What is Collision Insurance? A Complete Guide

What Is Collision Insurance?

Collision insurance is a type of car insurance that covers damage to your vehicle from a collision. It protects against financial loss if your car is damaged in an accident with another vehicle or object. Collision coverage is optional but highly recommended to avoid paying costly repair bills out-of-pocket. This guide will provide a comprehensive overview of what collision insurance is, what it covers, how it works, and tips for getting the best coverage at an affordable price.

What Does Collision Insurance Cover?

Collision insurance covers damage to your vehicle up to its actual cash value or replacement cost resulting from a collision. This includes accidents with other cars, objects, or by flipping or rolling your car. Collision is a broad term that includes:

  • Collisions with other vehicles
  • Single-car accidents
  • Accidents involving stationary objects (like a tree, pole, or guardrail)
  • Rollovers
  • Damage from potholes
  • Vandalism or car damage from civil disturbances

Collision insurance will pay to repair or replace your vehicle if the costs exceed your deductible. It covers both your vehicle and the other driver’s when you’re at fault.

Here are some common collision repairs and replacements covered:

  • Body work like dents, dings, and crumpled metal
  • Paint work
  • Mechanical and electrical repairs
  • Airbag replacement
  • Frame or structural repairs
  • Towing and rental car reimbursement during repairs
  • Replacement cost if the vehicle is totaled

Without collision insurance, you would have to pay these costs out-of-pocket. This could easily total thousands or tens of thousands of dollars depending on the severity of the accident.

What is NOT Covered by Collision Insurance?

While collision insurance covers a wide range of accidents, there are some limitations:

Wear and tear: Collision does not cover gradual damage from normal use and aging. This includes paint fading, rust, worn interiors, and minor dents or scratches. These maintenance issues are your responsibility as the car owner.

Mechanical breakdowns: Engine failure, transmission problems, electrical issues, and other breakdowns are not covered under collision. You need comprehensive or mechanical breakdown insurance for these repairs.

Accidents below your deductible: Any accidents causing damage below your selected deductible amount will need to be paid out-of-pocket. Collision only pays for costs exceeding your deductible.

Damage from natural disasters: Collisions from events like floods, hurricanes, tornadoes, earthquakes, or wildfires need separate comprehensive or act-of-God coverage.

Damage you cause intentionally: Insurance will not cover any collisions you cause on purpose. Causing intentional damage or staging accidents is insurance fraud.

Routine maintenance: Oil changes, new tires, brake pads, battery replacement, and other maintenance are your responsibility and not covered.

Diminished value: Collision does not compensate you for the loss of your car’s value after an accident due to having an accident on record. This reduction in resale value still applies even after repairs.

Always read your policy documents closely so you understand exactly what types of collisions are covered and any exclusions or limitations.

How Does Collision Insurance Work After an Accident?

When you’re in an accident, collision insurance covers repair costs through these basic steps:

  1. Report the accident to your insurance company promptly. Provide date, time, location, damage, injuries, and details on the other vehicles involved. Photos of the damage and accident scene are also helpful.
  2. An adjuster investigates to determine fault and validate that the damages exceed your deductible. For major accidents, they may inspect vehicles in person.
  3. You pay the collision deductible. This is your portion of the repair costs before insurance kicks in. Deductibles are typically $250 to $1,000.
  4. The insurance company pays for covered repairs above the deductible directly to the auto shop doing the work. You’ll only need to cover your deductible.
  5. Damaged parts are repaired or replaced to restore your vehicle to pre-accident condition. The shop will handle everything covered in your policy.
  6. You reimburse your deductible once repairs are complete and you pick up your vehicle. Keep the receipt as proof you paid your portion.
  7. Fault and payouts are determined. Your insurer will try to recover costs from the other driver’s insurance if they were at fault. You may need to sue the at-fault driver directly in some cases.

Following these steps ensures you get your vehicle fixed properly while minimizing out-of-pocket costs. Responsibly filing the claim protects your insurance record.

Do You Need Collision Coverage?

Collision insurance is almost always recommended for vehicles with any outstanding finance or lease balance. The lender legally requires you carry it to secure their investment in your vehicle.

But do you really need it once you fully own your car? Consider these factors:

How New is Your Vehicle?

The newer your vehicle, the more you stand to lose financially in an accident. Collision makes the most financial sense on cars 5 years old or less. As vehicles age, repair costs exceed actual cash value.

How is Your Driving Record?

