Collision Insurance: Worth The Cost?

Collision insurance is an optional form of coverage that pays to repair or replace your car after a crash. It is not required by law, but it may be required by your lender or leasing company if you are still paying off your vehicle. If you own your car outright and it is old or has low value, collision insurance may not be worth it. However, if you would have a hard time paying for repairs or a replacement after a crash, collision insurance can provide peace of mind.

When is collision insurance required?

Collision insurance is not required by law in any state. However, if you are leasing a vehicle or still making payments on it, your lender will likely require you to have collision coverage. This is to protect the lender or leasing company. If you are interested in new car replacement coverage, you will also be required to have collision coverage.

If you own your vehicle outright, you may still want to consider collision insurance. It can protect you from a costly repair or replacement after an accident. If you are in an accident where the other driver is at fault, their policy may not cover the full cost of the damages to your vehicle, and your collision policy can pay the remainder of your bills.

Collision insurance is particularly recommended if your annual premium is less than 10% of your car's value, which is often the case for newer and/or more expensive vehicles.

On the other hand, if you have an old car or a car with a low value, it may not be worth purchasing collision insurance.

When is collision insurance not worth it?

Collision insurance is not worth it in several scenarios. Firstly, if you have an old car or a car with low value, collision insurance may not be a worthwhile investment. The coverage will only pay up to the car's current market value, minus the collision deductible, so for older cars with low market value, the payout will likely be minimal or non-existent.

Secondly, if you have a safe driving record and are unlikely to cause an accident, collision insurance may be unnecessary. In the event of an accident, you can choose to claim on the other driver's insurance if they are at fault. Additionally, if your vehicle is not currently being driven and is kept in storage or garaged, collision coverage is not necessary as the risk of collision is eliminated.

Furthermore, if your vehicle is insured on another policy, such as a family member's policy that includes collision coverage, you may not need separate collision insurance. It's important to note, however, that your vehicle must be kept at the address of the policyholder for it to be covered under their insurance.

Lastly, if the cost of collision insurance is more than ten percent of your car's value, it may not be a cost-effective option. In such cases, it might be preferable to raise your deductible to lower the cost of the insurance or opt for other types of insurance coverage.

How much does collision insurance cost?

The cost of collision insurance varies depending on several factors, including your age, gender, marital status, driving record, the type of vehicle you drive, and where you live. According to data from the National Association of Insurance Commissioners (NAIC), the average annual cost of collision insurance in the US was $381.43 in 2019. However, premiums varied significantly by state, with South Dakota being the cheapest at $248.09, and Washington, D.C., being the most expensive at $539.48.

The cost of collision insurance can also depend on the insurance provider and the level of coverage you choose. Some providers may offer lower rates if you bundle collision insurance with other types of coverage, such as comprehensive insurance. Additionally, you can reduce your costs by setting lower auto coverage limits or choosing a higher deductible.

It's important to note that collision insurance is not required by law in any state. However, if you lease or finance your vehicle, your lender may require you to have collision coverage until the contract ends. Collision insurance can provide peace of mind, especially if you drive an expensive car or wouldn't be able to afford repairs after a crash.

What does collision insurance cover?

Collision insurance covers the cost of repairing or replacing your vehicle if it is damaged in a collision with another vehicle or object, such as a guardrail or a tree. This is the case regardless of who is at fault.

Collision insurance covers accidents such as:

• Wrecks involving another vehicle
• Collisions with a tree, fence, or guardrail
• Damage caused by road hazards, such as potholes
• Roll-overs
• Damage from hitting a curb

It is important to note that collision insurance does not cover damage caused by animals, the weather, or other environmental factors unrelated to auto accidents. It also does not cover damage to your vehicle while it is parked, or any medical expenses for the accident.

In general, collision insurance is recommended if your annual premium is less than 10% of your car's value, which is often the case for newer and/or more expensive vehicles. It may not be worth purchasing if you have an old car or if the value of your car is low.

What does collision insurance not cover?

Collision insurance does not cover damage caused by animals, the weather, or other environmental factors unrelated to car accidents. Any damage sustained while the car is parked is also excluded from collision insurance coverage. Here is a list of specific examples of what collision insurance does not cover:

• Hail, fire, or flood damage
• Damage from natural disasters
• Collisions with deer or other large animals
• Medical expenses for any accident
• Damage to another person's property
• Theft or vandalism damage
• Damage from falling objects, such as trees or boulders

To cover your own medical expenses, you will need a medical payments (MedPay) or personal injury protection (PIP) policy. If you want your car to be covered in the event of theft or weather damage, you will need to purchase a comprehensive insurance policy. Damage to another driver's vehicle is covered by liability car insurance.

Frequently asked questions