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What's included in collision coverage, and what should my deductibles be?

By Posted : 01/01/2011

What does Collision coverage include?

If your car overturns or collides with a car or another object, collision coverage pays for the damage to your vehicle or the cost to replace it, if it cannot be repaired. Collision coverage includes a deductible, such $250 or $500. This means that you are responsible for paying the amount of the deductible in any loss, before the insurance company is responsible for payment. For example, if the cost to repair your car is $1,500 and you have a $500 deductible, your company will pay $1,000 toward the repair costs. You are responsible for paying the first $500 to the body shop when the work is completed.

Collision coverage may also apply to a rental car when you are on vacation. Check with your company before you rent, so that you can decide whether you need to purchase additional coverage.

What deductibles should I choose for collision coverage?

Choosing a higher deductible ($500 or $1,000) will help you save money. But, it's a trade-off between saving money on your annual premium and having to pay the deductible if you have a loss. Here's a way to think about it. If you choose a $500 deductible instead of $250, you may save $60 a year in insurance premiums. So, if you don't have a loss for 5 years, that's a total savings of $300. However, if you have a loss during the 3rd year and you have to pay the higher deductible of $500, you haven't saved anything. Our advice? Compare how much you can save by checking the price for a few different deductibles when you get a quote. Some companies offer big savings for higher deductibles, while others don't.

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