Collision Insurance: What You Need to Know

In general, collision insurance can help you pay for some of the damage to your own vehicle, but there are conditions under which claims are covered by this insurance. Not all damages from every accident will be covered, for example, so we’re here to help you know just what you’re purchasing when you pay for collision insurance and how to get the right type of coverage for your needs.

What Is Collision Insurance?

Collision insurance is a type of auto insurance that can help pay for the repair or replacement of your vehicle if it’s damaged in a crash or accident with another object. This could be another car, but it could also be another object like a tree or other obstacle.

While collision coverage isn’t required by law in any state, there are times when you do have to have it in place, such as when you rent a car. Lenders also usually require this insurance if you are leasing or financing your vehicle so that you are deemed less risky. Otherwise, you can usually opt-out of or waive collision insurance if your vehicle is paid off, though it’s still wise to consider whether having this coverage in place is right for you.

What Does Collision Insurance Typically Cover?

As mentioned, collision insurance isn’t going to cover damages from every crash—everything greatly depends on the circumstances of the accident. You will typically have coverage under collision insurance when:

• a crash with another driver is caused by the insured/policyholder;
• a collision occurs with an object (like a fence, mailbox, post, etc.); or
• your vehicle rolls over.

Collision insurance is not going to cover damage to another person’s car, damage to your car that isn’t due to driving (such as hail or theft), or any costs or expenses you incur for medical bills.

How Does Collision Insurance Work?

It’s expensive to repair or replace new cars, so lenders financing vehicle sales or leases typically protect themselves by requiring borrowers to have collision insurance in place.

If your vehicle is damaged but repairable, for example, then your collision insurance can cover those repair expenses to restore it to its previous condition. If your vehicle is irreparably damaged, however, then you could receive the cash value of your vehicle that would then allow you to use those proceeds to replace it. In both cases, you are given the funds you need minus your deductible.

Remember, collision insurance doesn’t cover other damages like vandalism, only the physical damage to your vehicle while you are driving it. Also note that if the other driver is entirely at fault, then their auto liability insurance should cover the damages to your vehicle. There are exceptions to this, such as if a state’s required property damage limits aren’t enough to cover damages to a vehicle; in that case, collision insurance could provide coverage toward the costs to repair the vehicle.

How Collision Insurance Deductibles Typically Work

Like many types of insurance, collision insurance is subject to a deductible, which is the amount of money that the insured is responsible for and is therefore “deducted” from any collision claim payment. This matters because if the repair costs are less than the deductible amount, you generally don’t want to make a claim under your insurance. After all, you would not be presenting a claim to the insurance carrier for a covered loss.

For example, let’s say you have a deductible amount of $1,000. Your collision insurance would pay for the total cost of repairs less $1,000. However, if the damage to your car is only worth $500, then your insurance company typically wouldn’t pay anything. If you were to make a claim, not only would they not pay, but your insurance rates could also increase.

You can choose a deductible amount that’s right for you when purchasing insurance, which usually ranges somewhere between $500 to $1,500. A $500 deductible is going to be more expensive upfront as you make your premium payments, but your insurance company would pay for more in the case of an accident. You will want to decide how much you’re willing to pay month-to-month (or year-to-year) in premiums compared to how much you want to pay in the case of an actual accident in a deductible.

Comprehensive Vs. Collision Insurance

When you get auto insurance, there are two main types of coverage for property damage: collision and comprehensive insurance. Collision, as we’ve discussed, is coverage that goes toward your damaged vehicle if the driver is in control of the event. If the accident is the driver’s fault or the fault of another driver, collision insurance will likely provide coverage.

Comprehensive insurance includes coverage for non-crash damage to your vehicle, such as hail damage, fire damage, animals on the road, or damage related to theft. This is sometimes referred to as “acts of God or nature,” where the event is out of the driver’s control.

For example, say you are driving late at night, and a deer jumps out and hits your car. You can’t control a wild animal hitting your vehicle, so comprehensive insurance could cover that damage. If, however, you swerved to miss a deer and ended up hitting another vehicle or running into some kind of structure, then you were technically in control of the vehicle, so a claim for those damages would fall under collision insurance.

When you have both types of insurance, you have what is typically referred to as full coverage insurance. This is the most secure option when it comes to protecting yourself and your vehicle, though some people will choose to only get collision coverage since it’s typically less expensive than comprehensive coverage.

How To Know If You Need Collision Insurance

Consider the following circumstances to help determine if you need collision coverage:

• Lease/loan may require it. If you’re working with a lender, you probably won’t be able to opt out of collision even if you wanted to.
• Car value vs. insurance cost. Vehicles depreciate in value, so if the cost of premiums for collision insurance plus your deductible are more than the value of your vehicle, you likely won’t get any money if your car is totaled. 
• Emergency savings. If you don’t have money in the bank for an accident, collision insurance can be worth the monthly premiums so that you don’t lose your vehicle due to unmanageable repair or replacement costs.
• Good for first-time drivers. For people just learning to drive, collision insurance is definitely a purchase that should be strongly considered.

How Acrisure Can Help

If you need collision insurance but are overwhelmed by all of the auto insurance options out there, contact us to find an insurance solution that suits your needs. We can help match you with the right provider according to your needs, allowing you to skip the headache and frustration of shopping around by yourself. Get started by contacting us today, or request an auto insurance quote online!