Auto coverage known as collision insurance covers the insured for damage to their vehicle that was caused by the insured driver’s actions. To safeguard drivers in the event of collision damage, this kind of insurance is frequently purchased as an add-on to a standard automobile policy.
Collision coverage deductibles and limits
A deductible is an amount you pay before your collision insurance pays for your claim. When you buy insurance, the amount of your collision deductible is typically up to you.
You may be able to choose from a variety of deductible amounts, typically $0, $500, or $1,000, depending on your insurer. Your premium will probably go up if you choose a lower deductible. Similarly, if you select a higher deductible, your premium might go down. But keep in mind that if you have a covered claim, you will have to pay your deductible out of your pocket for car repairs. Therefore, if you select a deductible of $1,000 and your vehicle is later damaged in a covered accident, you would be required to pay $1,000 for repairs. The typical deductible ranges from $250 to $1,000, but the value of your vehicle is an important consideration when determining the amount of your deductible.
The maximum amount your policy will pay toward a covered claim is the limit of your collision coverage. The actual cash value of your vehicle, less its depreciation, is typically the amount that counts toward your collision coverage limit.
Take, for instance, a covered collision in which your car is totaled. The depreciated value of the automobile, less your deductible, would be paid to you by your insurance company. Keep in mind that if your old vehicle has “depreciated value,” you may not be able to buy a newer model. That would probably necessitate spending some of your own money.
Quick Facts on Collision Insurance
- Collision insurance can only be purchased in conjunction with comprehensive and liability insurance.
- When two vehicles in drive or reverse collide, collision insurance covers the damage.
- If you slide into an inanimate object and hit the ice, collision insurance will cover the damage to your vehicle.
- Pothole damage is covered by collision.
- People can save money on collision insurance by selecting a deductible of $500 or higher.
What does collision insurance cover?
Collision insurance helps pay to repair or replace your vehicle if it’s damaged from:
- A collision with another vehicle
- a collision with something, like a fence or a tree.
- a one-car collision that results in rolling or falling over.
What is not covered by collision insurance?
Collision insurance does not cover:
- Damage to your vehicle not related to driving (examples: hail or theft)
- Damage to another person’s vehicle
- Medical bills (yours or another person)
The cost of collision insurance
The National Association of Insurance Commissioners [1] reports that the average annual cost of collision coverage in the United States was approximately $381 in 2019, the most recent year for which data are available. Discounts and group policies, which typically cost less than individual policies that can be purchased online, may account for your own higher cost.
Depending on the company, you might not be able to buy collision insurance without comprehensive coverage, or vice versa. This could be because your current loan or lease requires both of them, or it could be because your insurer wants one to be bought by the other.
Comprehensive insurance typically costs less because collision claims are more common. A lower premium can be achieved by increasing your deductible if you can cover the out-of-pocket costs.
Why buy collision coverage?
Collision coverage is typically not an option if you owe money on your vehicle or lease it; It is required by most leaseholders and lenders. However, you can decide whether or not to purchase collision coverage if your vehicle is paid off.
One thing to think about: how much it would cost to fix or buy a new car if you were in an accident and it was damaged or destroyed. After a collision, if you couldn’t afford to fix your car or buy a new one, collision coverage might give you some peace of mind.
