Collision Deductible: What you need to know

If you are in the process of buying car insurance, it’s important to understand the different terms that insurance companies use. Collision deductible is the amount that you will need to pay for the damages to your vehicle before your insurance company can cover the cost to fix your vehicle. It’s essentially the amount that you will need to pay toward the total claim amount.

Dealing with insurance is a headache at the best of times, but simply knowing the industry lingo will put you a step ahead. This article will take a bit of a deep dive into collision deductibles, collision insurance and what you need to know as an auto owner. 

What is collision insurance?

Collision insurance covers anytime your vehicle collides with another vehicle or an object on the road. It generally covers the following:

  • Any collision that you are at fault as a driver on public roads.
  • Any collision with other objects such as guardrails, light posts, or anything else. 
  • Any accident where you are not at fault, but the other driver does not have adequate insurance to cover costs.
  • Any damage to your vehicle due to a rollover.

However, you should be aware that collision insurance does not cover several things. This includes:

  • Injuries to other drivers, including death
  • Theft of your vehicle or its contents
  • Accidental damage due to extreme weather, including fire, flood, wind, or hail

What are the other types of insurance?

There are two other types of insurance for vehicles that you may have heard of. 

The first is liability insurance which is required in every state in the union except for New Hampshire. Liability insurance covers:

  • Bodily injury- This insurance will cover costs associated with medical and rehab for the driver and passengers of the other vehicle involved in an accident. 
  • Property damage- This insurance will cover the costs caused to another vehicle or property due to an accident. 

Secondly, comprehensive insurance covers a host of things that could happen to your vehicle. You can think of comprehensive insurance as coverage for anything but an accident. This could include:

  • Natural disasters
  • Fire
  • Riots
  • Theft
  • Chipped and Cracked Glass
  • Animal strikes 

Is collision insurance mandatory? 

No, collision insurance is not mandatory insurance like liability insurance. However, it is an optional insurance that can be bought in any US state, including California. We should note that although the State of California does not require it, many lenders require proof of collision insurance or full coverage car insurance if you are financing or leasing a vehicle. 

What is collision deductible

A collision deductible is the portion of the repair that the owner of the vehicle pays before the insurance company steps in to cover the rest of the vehicle. The exact amount will depend on your insurance policy and the company you are working with, but most collision deductibles are between $500 and $2,000. 

How does it work? 

A simple example of a deductible in action is, let’s say, you were in an accident that you are deemed at fault. If your insurance’s deductible is $500 and the claim for the repair is $3,500, you would pay $500, and your insurance will pay the rest. If there are injuries, your liability insurance will cover costs associated with the damages to the other party. 

What determines if you need to pay the collision deductible? 

A few factors come into determining if you will need to pay the deductible or not. First and foremost, if you are at fault for the accident, you will need to pay the deductible. Also, if the cause of the accident is negligible, you will most likely be paying the deductible. However, specific policies may have other factors that contribute to whether you are paying or not, so it is always best to check your particular policy. 

Another thing to note is that some insurance companies offer a one-time grace claim if you are accident-free for x number of years. This will mean that your premiums will not rise due to the accident, but it still means that you most likely need to pay the deductible. 

When does collision insurance not make sense?

We often see this question, and the answer is really going to depend on your exact situation. A general rule of thumb is collision insurance does not make a lot of sense if your premium is ten per cent or more than the value of your vehicle or if you have enough money to cover the total loss of the vehicle. For most people, collision insurance makes sense, but there are some situations where it may not.

Closing Thoughts 

It is always best to read through and understand your auto insurance policy. Each policy is a little different, and your collision deductible will be directly related to the wording and clauses in your documentation for your collision insurance. 

Auto insurance can be confusing at the best of times, but collision deductibles are generally straightforward. If there is anything you take away from this, make sure it is this: If you are at fault for an accident with another vehicle or object, be prepared to pay your collision deductible. 

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