When it comes to car insurance, collision coverage is an option that many drivers consider. This coverage protects you financially if your vehicle is damaged due to a collision, regardless of who is at fault. However, collision coverage comes at an additional cost, raising the question of whether it is truly worth it. In this blog post, we will explore the pros and cons of collision coverage, helping you decide whether to invest in this type of insurance.
What is Collision Coverage?
Collision coverage is a type of auto insurance that pays for the repair or replacement of your vehicle in the event of a collision with another car or object. It is typically an optional coverage that you can add to your policy in addition to your primary liability coverage. While liability coverage protects other drivers and their property if you are at fault in an accident, collision coverage protects your vehicle.
What Does Collision Coverage Cover?
Collision coverage is a type of auto insurance that covers the cost of repairing or replacing your vehicle in the event of a collision with another car, object, or even a rollover accident. It is an optional coverage type that can be added to your auto insurance policy. Still, it is often recommended for those who want to protect their investment in their vehicle.
Here are some key points to understand about collision coverage:
1. Accidents with Other Vehicles: If you’re involved in a collision with another vehicle, collision coverage will cover the cost of repairing or replacing your vehicle, regardless of who is at fault. Whether it’s a fender bender or a major accident, this coverage can help alleviate the financial burden of repairing or replacing your vehicle.
2. Collisions with Objects: Collision coverage protects you if your vehicle collides with an object such as a tree, lamppost, or fence. If your car sustains damage from hitting an object, collision coverage will cover the cost of the repairs.
3. Rollover Accidents: In the unfortunate event of a rollover accident, collision coverage will cover the cost of repairs or replacement of your vehicle. Rollover accidents can cause significant damage, so having collision coverage can provide peace of mind, knowing you won’t have to bear the entire financial burden.
4. Deductible: Like other types of insurance coverage, collision coverage typically has a deductible. A deductible is the amount you are responsible for paying before your insurance coverage kicks in. You can choose a deductible amount that suits your budget and needs. Generally, a higher deductible will result in lower premiums, but it means you will have to pay more out of pocket in the event of a claim.
5. Vehicle Value: It’s important to note that collision coverage is based on the value of your vehicle. If your car is older or has a low market value, you may want to consider whether the cost of collision coverage is worth it. In some cases, the cost of the coverage may outweigh the potential repair or replacement costs.
6. Loan or Lease Requirements: If you have a loan or lease on your vehicle, collision coverage may be required by your lender or leasing company. This is because they want to protect their investment in the car. Failure to maintain collision coverage as required could result in a breach of your loan or lease agreement.
What Collision Insurance Doesn’t Cover
It’s important to understand that collision insurance doesn’t cover certain damages. For instance, it won’t cover damage to another person’s car, injuries, damage to your car caused by weather conditions like hail or flood, car theft, or repairs to an object such as a fence or pole you may crash into.
You’ll need comprehensive insurance if you want coverage for your car’s repair or replacement due to car theft, flood, fire, hail, falling objects (such as a tree branch), and animal collisions. Comprehensive insurance is often sold alongside collision insurance and is typically required if you have a car loan or lease.
How Does the Collision Insurance Deductible Work?
Your car insurance deductible will apply when you file a collision insurance claim. The deductible is the amount that will be subtracted from your insurance claims check. For instance, suppose you have a deductible of $500, and your car repair bills after a car accident equal $3,000. In that case, you will receive an insurance check for $2,500 ($3,000 – $500 = $2,500).
When you purchase collision insurance, you will have the option to choose your deductible amount. Deductible amounts can vary between $100 to $1,000 or even higher, with $500 being a popular choice. You may pay lower car insurance rates if you opt for a higher deductible. Your insurer will pay less if you file a collision insurance claim.
How Much Does Collision Insurance Cost?
Nationally, the average annual cost for collision insurance is $381, according to the National Association of Insurance Commissioners (NAIC). You can find your state’s average cost below.
