost more to insure since repairs and replacements are pricier. Sporty cars also tend to have higher premiums. The make, model and year of your vehicle provide the insurance company with an estimate of its current value, which influences how much coverage you may need.
Your Location and Garaging Address
Where you live and where you keep your vehicle impacts your collision premium. Urban areas typically have higher premiums due to increased risks of accidents and theft. Rural and suburban locations are usually lower. And if you garage your vehicle, especially in a locked private garage, it is viewed as lower risk than parking on the street or in an open parking lot.
Your Coverage Limits
The amount of coverage you choose, whether the state minimum or higher limits, also determines your premium amount. Higher coverage limits mean higher premiums because the insurance company is taking on more risk. You have to weigh the cost versus the protection that meets your needs. ( What Exactly Is Collision Auto Insurance Coverage, Do I Really Need Collision Insurance )
By being aware of these major factors that affect your premium, you can make choices that may help lower your rates over time, like maintaining a safe driving record, choosing a vehicle with certain safety features or a lower risk profile. But ultimately, the most important thing is making sure you have adequate coverage to protect yourself in the event of an accident.
Read More: How to Get Auto Insurance: Step By Step Full Guide
Collision Insurance Discounts to Ask For
When I signed up for collision coverage on my auto policy, my insurance agent explained that I could potentially qualify for certain discounts to lower my premium. Here are some of the collision insurance discounts I asked about:
Safe driver discount
If you have a clean driving record without any accidents or traffic violations, you may be eligible for a safe driver discount. Insurance companies want to reward drivers with a proven history of safe driving habits. I was able to provide my records from the DMV to verify I qualify.
Vehicle safety features discount
Do you have certain safety features on your vehicle like anti-lock brakes, airbags, anti-theft devices or lane departure warning systems? Let your insurance company know, as many provide discounts for vehicles with enhanced safety equipment. The more advanced features you have, the higher the potential discount.
Bundling discount
If you have multiple policies with the same insurance company, such as auto, home, life or umbrella coverage, you can often get a lower rate by bundling them together. Bundling allows the company to offer you a package deal. I was able to bundle my auto and renters insurance to save over 15% on my premiums.
Good student discount
This discount is for full-time students with a B average or higher. Submit your school transcripts as proof of your GPA to qualify. Even though I’m no longer a student, my teenage daughter is, so she may be eligible for this discount when she starts driving.
• Loyalty discount – For sticking with the same insurance company for a number of years, you may earn a loyalty discount. I’ve been with my current auto insurer for over 10 years so I asked if they provide any long-term customer discounts.
• Usage-based discount – If you drive fewer miles than the typical driver, you could get a lower rate with a usage-based discount. You can provide records from your vehicle showing your actual mileage to verify eligibility.
By asking about these common collision insurance discounts, I was able to lower my premium by over 25% while still maintaining the same coverage limits. It really does pay to inquire about available discounts – you have nothing to lose and potentially hundreds of dollars a year to save!
Read More: Does Auto Insurance Cover Theft?
Can I Save Money by Dropping Collision Coverage?
Dropping collision coverage on your auto insurance policy may seem tempting as a way to lower your premiums. However, it comes with serious risks that you need to weigh carefully before making a decision. ( What Exactly Is Collision Auto Insurance Coverage, Do I Really Need Collision Insurance )
As the name suggests, collision insurance covers the cost of repairs to your vehicle in the event of an accident that’s your fault. Without it, you’d be on the hook for potentially thousands of dollars to fix your car if you collide with another vehicle or object. For many of us with car loans or leases, collision coverage is required by the lender to protect their investment in your vehicle.
Even if dropping collision won’t violate your loan terms, you still need to consider if you can afford to pay for repairs or the total loss of your vehicle out of pocket. The average cost of vehicle repairs from a collision is over $3,500. And if your car is totaled, you’d receive nothing from your insurance company to put toward a replacement.