Drivers with clean records and no prior claims generally pay less for collision insurance. The expense is harder to justify for high-risk drivers with multiple accidents or violations. Review accident statistics and your record to estimate future risk.

Where do You Live and Drive?

Densely populated areas with congested driving and high accident rates warrant collision coverage. Rural areas with open roads generally have fewer and less severe collisions. Location impacts your risk.

Can You Afford Major Repairs?

Think about your savings and ability to pay for repairs in cash if needed. Out-of-pocket repair bills could total thousands for major collision damage. Only skip collision if you have ample savings as a safety net.

Is Your Car Paid Off?

Once your vehicle is paid in full, collision is more optional compared to financed cars. But you still need coverage if unable to self-insure repairs or replacement costs.

Carefully weighing these factors helps determine if collision insurance is worth the cost or if you can assume some financial risk. High-value cars almost always merit the extra protection.

How Much Does Collision Insurance Cost?

Collision insurance premiums are based on these factors:

  • Your vehicle: Newer, luxury, or high-performance cars cost more to insure and repair. Collision rates are higher to match the higher value of your vehicle.
  • Your deductible: Choosing a higher deductible reduces your premiums but increases out-of-pocket costs per accident. Lower deductibles have higher premiums.
  • Your driving record: Drivers with past accidents, tickets, violations, or claims pay a higher collision premium. Clean records have lower rates.
  • Your location: Collision premiums are higher in dense urban areas with more accidents, vandalism, and thefts compared to rural areas.
  • Your insurance company: Each insurer uses different formulas and risk factors to determine premiums based on claims data. Shop around for the best rate.

Expect to pay $100-$300 per year or more for collision coverage depending on these variables. Comparing quotes from insurers helps find the best rate for your situation. Your agent can provide quotes based on your vehicle and driving details.

How to Get the Best Collision Insurance Rates

Follow these tips to get the lowest premiums while still getting adequate protection:

  • Shop around and compare collision insurance quotes from both agents and aggregators like QuoteWizard or The Zebra. Rates can vary widely between insurers.
  • Increase your deductible. Premiums will be significantly lower with a $1,000 deductible instead of $500. Just ensure you have savings to cover the higher out-of-pocket costs.
  • Ask about discounts. Taking defensive driver courses, bundling policies, insuring multiple vehicles, and having anti-theft devices can reduce collision premiums.
  • Maintain good credit. Insurance scores factor into premiums. Keep up with payments, lower debt, and correct errors to increase your score.
  • Drive safely. Avoid accidents, traffic violations, and claims to qualify for lower premiums as a safe, low-risk driver.
  • Drop collision on older cars. Once your vehicle ages past 10 years or loses significant value, collision costs often outweigh the coverage benefit.
  • Increase liability limits. Boosting liability coverage limits often allows for reducing collision premiums in a bundled policy.

With smart shopping, you can find affordable collision insurance rates and maximize coverage value.

Frequently Asked Questions

What is the difference between collision and comprehensive coverage?

Collision covers accidents with other vehicles or objects while driving. Comprehensive covers damage to your vehicle when not in motion from non-collision causes like theft, vandalism, weather, or fire. Comprehensive and collision are sold as optional add-ons to basic liability insurance.

Can I just decline collision insurance?

Lenders require collision coverage for financed vehicles. Once you fully own the vehicle, declining collision is optional if you can pay repair bills in cash. But it’s a risky move for expensive cars or new vehicles still building equity.

Does my own insurance pay for repairs, or the other driver’s?

Your own collision insurance covers repairs regardless of who is at fault. Your insurer would then subrogate to get reimbursement from the at-fault driver after repairs are complete. Using your own policy gets your car fixed faster.

What if the at-fault driver has no insurance?

Uninsured motorist coverage would apply if the at-fault driver has no insurance. This pays for your repairs up to the specified limits. Your collision deductible still applies.

How much does the collision deductible cost if I’m not at fault?

You must pay your deductible upfront for repairs, even if the other driver is at fault. Your insurer will try to recover the deductible from the liable driver’s insurance after repairs, so you’d be reimbursed later.

The Bottom Line on Collision Insurance

Collision coverage protects against major repair bills from accidents while driving. It covers your vehicle’s repairs or replacement if damaged, minus your chosen deductible. Collision insurance provides valuable peace of mind against expensive covered losses. For newer and financed vehicles especially, collision coverage is highly recommended despite the added premium costs. But it can likely be declined on older, paid-off cars to save money for lower-risk drivers. Understanding exactly what collision entails helps ensure you have the right protection.

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