Life was going pretty good for Lila and her husband in 2016. The couple had just bought a year-old Kia Soul in cash. Then one day, while out on a drive, things changed.
“Somebody was trying to back up off of one ramp, trying to at the last minute to go to the other ramp, or something,” says Lila. “I don’t even know what they were doing, and they hit my husband from behind.”
It didn’t look good. The damage was extensive: nearly the entire back-end of the vehicle needed to be replaced. The repair bill tallied up to thousands of dollars. And this was only a month after they had spent thousands more buying the vehicle itself.
Luckily, Lila and her husband had something in their back pocket: collision insurance.
What is collision insurance?
Collision insurance covers the cost of replacing or repairing your car if you’re involved in an accident. You’re covered regardless of who is at fault in the accident.
Even though collision coverage is an optional part of your insurance policy, an estimated 73 percent of people still spring for it.
It can come in handy for:
Collisions with other cars
Even if you get into are involved in an accident with another car and it was their fault, you may be able to get back on the road faster and with less of a headache by filing a claim with your own insurance company. That’s exactly what Lila did when her husband was hit.
“Right off the bat, our insurance company stepped in and started the repair work. If we had to deal with their insurance company, I’m sure it would’ve made it take a lot longer. Whereas, because we had the insurance, they just dealt with it for us and went after the person who was at fault’s company.”
You can also use this coverage if your car has been damaged in a hit-and-run scenario.
Not all car crashes involve other cars.
In fact, there are all kinds of ways you could get into an accident by yourself. You could damage your car running over potholes, roll over on icy roads, hit a tree, fence, or utility pole, and more. When these scenarios happen, you can rest assured that your collision insurance will cover you.
Property damage liability vs. collision insurance
Property damage liability coverage covers the cost of repairs if you’re at fault in a car accident that damages someone else’s vehicle or property. This helps pay to cover the cost of repairs if you’re at fault for a car accident that damages another vehicle or property. It’s required by law in most states.
But with property damage liability, your car is not protected. You would need to buy collision insurance to cover the cost of damage to your own vehicle.
How much does collision insurance cost?
The average auto collision insurance policy cost $342.40 per year, according to the Insurance Information Institute. However, your exact cost will vary depending on several factors.
For example, your premium for collision insurance can vary depending on what state you live in. If you live in South Dakota, you’d pay $219.21. If you live in Texas, you’d pay $403.29.
Remember, this is also on top of the cost of your policy. Other factors that can affect your premium include:
- How much you drive and your driving history
- Your car’s make, model, and age
- How big of a deductible you opt for
Should I get collision insurance?
If you want the most protection possible, then collision insurance is a good idea to have.
However, it’s not always that simple. There are other considerations to take into account to ensure that you’re saving the most amount of money, while getting the most benefit from your coverage.
Here are a few questions to ask yourself.
Am I leasing or paying off this car?
If you financed the purchase of your car and are paying a lender, then your car doesn’t really belong to you — it belongs to the lender who paid for it.
Often, your lender will require you to buy collision insurance and comprehensive insurance to protect their own investment. Take heart, though; you’ll still benefit from having this insurance, especially if you’re paying off a car that you’ll eventually own someday.
How much is your car worth?
If you’re driving a car that’s not worth very much, it might not make sense to buy collision insurance. The insurance may cost you more over time than what the actual car is worth.
You can roughly estimate whether or not collision insurance is worth it by getting a quote from an insurance company. Then, multiply the annual collision insurance premium by three to five. If the total cost of insurance over three to five years is worth more than the value of the car itself, it may not be worth it.
How often do you drive?
The more you drive, the more risk you have.
If you only use your car as a weekend grocery-getter in a relatively safe residential neighborhood, then it may make less sense to get collision insurance. On the other hand, if you battle rush-hour traffic for an hour a day while on a snowy interstate, it may make more sense to get collision insurance.
Can you afford to repair or replace your own car?
Collision insurance is expensive, yes. But so is getting your car road-worthy again or even buying a new car if your current one is totaled.
Consider whether you could afford to pay for any collision damage out-of-pocket if you were to get in an accident. If not, then it might be a good idea to get insurance so that you’re not left high and dry.
As for Lila and her husband, they still carry collision insurance on their cars to this day.
“I wouldn’t want to have to cover $5,000 worth of damage to my vehicle,” she says. “That would have been a blow to us, and I guess that’s the point of insurance, right? You pay a lesser amount so that you don’t have to pay a catastrophic amount.”