Average annual cost of collision insurance lists by state
| State | Annual average collision insurance cost |
| Alabama | $390 |
| Alaska | $402 |
| Arizona | $328 |
| Arkansas | $373 |
| California | $495 |
| Colorado | $332 |
| Connecticut | $413 |
| District of Columbia | $539 |
| Delaware | $355 |
| Florida | $356 |
| Georgia | $421 |
| Hawaii | $371 |
| Idaho | $270 |
| Illinois | $351 |
| Indiana | $289 |
| Iowa | $251 |
| Kansas | $286 |
| Kentucky | $308 |
| Louisiana | $485 |
| Maine | $298 |
| Maryland | $430 |
| Massachusetts | $447 |
| Michigan | $479 |
| Minnesota | $274 |
| Mississippi | $365 |
| Missouri | $318 |
| Montana | $286 |
| Nebraska | $273 |
| Nevada | $375 |
| New Hampshire | $334 |
| New Jersey | $422 |
| New Mexico | $316 |
| New York | $470 |
| North Carolina | $344 |
| North Dakota | $284 |
| Ohio | $304 |
| Oklahoma | $339 |
| Oregon | $282 |
| Pennsylvania | $383 |
| Rhode Island | $491 |
| South Carolina | $318 |
| South Dakota | $248 |
| Tennessee | $353 |
| Texas | $434 |
| Utah | $308 |
| Vermont | $333 |
| Virginia | $324 |
| Washington | $325 |
| West Virginia | $353 |
| Wisconsin | $251 |
| Wyoming | $292 |
| Source: National Association of Insurance Commissioners, 2022 Auto Insurance Database Report | |
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Do You Need Collision Insurance?
If you own your car, collision insurance is not mandatory, so you are not obligated to purchase it. However, you will most likely be compelled to buy collision insurance if you have a car loan or lease. This insurance aims to protect the financial investment of your lender or leasing company if your car is totaled in a car accident.
Even if collision insurance is not mandatory for you, it is still a good idea to consider it. According to the latest data from the NAIC, the national average collision claim amounted to $4,601. If you caused a car accident and did not have collision insurance, you would not have coverage for your car repair bills. Moreover, if your car is deemed a total loss, you must pay for its replacement from your own pocket.
What are the benefits of collision coverage?
1. Protection against Repair Costs:
One of the primary benefits of collision coverage is that it helps cover the costs of repairing your vehicle after a collision, regardless of who is at fault. Repairing a damaged car can be a significant financial burden, but with collision coverage, you can rest assured knowing that your insurance will assist you in covering the expenses. This coverage applies to collisions with other vehicles, stationary objects, or rollovers.
2. Vehicle Replacement:
In some unfortunate cases, an accident may render your vehicle irreparable. In such situations, collision coverage can be a lifesaver by providing funds to replace your vehicle. Depending on your policy, the insurer will reimburse you with the actual cash value of your car or the cost to replace it with a similar model. This benefit ensures that you won’t be left without a vehicle, minimizing the disruption to your daily life.
3. Peace of Mind:
Knowing that you have collision coverage can bring peace and security. Life is unpredictable, and accidents can happen unexpectedly. By having this type of coverage, you can drive with confidence, knowing that you are financially protected in the event of an accident. It lets you focus on the road and enjoy your driving experience without worrying about potential repair costs.
4. Flexibility in Choosing Repair Shops:
With collision coverage, you can choose where your vehicle will be repaired. While your insurance provider may recommend certain repair shops, you are not obligated to use their suggested options. This freedom enables you to select a repair facility you trust, ensuring your vehicle is in capable hands.
5. Protection for Leased or Financed Vehicles:
If you are leasing or financing your vehicle, collision coverage is often a requirement by the lender or leasing company. This coverage protects their financial interests and your own by ensuring that the car can be repaired or replaced in case of an accident. Without collision coverage, you may breach your lease or loan agreement.
>>> Read: Top Tips to Lower Your Car Insurance Premium
What are the drawbacks of collision coverage?
We will explore the drawbacks of collision coverage, allowing you to make an informed decision about your auto insurance needs.
1. Cost:
One of the primary drawbacks of collision coverage is its cost. Compared to other types of auto insurance coverage, collision coverage can be relatively expensive. This is primarily due to the higher probability of accidents and the potential for significant vehicle repairs or replacements. As a result, collision coverage can significantly increase your insurance premium.
