Now when I said “in full”, I mean that the other company pays all of it and sometimes rents you a car while your car is being repaired. If you were at fault, then your insurance company will pay for the repairs – minus the deductible. Most deductibles are $250 but can vary from $500 up to $1000. A deductible is the amount you have to pay out of your pocket for the repairs.
Let’s say you crash your car. The repairs on your car are going to be $3000. Your insurance company will use an adjuster to estimate the repairs or send you to a body shop for an estimate. Then, the insurance company pays you $3000 minus the deductible ($500) or $2500. Some insurance companies require YOU to pay the $500 up front before they cut their portion of the check.
Let’s talk deductibles for a moment. If you have a $250 deductible, then your premium is going to be much higher than if you have a $500 deductible. In most cases, you can raise your deductible and save the additional money you were paying and have $500 sitting in the bank just in case you have an accident. Its usually that significant of an increase in premium.
Again, if you finance the car, then you will have to purchase collision insurance. If you have an older vehicle, you could probably save the money you spend on collision insurance and have enough money to buy another used vehicle as good as the one you wrecked. Make sense?
In summary, collision insurance covers repairs to your vehicle after you are at fault in an accident, less your deductible. If you car is paid off, then you need to look at whether you really need this coverage or not, depending on age and condition of you car.