A Pennsylvania driver reconsiders his collision coverage

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Car insurance can cover you after your vehicle is damaged, whether due to an accident, vandalism, or a natural disaster. But whether your policy can fully make you whole again depends on how much and what types of coverage you have. While virtually every state requires car insurance, comprehensive and collision coverage are optional everywhere (unless you have a car lease or loan).

Some people choose to eliminate their comprehensive and collision coverage to save on their premiums. However, those who keep the coverage can save by increasing their deductible instead.

However, it all depends on your risk tolerance. For one driver in Pennsylvania — who I’ll call Mark, since he asked that his real name not be used — a minor accident had him reconsidering his options.

Mark lives in a suburban area where driving is a necessity. He drives a 2019 Toyota Camry, a reliable, mid-range sedan he paid off last year. With no auto loan and a mostly uneventful driving history, Mark questioned whether he still needed comprehensive and collision coverage.

After reading up on the subject and doing some number-crunching, Mark was tempted to drop both optional coverages. However, he ultimately decided to keep them, as his car was still in great condition and it would’ve been financially painful to replace out of pocket. 

He chose another route: increasing his deductible. It seemed like a smart compromise. Raising his deductible from $500, the most common amount, to $1,000 significantly lowered his premium, giving him some of the savings he wanted without leaving him entirely exposed.

An untimely accident

Unfortunately, Mark didn’t have to wait long to test the limits of his new policy. Later that summer, he was driving home when a deer darted into his path. Swerving to avoid a collision, Mark managed to miss the animal but veered off the road, causing the front of his car to bounce over the curb and clip a post. His car incurred damage to the front and a smashed headlight.

After documenting the damage, Mark took the car to a local body shop, which quoted him about $1,200 for the necessary work. 

With his photos from the scene and the repair estimate in hand, Mark contacted his insurance agent to inquire about initiating a collision claim. 

“I hadn’t filed a claim in a long time, so I wanted to check with my agent about what they needed,” Mark says. “It was the same guy I worked with to get my car insurance in the first place, who was very helpful back then.”

What Mark’s insurance agent told him

But when he spoke to the agent, he received some unexpected news.

Because Mark had increased his deductible to $1,000, and the estimated cost of repairs was about $1,200, the insurer would pay only around $200 if the claim was approved. 

“But what I came to find out was that even filing the claim might not be worth it,” he says. “Not for 200 bucks.”

Multiple claims, especially for relatively minor incidents, could trigger a reassessment of his risk profile and lead to higher premiums in the future.

Mark had to weigh his options: Filing the claim would get him a modest payout, but it could cost him more over time if his insurer raised his rates. If he chose not to file, he would bear the full cost of the repair, but avoid the risk of future rate increases. After thinking it over, Mark decided not to file the claim and paid for the repairs himself.

A teachable moment in coverage choices

In the end, the $1,200 repair bill wasn’t enough to cause serious financial strain, but it did highlight the trade-offs involved in customizing a policy for cost savings. 

Mark had chosen a higher deductible, assuming that any accident severe enough to require filing a claim would far exceed that threshold. Yet not every incident totals a vehicle or results in thousands of dollars in damage. Sometimes, the damage is just enough to be a financial inconvenience but insufficient to justify a claim.

The experience also highlighted a commonly overlooked part of car insurance — the role of deductibles in shaping the value of a claim. 

“What I did decide was that the math still worked out,” he says. “If I kept my $500 deductible, I could’ve gotten about 700 bucks back. I was actually only saving a couple of hundred bucks a year with the higher deductible. But that’s before adding in the higher rates from filing the claim.”

In other words, he might’ve been more tempted to file his claim after the collision if the payout had been higher, only to be surprised later with higher premiums. Instead, he learned something about how his car insurance worked. Mark said he might opt for an even higher deductible next time, such as $2,000, which could save him even more on his car insurance premiums, since he’d likely continue to pay out of pocket for future claims when they’re relatively low.

How to balance premiums, deductibles, and risk

Mark’s case is a reminder that car insurance is about managing financial risk. While it’s tempting to minimize monthly premiums, there’s a fine line between cutting costs and cutting corners. A lower-cost policy may be the cheapest option in the short term, but with more coverage comes more peace of mind and financial protection when you’re in an accident.

Mark was glad he kept his comp and collision coverage even when he still had to pay out of pocket for the repair. The damage could’ve been significantly worse, especially if he had collided with the animal or hit the post head-on.

However, because he has been a safe driver, Mark doesn’t think he needs to pay more in premiums for a lower deductible. And he might be right. For him, it’s not necessarily cutting corners, nor does it cut his costs that much. It’s just what he’s comfortable with for what he’s paying.

Zack Sigel

 

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Zack Sigel is a writer and editor based in New York City. He has been managing editor at Policygenius and M1 Finance, where he led teams specialized in writing about business and finance, and he has also written about music and culture for Hyperallergic, VH1, Complex, and the Los Angeles Review of Books. Zack has a bachelor's degree from New York University, Tisch School of the Arts.