Collision Coverage and Collision Deductible
by Doug Cohen

1. Is Collision Insurance Required?
For those who own their vehicles outright, collision insurance coverage is obviously optional. If you still owe payments, the bank may require you to carry collision until your car loan is paid off. The reason the bank probably requires this is to keep the car in good working order and protect the value of their investment. The last thing they (or you) want is a loan on a car of no value.

Collision insurance coverage also prevents you from bearing the financial burden of paying for repairs and a car payment at the same time. The bank's interests are protected and you get to drive a working vehicle even after an accident. Remember, as obvious as it sounds, collision insurance coverage pays for damages caused by a collision, whether you backed into a stationary object or accidentally hit another vehicle. Top

2. What Are Collision Insurance Deductibles?
When you arrange collision insurance coverage, you must decide on a deductible amount for your collision policy. An insurance deductible is a set amount of money you pay out-of-pocket before your insurance coverage begins. If you carry a $500 deductible, you are responsible for the first $500 of the repair bill; your collision insurance policy takes care of the rest where the coverage applies.

Many people set their collision coverage deductibles but don't set aside the money to pay that amount in cash or by check when an accident happens. It's best to put aside money to cover your deductibles into a bank account specifically for this purpose. Does your collision repair shop offer you the use of a free replacement vehicle while the repairs are underway? If not, you may also need to set some extra money aside together with the amount of your deductible, just in case. The peace of mind you'll get from having this financial cushion is well worth the inconvenience of setting the money aside in the beginning. Top

3. Raising and Lowering Deductibles
Most insurance companies will allow you to raise your deductible midstream with no questions asked, and they will adjust your bill accordingly downward. However to lower your deductible they will often request you sign, date, and return a "no known losses" letter before making such an adjustment to your auto policy.

Carrying a lower insurance deductible for your break-in period can save you money in case of a fender-bender or other minor accident that requires body work or other cosmetic repair. It's important to check with your insurer to know what their specific policies are about changing deductibles and what restrictions may apply. Know the policy before you set your insurance deductible. Top

4. What Is Limited Collision?
In states where limited collision coverage is available, this option can be one way to lower your car insurance bill. If you choose this option and are involved in an accident, and you are deemed 51% at fault or more, your insurance pays nothing to fix your car. Yes, you will be responsible to repair your own car. Whereas, if you are 50% or less at fault in the accident, your insurance will pay to repair your car (minus your deductible, of course).

This can be an attractive option for those who don't owe money on their car and can decide for themselves whether they want to repair their car or not. This type of collision insurance option also costs less because your insurance will not pay unless the accident was at least half (50%) the other driver's fault. Conversely, if you were more than half (51%) at fault, you will pay to repair the damage to your own car.

This is also a good money saver for those who seldom drive a particular car, and especially if it is kept in storage most of the time. Drivers who own older cars with little or no resale value often choose limited collision as well because they know it may not be worth it to have the car fixed if it gets severely damaged.

Lastly, most will agree this type of collision insurance coverage is not appropriate for teen drivers and is a bad risk for new car purchases, especially in high-traffic areas. Top

5. Do I Always Have to Pay Collision Deductibles?
In some states, the rules for paying a collision insurance deductible may be different when the other driver is at fault. Your collision insurance coverage may provide for a "no deductible" payout for some types of collision coverage such as "Broad Form Collision." This type of collision insurance coverage may not be available in all areas, but where it applies there is no insurance deductible for an accident where the other driver is judged to be 50% at fault or more.

Even under Broad Form Collision insurance coverage, you are required to pay the insurance deductible if you are found to be 50% at fault or more. Broad Form Collision rules may vary from state to state and much depends on what your insurer's rules for the coverage stipulate. Always ask your insurance rep for details and how the rules may apply to you. Top

6. What Is the Difference Between Collision, Liability, and No-Fault Insurance?
Collision and liability plans work together to cover a wide range of damage and payments after a motor vehicle collision. Together, these separate piece of the insurance puzzle add up to cover most potential accidents.

Good insurance agents advise their clients to protect themselves as much as possible. If you are involved in a motor vehicle collision, you need all mandatory insurance including no-fault insurance, bodily injury and liability. You should also carry a good collision insurance coverage plan to protect the investment in your vehicle. No single part of a coverage plan handles all contingencies or types of damage to your car.

To some people, the phrase "no-fault" seems to imply wider coverage than the plan actually provides. States requiring no-fault protection usually intend the coverage to pay for medical bills for those injured in an accident, including pedestrians. Damage to the vehicle itself falls under collision insurance coverage. In most states, you also need a liability plan to pay for the damage to other vehicles when you are judged to be at fault in an accident. Collision and liability plans work together to cover a wide range of damage and payments after a motor vehicle collision. Together, these separate piece of the insurance puzzle add up to cover most potential accidents. Top

7. Does Collision Insurance Cover Glass Damage?
Collision insurance coverage does not pay for damage to your car caused by hail, vandalism or other incidents that don't involve an accident. If you get a broken windshield because your car was hit by another car, either their insurance will cover your damage with no out-of-pocket costs from you, or if you were at fault, your collision coverage (after your collision coverage deductible) will pay for it, unless there is a "no glass" clause in your collision policy or something to that effect. Comprehensive insurance applies if your car is parked and damaged for example by a falling tree or telephone pole during a storm.

In cases where your collision deductible is set too high, the cost of replacing your windshield after an accident could come out of your own pocket. Some states make it illegal to drive with a broken windshield, so even a crack may be enough to warrant replacing the glass. Consider your insurance deductible carefully to avoid facing high out-of-pocket costs after a minor accident. Top

8. Do I Pay Separate Deductibles for Multiple Incidents?
If you have a $500 insurance deductible on your collision insurance coverage, you are responsible for that first $500 for every claim you make. If you get into two separate accidents in the same day, the deductible applies for each. Deductibles are not one-time payments, which is why it is very important to set aside the amount of your deductible in case of an accident.

Setting a lower insurance deductible can help offset your costs after an accident, but it comes with higher monthly premiums. You may be able to lower your monthly insurance bills by talking with your insurance rep. Have you taken a defensive driving course recently? Changed age brackets? There are many ways you can take advantage of good driver bonuses and other incentives that help lower the bills while maintaining your collision insurance coverage and protecting your car. Your insurance rep can help you find some cost-cutting discounts, and we have also included many of those tips here for you as well. Top

9. Can I Change My Collision Deductible on Leased Vehicles?
If you carry collision insurance coverage on a leased vehicle, you are bound to the terms of your contract. If your lease agreement spells out a specific insurance deductible, you cannot change the amount. Always read the fine print of any vehicle lease to see what insurance minimums and deductibles are required, as well as the reporting procedures should you be involved in a motor vehicle collision with a leased auto. Consult with your leasing agent and insurer if you are unsure about the terms of your lease as they relate to your insurance responsibilities.