Collision insurance covers damage to your vehicle in the event of a covered accident. Unlike liability insurance, which may cover damage to other vehicles or property, collision auto insurance may help to repair or replace your covered vehicle. Collision insurance also differs from comprehensive insurance, which only applies to covered accidents that do not involve another vehicle.
The combination of a liability insurance policy and collision coverage will help reduce the risk of having to pay for repairs out of pocket in some vehicle accident situations, after your deductible payment.
How to determine whether collision coverage is for you
While collision may not be required by law, it’s a smart coverage for vehicle owners. Additionally, most banks and car dealerships require collision coverage for financed or leased vehicles.
There may be a point at which it makes sense to drop collision insurance. That point will vary by driver and will be determined by the resale value of your vehicle and how much you pay for collision coverage.
Collision auto insurance: premium vs. deductible
When buying a collision coverage policy, ask your insurance agent about premium and deductible options. Your insurance premium is the amount you pay for the plan. The deductible is the amount you pay out-of-pocket for an auto repair before the insurance company covers the rest.
As one goes up in cost, the other usually comes down. A discussion of your financial goals and driving habits with your insurance agent will help you find the right balance between your premium and deductible.