2. Deductibles:
Collision coverage typically requires policyholders to pay a deductible before the insurance company covers the remaining cost of repairs or replacement. A deductible is the amount you must pay out of pocket before the coverage kicks in. If you have a high deductible, you must pay a substantial amount upfront before your insurance benefits apply. High deductibles can be a drawback for individuals who may not have readily available funds to cover the cost.
3. Limited Coverage:
Another drawback of collision coverage is its limited scope. Collision coverage only covers damages caused by a collision with another vehicle or object. It does not cover other types of hazards, such as theft, vandalism, natural disasters, or damage caused by animals. To protect against these risks, you would need additional coverage like comprehensive insurance. Therefore, relying solely on collision coverage may expose you to other potential financial burdens.
4. Age and Condition of Your Vehicle:
Your vehicle’s age and condition can also influence collision coverage’s drawbacks. If your car is old or has depreciated significantly, the cost of repairs or replacement may not be worth the premiums you pay for collision coverage. In such cases, it might be more financially viable to consider dropping collision coverage and relying on other forms of coverage.
5. Potential Rate Increases:
Another consideration is the potential for rate increases following a collision claim. Insurance companies take into account your claims history when determining premiums. If you make a collision claim, especially if you are at fault, your insurance provider may raise your rates at renewal. This can lead to long-term financial implications, as increased premiums can persist for several years.
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Pros and Cons of Collision Coverage
Pros of Collision Coverage:
1. Protection for Your Vehicle:
The primary advantage of collision coverage is that it protects your vehicle from damage caused by collisions, regardless of who is at fault. This coverage provides peace of mind, especially if you have a newer or more expensive vehicle that would be costly to repair or replace.
2. Coverage for Single-Vehicle Accidents:
Collision coverage not only covers accidents involving other vehicles but also those involving stationary objects such as trees, fences, or poles. This is particularly useful if you live in an area prone to inclement weather or have a higher risk of accidents due to road conditions.
3. No Need to Rely on Others’ Insurance:
Without collision coverage, you would need to rely on the at-fault driver’s insurance to cover the cost of repairs. This can be problematic if the other driver is uninsured or underinsured. Collision coverage ensures you can promptly repair your vehicle without worrying about delays or insufficient compensation from others.
Cons of Collision Coverage:
1. Additional Cost:
One of the main disadvantages of collision coverage is that it increases the cost of your auto insurance premium. The price of this coverage varies depending on factors such as your driving history, the value of your vehicle, and your deductible. It’s essential to consider whether the added expense fits within your budget.
2. Coverage Limitations:
Collision coverage typically has limitations that you should be aware of. For instance, it may not cover the full cost of repairs or replacement if your vehicle is deemed a total loss. Additionally, some policies may exclude certain collisions, such as those involving animals or intentional damage.
3. Older Vehicles Might Not Benefit:
If you have an older vehicle with a low market value, collision coverage may not be cost-effective. In such cases, the cost of the coverage over time may exceed the potential payout for repairs or replacement.
Make a claim on your collision insurance.
When you have collision insurance, it will pay for your car repair bills, but you will have to pay a deductible. For instance, if your car repair bills amount to $3,000 and your deductible is $500, you would receive an insurance check of $2,500. In case the other driver is responsible for the accident, your insurance company may be able to obtain a full or partial refund of your deductible through a process called “subrogation.” However, the laws for this process vary by state, and the resolution might take up to a year or more.
Make a claim against other driver’s liability insurance.
If you were involved in a car accident that another driver caused, you may be able to file a claim against their liability insurance. However, this process can be a bit tricky, especially depending on the state in which you reside. Some states have comparative negligence laws for car accidents, which assign a certain percentage of fault to each driver.
For instance, the other driver’s insurance company may determine that their driver is 75% at fault for the accident and you are 25% at fault. The other driver’s insurance company would only pay for 75% of your claim. So, if your car repair costs were $3,000, you would receive an insurance check for $2,250 ($3,000 x 75% = $2,250) before your deductible is subtracted. However, remember that the details of how fault is split up can vary by state.
