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Is Collision Insurance Worth It for Me? | Car Insurance Basics

    3 minute read

    Collision car insurance pays to replace or repair damage on a policyholder’s vehicle following an accident with another car or object. Unlike liability insurance, collision coverage isn’t required by law in any state. However, lenders typically require collision insurance when leasing or financing a vehicle.

    Since you don’t need the coverage, drivers must decide whether to pay the extra premium for collision car insurance. Although it makes sense to do so in most cases, there are a few situations when paying for the additional coverage just isn’t worth it.

    Why is Collision Coverage Important to Have? 

    person on the phone after a car collision

    Collision coverage will pay to repair or replace your vehicle (up to its actual cash value and minus your deductible) if it is damaged from the following:

    • An accident with another car (including if your vehicle is stationary), regardless of fault.
    • A collision with a stationary object, such as a light pole, fence, or barrier
    • A single-vehicle accident, such as a rollover
    • An accident with an uninsured driver

    Collision car insurance is worth having for many drivers as it provides financial protection against repairing or replacing a vehicle out of pocket following an accident. Remember, state-required liability insurance only applies to damage you cause to another person or their property. Collision insurance is entirely optional unless you are financing or leasing a vehicle.

    Is Collision Car Insurance Worth It for Me? 

    If you own your vehicle long enough, there will come a time when you ask yourself if continuing to pay for collision coverage (and a potential deductible) is worth the cost. If you drive a new car, collision car insurance is almost always worth it unless you can easily afford to replace or repair it after an accident. For older vehicles, however, you’ll need to crunch the numbers.

    a person analyzing a crashed vehicle

    For example, let’s say you have an older vehicle worth approximately $2,500 and carry collision coverage for $500 a year with a $1,000 deductible. If you end up needing to file a claim this year, it will cost you a total of $1,500 out of pocket (the cost of coverage + your deductible). Since your car’s value is $2,500, your insurer will only pay up to $1,500 for repair or replacement costs ($2,500 value – $1,000 deductible). In this case, you may be better off saving the premium towards repairs or replacement costs yourself rather than purchasing collision coverage. 

    However, let’s say that your vehicle is worth $10,000 instead of $2,500. With these numbers, your insurer will pay up to $9,000 ($10,000 value – $1,000 deductible) for repair or replacement costs. Since you’ll receive a greater payout, it’s likely worth paying the additional premium for the added coverage.

    How Much Does Collision Car Insurance Cost? 

    taking photo of damage from car crash

    According to the Insurance Information Institute, the average cost of collision car insurance is around $300 per year. However, insurance providers rely on multiple factors to determine premiums, so the amount you pay for the coverage can vary heavily. Here are just a few factors that determine the cost of coverage:

    • Your vehicle’s make and model: expensive cars are expensive to repair or replace, increasing collision coverage costs.
    • Your driving record: if you have a long history of accidents, moving violations, and claims, insurers may consider you a risky driver.
    • Your location: because traffic and driver data vary significantly depending on your location, some drivers may pay more for coverage in one ZIP code than another.
    • Your deductible: collision coverage is subject to a deductible, which is the amount you pay out of pocket for a claim before your insurer covers the rest (up to your policy’s limits). Generally, a high deductible will result in a lower premium and vice versa.

    Still Not Sure? Speak With an Insurance Specialist 

    Car insurance can sometimes feel overwhelming due to the many coverages available. However, it doesn’t have to be. If you’re unsure of the coverages you need, AIS can help. Our team of specialists will guide you through all the options available from our network of insurance partners to find a combination that works for you. Give us a call today at (888) 772-4247 to speak with a specialist, or start a new quote online.

    The information in this article is obtained from various sources and offered for educational purposes only. Furthermore, it should not replace the advice of a qualified professional. The definitions, terms, and coverage in a given policy may be different than those suggested here. No warranty or appropriateness for a specific purpose is expressed or implied.