In almost all the states in the U.S., you’re required to have a minimum car insurance policy that will cover property damage and bodily injury. In some states, you also have to have uninsured/underinsured motorist coverage. While those are often the minimum requirements, states don’t require that you have collision insurance.
Collision insurance definition – Covers the cost of damage to your car if you hit an object, or someone else hits you.
For people who want cheaper monthly auto insurance costs, they might decline collision insurance, but are they leaving themselves in a risky position by doing so? In some cases, it’s okay to opt out of collision insurance, and in others, it may not be a smart idea.
- What Does Collision Insurance Cover?
- Benefits of Having Collision Insurance
- Is Collision Insurance Worth It?
What Does Collision Insurance Cover?
Collision and comprehensive coverage often go hand-in-hand, as they provide protection in the event of car damage. However collision insurance will cover the cost of damage to your car if you hit an object, and also damage to your car if someone else hits you. In some cases, if someone else hits you, you might instead make a claim against the liability insurance of the other driver.
Collision and comprehensive insurance are often sold together as a package deal, but they don’t cover the same things. Something a lot of people don’t understand about collision insurance is that it can also be used for accidents when you’re not at fault.
Specific situations covered by collision insurance include not only hitting another object, but also overturning your car. If your vehicle is part of a hit-and-run accident, such as in a parking lot or on the street, collision will also cover this.
With collision, if you wreck your own car, the insurance company will pay for the expenses related to repairing it. If the cost of repairs is more than the value of the vehicle, the insurance company will pay for a replacement. The replacement is based on the market value of your vehicle at the time the accident occurs. Also, if you don’t have comprehensive coverage, sometimes collision might pay for things that would normally be covered under this as well.
Benefits of Having Collision Coverage
First, while collision coverage can be a choice based on state law, some lenders will require it. If you’re leasing a car, you may also be required by the leaseholder to purchase collision coverage. If you don’t purchase it on your own, they’ll buy it for you and then include the costs in your monthly loan or lease payment. It’s often much more expensive this way than it would be if you bought it on your own.
Collision coverage is also just a good overall source of protection if someone unexpected happens, which it can and often does. If you were to hit something, such as a telephone pole, would you be able to afford the costs of repairing or replacing your car? With collision insurance, you don’t have to worry about going into your savings or not having the money if you hit something with your car.
A car is an asset, and as with other assets, you should try and protect it as much as possible. Collision insurance can be an important part of protecting it. Also, proving fault in an accident can be very challenging. However, if you have collision insurance, you don’t have to go through the difficult and often lengthy process of proving fault.
Is Collision Insurance Worth It?
While there are benefits to having collision insurance, there are reasons it might not make sense for you as well.
Sometimes, if your car isn’t worth much, it’s smart just to replace it if something happens, and there’s no need to pay the cost of collision coverage along the way. If you’re unsure, research the current value of your car. You can then calculate how much collision coverage will be for coverage. If you can look at your annual premiums for the next three years or so and they’re going to be nearly the same or more than the value of your car, you may want to skip or cancel collision insurance.
Overall, the cost to add collision insurance can vary quite a bit based on the insurance company, as well as the value of your car, where you live, your deductible, and your driving history. For example, if you live in New York, according to CarInsurance.com, the average annual cost of a basic liability policy is $1,403, and the cost to add both comprehensive and collision is an additional $2,510.
If you raise your deductible, you can save money, but you have to think about how that’s going to affect you if you do end up having to repair your car or replace it. To give another estimate of how much collision insurance might cost, according to Progressive, it on average costs $63 per month, and the typical deductible is $500.
For most drivers, collision coverage is probably worth it. While states don’t require these types of coverage, many lenders and car lease companies do. It is a good safeguard, especially for more expensive or newer vehicles.
The only time where collision insurance probably won’t be worth it is if your car is very old or has very little value. In these cases, you’d probably be paying more than the car is worth. Other than that, it’s valuable for the majority of drivers.