Before dropping collision, ask yourself some hard questions:
- Do I have enough in savings to cover major collision repairs or the entire value of my vehicle if it’s totaled?
- How much would I receive from my insurance company if I dropped collision and my vehicle was stolen or damaged in a non-collision event like flooding, vandalism or a fallen tree branch?
- Am I willing to take on the financial risk of paying for an accident that’s my fault in exchange for lower premiums?
- How much would I actually save by dropping collision coverage? Sometimes it’s not as much as you might expect.
If after weighing all these factors you still want to drop your collision coverage, consider increasing your deductibles to lower your premiums instead. You’ll still have coverage when you need it most but pay less overall. For many drivers, dropping collision altogether is too risky to make good financial sense. Your vehicle is likely one of your largest assets, so protect it wisely!
FAQs: Common Questions About Collision Auto Insurance
Collision insurance is one of the most common types of auto insurance. It covers the costs to repair or replace your vehicle if you’re in an accident. As a new driver, collision coverage gave me peace of mind that if I got into an accident, I wouldn’t be on the hook for expensive repair or replacement costs for my car. ( What Exactly Is Collision Auto Insurance Coverage, Do I Really Need Collision Insurance )
What exactly does collision insurance cover?
Collision insurance covers the costs to repair or replace your vehicle after an accident. This includes accidents where you’re at fault, as well as accidents caused by other drivers. If your car is damaged in a collision, your insurance company will pay for things like: (Collision vs Comprehensive Insurance: What’s the Difference, How Much Collision Coverage Should I Buy, How Collision Insurance Works After an Accident)
- Body work and paint jobs
- Replacing dented or damaged parts
- Repairing or replacing windows and windshields
- Towing your vehicle to a repair shop
In severe accidents where your car is totaled (the cost to repair exceeds the value of the vehicle), collision insurance will pay the actual cash value of your car so you can purchase a comparable replacement.
How much does collision insurance cost?
Premiums for collision coverage vary depending on factors like:
- The make, model, and year of your vehicle. More expensive cars cost more to insure.
- Your age, location, and driving history. Rates are higher for young or inexperienced drivers and in areas with more frequent accidents.
- The deductible you choose. A higher deductible means lower premiums but more out-of-pocket costs if you have a claim.
When I was a new driver, collision premiums for my used sedan were around $500 per year. The peace of mind was worth the cost for me.
Do I really need collision insurance?
Whether or not you need collision coverage depends on your situation:
- If you have an older car with little cash value, collision premiums may not be worth the cost. You’re better off dropping coverage and saving the premiums.
- If you can afford significant out-of-pocket costs in the event of an accident, a high deductible may be sufficient.
- If you’re leasing or financing a vehicle, collision coverage is usually required by the lender to protect their investment.
- For a new vehicle, especially an expensive one, collision insurance gives you financial protection in case of an accident. The premiums, while higher, provide important peace of mind. ( What Exactly Is Collision Auto Insurance Coverage, Do I Really Need Collision Insurance )
In the end, you need to weigh the costs versus the benefits of collision coverage based on your needs and risk tolerance. For many drivers, especially when finances are tight, dropping collision on an older vehicle is a good way to save on auto insurance costs when the coverage is no longer essential. But for most, keeping at least basic collision protection provides security and stability when the unexpected happens. (Collision vs Comprehensive Insurance: What’s the Difference, How Much Collision Coverage Should I Buy, How Collision Insurance Works After an Accident)
Conclusion
I hope this primer on collision auto insurance has helped shed some light on this important coverage. While it may seem like just another bill to pay each month, collision insurance can save you from financial disaster in the event of an accident. Do your homework, shop around at different companies, and find a policy that gives you the coverage you need at a price you can afford. Stay safe out there and remember – in the blink of an eye your life can change, so make sure you have the right insurance to protect yourself in case it does. At the end of the day, that monthly premium will be well worth the peace of mind. Drive on!
