What is Collision Insurance? And how much does it cost?

Collision insurance is one of the most common types of car insurance available. It covers financial expenses that arise from damages your car sustains in a collision. It does not, however, cover the other driver’s car. If you are in an accident, there is a good chance you will rely on collision insurance to cover the cost of your repairs.

What Is Collision Insurance?

Collision insurance is the type of car insurance that covers financial expenses arising from damages your vehicle sustained in an accident. In essence, collision insurance covers your damage expenses resulting from an accident. Backing into another car in the parking lot is a typical accident that is covered by your collision car insurance. Running into a tree or another car are two other types of common collisions covered by collision car insurance. Dealerships and banks typically require you to have collision insurance if you are leasing or financing a vehicle

What does Collision Insurance cover?

Collision insurance covers the damage to your car. When you are in an accident, you are entitled to file a claim for compensation with your insurance company regardless of who is at fault. Collision insurance will only cover up to the ACV (Actual Cash Value) of your vehicle and NOT what you paid for your car. That means that if your car was $30,000 brand new, but is now worth $20,000 with age and depreciation, you can only be reimbursed up to $20,000 minus a deductible. A deductible is a fixed amount you must pay before your insurance will kick in and cover the rest. This could start from $500 and go up to $2,000.

A nice thing about collision insurance, however, is that you deal with your own insurance company. You may receive a damage award sooner than you would from the other party’s insurance company. Furthermore, these claims are easier to settle than property damage claims with your own insurance company since a property damage claim requires the other party to be at fault. Thus, collision coverage offers significant benefits if you are in an accident.

Collision coverage does not cover damage done to another driver’s vehicle in the collision.  If you cause damage to another car in an accident, your property damage liability insurance covers this cost.

What Is the Difference Between Collision Insurance and Comprehensive Insurance?

Collision insurance covers most automobile accidents. Comprehensive insurance, on the other hand, excludes accident-related damage to your car. Examples of incidents that comprehensive insurance covers include natural disasters, theft, vandalism, and acts of God that cause damage to your car. Most damages a car sustains unrelated to an accident fall in the comprehensive insurance category. Comprehensive insurance is typically cheaper than collision insurance because the likelihood of an accident is higher than a natural disaster like a tree falling on your car. Because of the difference between these two types of insurance, insurers often recommend both. In fact, some insurance companies require that you purchase comprehensive coverage in order to obtain collision coverage.

How much does Collision and Comprehensive Insurance Cost?

The addition of collision and comprehensive insurance to your auto insurance coverage varies depending on these major factors.

  • Your Driving History – drivers who have had a previous accident will pay more in insurance premiums.
  • Where you Drive
  • The value of your car
  • The amount of deductible – the higher your deductible, the lower the cost. Some insurance companies offer up to $2,000 in deductible, but that means that you would have to pay $2,000 out-of-pocket first before the collision insurance reimburses for any costs.

Adding collision and comprehensive insurance to your basic car insurance policy can contribute up to almost 60% of your total car insurance premium. For example, in the state of California, the state minimum liability policy which covers the other party and their property when you are at fault would cost an average of $600 annually. However, if you add collision and comprehensive insurance to your basic liability coverage, you would pay $900 extra adding up to a total of $1500. This means that 60% of what you are paying goes toward collision and comprehensive insurance.

How Does Collision Differ from Uninsured Motorist Property Damage Insurance?

Collision insurance and Uninsured Motorist Property Damage Insurance overlap in many ways. They both pay for the damage to your car caused by an accident. Uninsured Motorist Property Damage Insurance, however, requires that the other driver be at fault. This type of car insurance does not offer adequate coverage in accidents in which you are at fault. Some states require drivers to have Uninsured Motorist Property Damage Insurance. You should consider obtaining collision insurance as well.

Do You Need Collision Insurance?

You need collision car insurance to cover the cost of your repairs if you are in an accident, especially if you are at fault. If you are in an accident, the cost of damages to your car can range from hundreds to thousands of dollars. If you have an expensive vehicle, you should purchase collision insurance. Like comprehensive insurance, collision insurance is recommended by insurance companies if your car has value (over $3,500). Collision auto insurance protects you from having to pay for car repairs from an accident with your savings.

>>MORE: Reasons Why You Need Collision Insurance


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