Collision insurance is an optional coverage that pays to fix damage to your car when you hit another object or vehicle. Collision coverage also comes into play if your car is hit by another driver who doesn’t have enough insurance to pay for the repairs.
- Collision coverage covers your vehicle for damage that your car sustains when it hits or is hit by, another vehicle, or another object.
- Collision Insurance only pays up to the actual cash value of your car.
- If you have a loan or lease on your vehicle, then your lienholder will require you to carry this coverage and may mandate the specific deductible amount you have to select.
- Not every issue with your vehicle is covered by collision or comprehensive insurance. An instance such as damage caused by wear and tear, freezing or mechanical breakdown.
- What does collision insurance cover?
- Is collision coverage mandatory?
- What is the recommended deductible?
- Do I need collision insurance?
- How much does collision coverage cost?
- What happens if I don’t have collision coverage?
- What is the average accident claim pay out for collision claims?
- Will collision cover a dent if I repair it myself?
What does collision insurance cover?
Collision coverage covers your vehicle for damage that your car sustains when it hits, or is hit by, another vehicle, or another object. Collision also covers the upset of your vehicle, such as the unintentionally rolling or flipping of your vehicle.
Your property damage liability coverage does not cover your vehicle in any way; it only covers those that you hit. For auto accident damages to your vehicle to be covered by your auto policy, collision coverage is needed.
Collision coverage allows you to file a claim with your car insurance company and have it pay, minus your deductible amount, for damages received in most auto accidents. Collision will pay out, according to the terms and conditions of your policy, if the other driver is uninsured, underinsured, or unknown — or even if you are at fault.
Collision doesn’t cover any and all damages that your vehicle may receive. To have “full coverage” on your car you would also need to carry comprehensive insurance, which covers your car if it is stolen or damaged by vandalism, flood, fire, or animals.
Keep in mind, not every issue with your vehicle is covered by collision or comprehensive insurance. For instance, damages caused by wear and tear, freezing or mechanical breakdown are not covered by either coverage — or any other portion of an auto insurance policy.
When receiving a quote for collision coverage, you will need to choose a deductible amount. A deductible is the portion of a claim that you’re responsible for paying before your insurance coverage kicks in.
Is collision coverage mandatory?
Collision insurance is not required by any state. Most states require property damage liability so that your insurer will pay (up to your limits) if you damage other people’s vehicles or property, but states do not mandate that you carry coverage to pay for damages to your own car.
However, if you have a loan or lease on your vehicle, then your lienholder can (and usually will) require that you carry this coverage and may mandate the specific deductible amount you have to select.
If want to lower your insurance premium by raising your deductible, while your car is still financed, be sure to check with your lienholder to see if they will allow a higher deductible than what you are currently carrying.
What is the recommended deductible?
Collision coverage does not come with limits; instead, the most it will pay you is the actual cash value of your car, minus your deductible, if it is declared totaled. Experts typically recommend a $500 deductible unless you have substantial savings to tap. If you have put a minimal down payment on a car, you should consider gap insurance.
Typically, the range you can choose for your collision deductible is anywhere from $100 to $1,500 (deductible choices vary according to state laws and insurance company guidelines). Most car owners choose a deductible of between $250 and $1,000.
In general, the higher the deductible the less expensive your premium and the lower your deductible the higher your collision premium – since the insurer is taking on more risk. So, a higher deductible can substantially lower the cost of insurance premiums, but you’ll have more to pay out-of-pocket before your collision benefits kick in.
When picking a deductible amount, find the right balance for your finances.
If you set your deductible at $1,000 and your car sustains damages totaling $1,500, you will pay $1,000 and your insurance company will pay $500.
Deductibles are due per incident, so you will have your deductible amount due each time a collision claim is made. If you raise your car insurance deductible to lower your rates, you can save, on average, about 10 percent, but in some cases it can be much more.
Do I need collision insurance?
To determine if you need collision insurance, you should find out the value of your car, and then take into account your deductible amount. Collision only pays up to the actual cash value of your car. That means if your has little value, you don’t need collision coverage.
If you have a $1,000 deductible you have to pay to file a claim to fix it, and your car is not worth much more than that, it doesn’t make sense to pay for collision coverage.
Another way to decide is to consider the following coverage recommendations:
- If your car is less than 10 years old, you should consider buying collision.
- If your car is more than 10 years old, buy collision if your car is worth $3,000 or more.
- Buy collision if you can’t afford to replace it if you crash it.
How much does collision coverage cost?
According to a CarInsurance.com rate analysis, the average rate for collision coverage is $526 per year, for a full coverage policy with a $500 deductible.
You’ll see below how states compare for the cost of collision. Enter your state in the search field to see what you can expect to pay.
Source: CarInsurance.com commissioned Quadrant Information Systems in 2018 to field rates for coverage of 100/300/100 with $500 deductible from up to six major insurers.
What happens if I don’t have collision coverage?
Without collision coverage, you may be left to pay out of your own pocket for your car’s repairs unless there is someone else found liable for the damages, such as an at-fault driver who has property damage liability coverage with which you can make a claim through.
Or if you are hit by an uninsured motorist and have uninsured motorist property damage (UMPD) coverage under which you can make a claim.
With a newer, high valued car, you will normally want this added protection for your vehicle, whether you have financed it or not. Without collision coverage, you could end up in a situation where you would not need to pay for repairs, but instead need to replace your car due to it being totaled out, and that’s a lot of money to be out for even a moderate valued vehicle.
If you have an older car with a low value (without a lease or loan on it), you may not want to pay for collision coverage since if your car is damaged, or totaled, the low amount of compensation you’d receive from your auto insurance company may not be worth the premium paid out.
Knowing how much your vehicle is worth can certainly help you determine if collision coverage is worth the price. Find out the current value of your car by using appraisal tools offered on sites such as Kelley Blue Book (KBB), NADAguides, and Edmunds.
What is the average accident claim pay out for collision claims?
The average collision amount paid in 2018 was $4,821, up 3% annualized from $3,818 in 2010, according to the latest data from the Insurance Research Council (IRC). Over the same period, overall CPI inflation was just 1.8%. The median payment in 2018 was $2,849.
Only 8% of collision claims were 5% or less. The percent of claims with payments of more than $10,000 increased from 8% in 2010 to 12% in 2018.
Will collision cover a dent if I repair it myself?
If a collision claim is filed on some light body damage to your car, it’s perfectly acceptable to fix it yourself and have the insurance company pay you directly. The only exception may be if your policy specifically states you must use preferred body shops, but that is rare and only legal in some states.
When dealing with your insurance company, explain that you will fix the damage yourself and that you want the money paid to you. It is strongly recommended that you only do this for light dents; if there is any frame damage, take the car to a body shop.
– Michelle Megna contributed to this story