Collision car insurance pays for repairs and replacements on your vehicle in case you are involved in an accident even if you are at fault. This type of insurance is usually optional so your insurer will require extra payment if you choose collision insurance as an extension on your policy.

If your car is leased or on loan, the financier or leasing company will usually require collision insurance to protect their asset.

How Does Collision Insurance Work

Collision insurance covers you if your car is damaged or totaled in an accident. It covers damages such as:

• Crashing into another car
• Crashing into a standing object such as a pole, fence, wall, or guardrail
• Hit and run where the other driver hit your car
• Your vehicle rolls over
• Damages caused by a pothole

Collision insurance does not cover damages such as:

• Theft
• Weather-related damages
• Injuries
• Damage to another person’s vehicle
• Repairs to the objects you may have collided into such as fences or poles

If you want your insurance to pay for theft, natural events that damage your car, collisions with animals, floods, or fire, consider buying comprehensive insurance. Comprehensive insurance may be bought together with collision insurance.

If your car is loaned or leased, you will be required to buy comprehensive insurance in addition to collision insurance.

If you are in an accident, you can file a claim with your insurer to help you pay for repairs even if you were at fault. If your car is considered a total loss or the damages are too extensive for repairs, you can also claim for replacement.

If you are not at fault for the accident, usually the liable party’s insurance will pay for your repairs. However, if they are underinsured or uninsured, your collision coverage will cover the cost.

Of course, once you file a claim, you are required to pay your deductible towards repairs while insurance covers the remaining balance.

Collision Insurance Deductibles

The collision insurance deductible is an amount deducted before your insurance pays for your claim. When you purchase a policy, you can choose the deductible ranging from $100 to over $1000.

However, if you choose a lower deductible, it also means that your insurance rates will be higher. If you choose a higher deductible, your premiums will be lower. This is because, if you file for a claim, your insurer will have to pay more if you have a lower deductible.

Keep in mind that the deductible is usually paid out of pocket. For instance, in case you are in an accident, if you choose a $500 deductible, you will usually have to pay this amount towards repair costs.

Common deductible amounts range from $250 to $500. However, the deductible rate is typically influenced by the value of your car.

Your collision coverage usually has a limit. This is the maximum amount that your insurer can pay towards your claim.

The collision coverage limit is usually the actual cash value of your car. If your car is totaled in a collision, the payout from your insurance company will be the value of your car minus depreciation and your deductible.

This means that you may not be able to replace your car with the same make and model or a newer version and you may have to pay more money out-of-pocket to get a new vehicle. It is sensible to choose a lower deductible if you have a lower-value car.

How Much Is Collision Insurance?

According to the National Association of Insurance Commissioners, the average national rate for collision insurance is $381. However, this varies by state, with some such as California and Columbia paying as high as $495 and $539 respectively.

Some states such as Nebraska have a lower average of $273. Of course, there are also other factors that insurers use to determine your insurance rates such as:

• Age
• Driving History
• The deductible chosen
• The make and model of your car, and others

Why Do You Need Collision Coverage?

As discussed earlier, if your car is leased or on loan, collision coverage is not optional. Most lenders require you to have this coverage to ensure their asset is protected.  However, if the car is fully paid off, collision coverage is completely optional.

One major factor that affects the decision to buy collision coverage is repair costs in case of an accident. If you cannot afford repairs after an accident or to buy a new car if it is written off, then collision insurance is a good option.

Do You Need Collision Insurance for Older Vehicles?

If you are buying a brand new car, fresh out of the showroom, it makes sense to buy collision insurance. But what if you are driving an old car or a second-hand model? Is it worth it?

The biggest factor to consider is always how much you can afford to spend on repairs and replacement. Just because the car is old, does not mean that you will not need help to pay for repairs.

Another factor to consider is how much the car is worth. If the car is worth $500 it makes no sense to spend $300 on collision insurance. In this case, it will be easy to replace it with another car of similar value.

No matter how old the car is, it is always a good idea to consult your insurance agent to find out how much it will cost for collision coverage. If the cost is low enough, then it makes sense to pay for collision insurance and keep a good old model vehicle covered while you are on the road.

Choose the Right Collision Insurance Coverage for Your Needs

While choosing the right insurance coverage for your needs can be tricky, it is always a good idea to protect yourself as much as you can.

Purchasing collision coverage gives you peace of mind and allows you to pay for extensive damages that you might not otherwise be able to afford. It also prevents you from having to pay out of pocket for any costs that exceed your deductible.

While it is optional, combining collision insurance with comprehensive and liability coverage gives you enough protection.

Contact your insurance provider to find out more about collision coverage and how you can benefit from adding it to your policy.