Collision insurance can provide vehicle repair or replacement costs after an accident, whether or not you’re at fault.
Countless scenarios can lead to a car crash, whether it’s icy weather, a missed blindspot check, or an abrupt stop. That’s why your small business might want to consider collision coverage for company vehicles. Collision insurance can provide vehicle repair or replacement costs after an accident — whether or not you’re at fault. That’s the good news.
The bad news is collision coverage is not a set-it-and-forget-it type of insurance plan. As your vehicle ages, the value of collision insurance drops. Read on to learn what collision coverage does and doesn’t cover, how much you can expect to pay for it, and when it might be a good time to say goodbye.
Collision insurance covers repair or replacement costs from solo accidents, for example, if you skid on a patch of black ice and slide into a lamppost. It can also help cover collisions with other drivers at fault when they don’t have enough insurance to cover the damage. So if you’re minding your business at a stop sign and an uninsured driver slams into you, you can be covered.
Collision coverage isn’t mandatory under any state laws, but if you’re financing or leasing your vehicle, loan finance companies often require you to purchase it.1 The decision is in your hands once your vehicle is paid off.
While you can buy a standalone collision insurance policy, it’s going to be more pricey than if you purchase commercial auto insurance that bundles collision insurance with comprehensive insurance and liability insurance. Comprehensive insurance safeguards against vandalism and theft, while liability insurance covers third-party bodily injury and property damage claims.
While collision insurance covers repair costs from accidents, it doesn’t cover all types of accidents. Collision car insurance specifically covers:
If there’s an accident involving another vehicle and you’re at fault, collision insurance would cover the damage to your vehicle.
If the other vehicle’s driver is at fault, their property damage liability insurance would cover the claim on your vehicle, as every state except New Hampshire requires it. Required minimum coverage in some states can be as low as $5,000.
A $5,000 payment will not do you much good if someone with minimal coverage totals your company car. Your own collision insurance would provide coverage for repair or replacement costs on the damage to your vehicle.
Collision insurance doesn’t cover every damage to your vehicle or all parties involved in an accident. Your plan won’t cover:
A collision insurance policy on your company vehicles could financially protect your small business in case of accidents. That is, as long as the value of your vehicle is worth more than your collision plan deductible. There’s a big difference if you’re driving clients around in a fancy stretch vehicle versus operating out of a decades-old lemon.
To determine if collision coverage is a good idea for your business, consider the value and lifespan of your vehicle. As you likely know, vehicles depreciate over time. If your car is worth less than the collision plan’s deductible — the amount you pay out of pocket before insurance coverage kicks in — then it probably doesn’t make sense to have collision insurance. Otherwise, you could pay more than your vehicle is worth to repair it after an accident.
Collision insurance has two important elements that influence cost: deductibles and limits.
Your limit is the maximum amount your policy covers for any claim. It typically matches your vehicle’s cash value at the time of assessment, and so depreciation would come into account. You can’t choose your limit when selecting your plan. That’s the insurance company’s domain.
Your collision coverage deductible is a set amount of money you pay before your coverage kicks in. If your unpaid deductible is $500 and you get into an accident, you’d have to pay $500 toward repair costs before your plan would cover you.
Unlike the limit, you can often choose your deductible when selecting your plan. Deductibles have an inverse relationship to your premium. This means if you select the plan with the lowest deductible, your premium will be higher than if you choose the plan with the highest deductible.
While you would save in premium costs with a higher deductible, in an accident, you’d pay more out-of-pocket to cover repairs than you would with a lower deductible plan. When deciding which deductible plan to select, consider how you use your vehicle, how many miles you drive, where you are driving and whether you can afford a high deductible in the event of a collision.
Collision coverage can safeguard your small business from the financial impact of accidents involving other drivers, objects, or single-car incidents like rollovers. It’s typically only required if you’re financing or leasing your vehicle, though it can add another layer of financial protection if you own your vehicle.
To determine if collision insurance is right for you, consider the depreciated value of your vehicle and how it’s operated for your small business.
Ready to get covered? You can have commercial auto insurance from Thimble today. Click “Get a Quote” or download the mobile app, then answer a quick set of questions to get covered. With Thimble, you’ll stay protected from many of the financial consequences that come with owning or operating a vehicle for your small business.