What to know when considering collision insurance

No state requires the purchase of collision insurance — so why do people have it? There are actually many ways collision insurance helps protect you when you’re on the road, and when it comes down to it, you can’t go wrong with the added peace of mind it provides.

Let’s take a look at the ins and outs of collision insurance, so you’re informed when deciding if it’s right for you.

What is collision insurance?

Collision insurance is an optional coverage that helps cover your car if it’s damaged by another vehicle or object, like a tree or mailbox. It’ll help pay for damages whether you’re at fault or not. Usually, when you get in a covered accident, you’ll pay a deductible before the insurance kicks in.

Let’s break it down:

What is covered by collision insurance?

• A collision with another vehicle, whether it was your fault or not.
• A collision with an object, like a tree, mailbox, fence, pole, even potholes.
• A single-car accident that involves a roll-over, for instance from black ice.

What is not covered by collision insurance?

• Damage to another person’s vehicle. (That’s what liability insurance is for.)
• Damage to your vehicle caused by something not related to driving. (That’s what comprehensive coverage is for.)
• Yours or someone else’s medical bills. (That’s what medical expense coverage is for.)

Why is collision insurance important?

Imagine you’re driving down a highway on a snowy winter day. The snowplows are clearing the roads ahead and you think you’re in the clear. Suddenly, your car begins to slip and you can’t maintain control of your vehicle, causing you to slam into the car in the next lane. Fortunately, no one is seriously injured, but unfortunately, both cars took on some serious damage.

You provide your insurance information to the other driver, and your property damage liability insurance will take care of their damages. But what about your vehicle? You take a gander at the front end of your car and realize it’ll be a pretty penny to repair. Thank goodness you have collision insurance! All you have to do is pay your deductible and your insurance company should cover the rest.

Now imagine you didn’t have collision insurance. How much would it cost to repair or even completely replace your vehicle if it was totaled? If you wouldn’t be able to afford the costs to repair your car, or even more so, buy a new one to replace it, having collision insurance is that added layer of protection that can prevent you from financially being responsible for expensive damages — and that’s really important.

Why you might need collision coverage

As mentioned before, no state requires you to purchase collision insurance coverage, but that doesn’t mean you don’t need it. Consider the following:

Do you have a lease or loan on your vehicle? A leasing and financing company typically require you to have collision coverage when you lease or take out a loan on your vehicle.

What’s the actual cash value (ACV) of your vehicle? Find out the cash value of your vehicle and compare it to your collision premium — is it worth it to continue the collision coverage if your car isn’t worth that much? That’s your judgement call, since you’ll decide what you can afford to repair or replace your car if you get into an accident.

Don’t forget to consider your deductible here too. If you have a high deductible, say $1,000, and your car’s ACV is only $1,500, is it worth it to fork out the premium each month for collision? Again, that’s up to you, but it’s important to consider what you’re actually paying for when deciding if you need collision or not.

Do I need collision and comprehensive coverage?

Collision and comprehensive coverage often go hand in hand when purchasing auto insurance. You now know how collision covers you — here are some ways comprehensive coverage protects you:

• Damages to your car from things like vandalism, hail, fire, falling objects, flooding, rocks cracking windshields.
• Damage to your car from hitting an animal, like a deer.
• If your car is stolen and not found, you can receive the actual cash value for your vehicle.

Most insurance companies require that you purchase comprehensive if you purchase collision. On the other hand, if you only want to purchase comprehensive, you don’t have to purchase collision.

How do you know if you need these coverages? Consider the following circumstances:

• Is your car less than 10 years old?
• Is your car more than 10 years old and worth more than $3,000 or more?
• Can you afford to repair or replace your car if it’s damaged, totaled or stolen?

Again, it mostly comes down to what you can afford if you were to get into an accident. Take some time to determine what you’d pay for collision and comprehensive coverage annually, how much your car is worth, and how much you could afford to pay out of pocket if you were in an accident. What makes the most sense for you?

Should I get collision insurance on an old car?

Your car may be old, but what’s its actual cash value? You can find that out by using the reliable Kelley Blue Book Online, which will help you get a solid estimate on the value of your vehicle.

Is it worth it to get collision coverage for an old car? Usually, if its value is less than $3,000, you probably don’t need collision coverage since the price of paying your premiums would eventually surpass what your car is even worth.

Is collision insurance necessary for a rental car?

Whether it’s through your own provider or purchasing a loss damage waiver (LDW) through the rental company, it’s good to have some form of collision insurance to rent a car — and you’ll want it since you’re liable for any damages that occur to the vehicle while it’s in your possession.

That being said, some rental companies don’t require you to have collision coverage as long as you sign on the line that you’re responsible for any damages.

Having collision insurance on your own policy generally extends to a rental car, much like you other coverages will. But to be sure, give a call to your agent and make sure this is the case. And if you don’t have collision coverage, ask the rental agency what coverage you’ll need to be covered for damages and repairs to the vehicle.

How much does collision coverage cost?

The price for collision coverage differs with every person and every insurance company, but there are three main factors that determine the cost of your collision coverage:

Driving history. If you’ve had several accidents, you’ll probably be paying more for collision coverage than someone with a clean record.

Value of your vehicle. Is your car worth a lot? Your premium for collision coverage will be higher than someone with a less expensive vehicle, since it’ll cost more for repairs or to replace your car.

The size of your deductible. A deductible is the amount of money you’ll pay for damages and repairs before your insurance company steps in to cover the rest (up to your policy’s limits). Usually, your deductible ranges from $100-$1,000, and the lower deductible you pay, the higher your premium. Vice-versa — the higher you pay for your deductible, the lower your premium will be.

If you’re considering getting collision insurance but aren’t sure if you can afford it, give your insurance agent a quick call — they’ll help you determine an estimate.

How much collision insurance do I need?

Collision insurance covers the repair or replacement cost for your vehicle in the event you get into an accident, and your collision coverage limit will be based on how much your vehicle is worth. Since your collision coverage limit is determined by your vehicle’s value, your focus should be on the deductible. Remember, the deductible is the amount of money you’ll pay out of pocket before your insurance covers the rest. So, you’ll need to decide how you went to set your deductible — pay more in premiums and less in the event of an accident or pay less in premiums and more in the event of an accident.

Is collision insurance worth it?

If your car is paid off and you plan on driving it for a long time, if your vehicle is worth a good chunk of change, or you simply want peace of mind that you have that extra layer of protection — collision insurance is absolutely worth it.

Having this coverage can save you a lot of money out of your own pocket (and stress!) if you were to get into an accident, and though we hope you avoid any accidents, you never know when the unexpected will happen.

So, should I get collision insurance?

The short answer? That’s up to you and your unique situation. Do your research and get informed — collision insurance isn’t for everyone, but it is for a lot of people.

Being educated on your auto insurance can save you money in the long run! If you have any questions about collision insurance, get in touch with your American Family Insurance agent to determine what the best coverage is to keep you driving forward.

This article may include information that represents a brief description of coverages, but this is not part of your policy, and is not a promise or guarantee of coverage. If there is any conflict between this information and your policy, the provisions of the policy will prevail. Insurance policy terms and conditions may apply. Exclusions may apply to policies, endorsements, or riders. Coverage may vary by state and may be subject to change. Some products are not available in every state. Please read your policy and contact your agent for assistance. We are not responsible for the content of any third-party sites that may be linked in this article.