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Collision Insurance

What is collision insurance?

When you get into an auto accident, collision insurance helps cover the costs to repair or replace your vehicle, minus your deductible.

Collision is often required as a condition for a loan or a lease agreement. However, if you own the vehicle outright, this coverage is optional.

What does collision insurance cover? What does it not cover?

Collision insurance can cover the costs of repairing your car when it gets damaged in a car accident. If the damage to the car exceeds the value, standard collision coverage will only cover the actual cash value of the car based on market research. Here are some situations that are covered by collision insurance:

Collision coverage applies only to vehicle damage, not to things like:

Collision Car Insurance Versus Comprehensive - What's the Difference?

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How do you choose a deductible for collision?

When you purchase collision coverage, you’ll have options to choose the amount of your deductible. This is your out-of-pocket cost in the event of a collision loss.

So how does a deductible work? Let’s say you opt for a $1,000 deductible. Then you get into an accident, and the damage comes to $2,500. The insurance company would reimburse you for $1,500, while you would be on the hook for the remaining $1,000 (your deductible amount).

Many people choose a higher deductible, so they can save money on their premium. A driver taking a $1,000 deductible versus $250 is shouldering more risk. So choosing a deductible may be a balance between your comfort with risk and your budget.

Choosing a deductible may be a balance between your comfort with risk and your budget.

When you’re choosing to purchase collision coverage, calculate the year-to-year savings compared to the cost of the deductible. If the three-year savings is less than the cost of the higher deductible, it may be more worth your while to opt for the lower deductible.  

But there are certainly other things to consider when choosing a deductible for your collision insurance. Your ability to pay is one. Also, consider the value of your car.

How does collision coverage compare to comprehensive?

If you want collision coverage, most insurance companies also require you to have comprehensive coverage. This is often referred to as full coverage.

Both give you coverage when damage occurs to the vehicle, but it comes down to how the damage occurred.

To simplify, collision insurance covers car accidents—things that happen while you’re driving and in control of the vehicle. Comprehensive insurance coverage tends to cover situations that were out of your control. 

Comprehensive insurance covers damages caused by:

Collision covers car accidents, specifically when the accident was caused by you. In fact, if you caused an accident, your liability insurance could pay for the other car’s damages.

However, even if the crash was caused by another driver, your collision policy may also give you additional protection, so you can get back on the road.   

Do I need collision coverage on an old car?

Maybe your car loan is finally paid off, and you’re no longer required to have full coverage on your car. Or maybe your car is close to a decade old and you’re reading a lot of financial advice columns telling you that dropping collision is a great way to make more room in your budget.

The truth is, the question around the right time to drop coverage is not an easy question to answer. It depends on your car and your circumstances. Here are a few questions you can ask yourself.

If you have additional questions or want to talk this through, contact a local ERIE agent. They will be able to walk you through specific auto policy details and make sure yours is tailored specifically to you.