Collision Deductible Waiver: What It Is and When You Might Need One

If you've ever been in a car accident, you know it is a stressful situation, especially when the other driver doesn't have insurance. Even if you aren't at fault, you may still be on the hook for the deductible on your collision coverage before the insurance company pays its share.

In this situation, a collision deductible waiver comes in handy. This optional coverage protects you from paying out-of-pocket for repairs, but it's not always available or applicable to every accident.

Let's break down what a collision deductible waiver is, how they work, and what alternatives you may want to consider.

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Key takeaways

Collision deductible waivers are optional and vary in availability and terms depending on the state and insurance provider.
You must know the identity of the at-fault uninsured driver to be eligible for a collision deductible waiver.
Hit-and-run accidents usually don't qualify for a collision deductible waiver.
California and Massachusetts are the only states that regulate collision deductible waivers.

What is a collision deductible waiver?

A collision deductible waiver (CDW) is optional coverage you can add to your car insurance that helps you avoid paying the deductible on your collision insurance. It is typically only used in certain situations, like when you are not at fault for an accident and the driver at fault is uninsured.

Without the collision deductible waiver, you'd be responsible for paying your car insurance deductible before your insurance kicks in, even if someone else caused the accident. But with a waiver in place, your insurance waives the deductible so you don't have to pay anything out-of-pocket to repair your car.

Collision deductible waivers can be especially useful if you live in an area with a high rate of uninsured drivers. However, it's important to note that not all insurers offer these waivers, and availability may vary by state. Also, hit-and-run accidents usually aren't eligible.

Since collision deductible waivers are optional coverage, adding them to your car insurance policy may increase your premiums. However, the increase may be worth it if you are in an accident with an uninsured driver and have to pay the $500 to $1,000 deductible on your collision insurance.

Is uninsured motorist coverage the same thing?

Uninsured motorist coverage is not the same as a collision deductible waiver. Although both offer protection if you're hit by a driver who doesn't have insurance, they serve different purposes.

Uninsured motorist coverage helps pay for your medical expenses, property damage, and lost wages when you are in an accident with an uninsured driver. In some cases, it may also cover hit-and-run accidents.

On the other hand, a collision deductible waiver only applies to your collision coverage and the deductible you'd have to pay if you're in an accident with an uninsured driver. It waives the deductible, so you don't have to pay anything out-of-pocket to get your car repaired. It doesn't cover medical expenses or other costs.

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State laws

State laws significantly influence how collision deductible waivers are offered and used. Some states may prohibit or limit the use of the waivers. California and Massachusetts are the only states that legally regulate these waivers.

In California, insurers are legally required to offer collision deductible waivers to policyholders with collision and uninsured motorist bodily injury coverage. However, the at-fault uninsured motorist must be identified for the waiver to kick in. California drivers must also choose between the waiver and Uninsured Motorist Property Damage (UMPD) coverage, which pays up to $3,500 for repairs caused by an uninsured driver. Only drivers who don't have collision coverage are eligible for UMPD coverage.

Massachusetts doesn't offer UMPD coverage, so a collision deductible waiver is essential protection if you are in an accident with an uninsured driver. But, like California, you need to be able to identify the driver to qualify for the waiver.

Alternatives to a collision deductible waiver

Collision deductible waivers aren't offered by every car insurance provider or available in every state. If a collision deductible waiver is unavailable for you, there are a few alternatives that you can consider.

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Uninsured Motorist Property Damage (UMPD)

UMPD coverage can help pay for car repairs if an uninsured driver hits you. Sometimes, this coverage can apply to hit-and-run accidents, which waivers usually don't cover. It is optional coverage that is not offered in every state or by all insurance companies. UMPD coverage and deductibles can vary.

Vanishing deductible programs

Some insurers, like Progressive and Liberty Mutual, offer vanishing, diminishing, or disappearing deductibles. These programs reward you for maintaining a clean driving record free of claims by gradually reducing your deductible over time. After a few years, your deductible may be significantly reduced or even eliminated.

Accident forgiveness

Some insurers offer accident forgiveness as a policy perk or add-on coverage. It won't impact your deductible, but it can protect you from an insurance premium increase after your first at-fault accident.

Choosing a lower deductible

Some insurers offer collision deductibles lower than the typical $500 or $1,000 options. If you are worried about paying too much out-of-pocket after an accident, you can choose a more affordable deductible for your situation. But remember, a lower deductible often means higher premiums.

Have emergency savings

Building an emergency savings fund can help you cover deductible costs, as well as any other unexpected expenses you may have. Experts recommend that an emergency fund have at least enough to cover three to six months of expenses.

FAQs

Is it better to have a $500 or $1000 deductible?

The choice of whether to have a deductible of $500 or $1,000 is really up to your financial situation. If you have enough to pay $1,000 out-of-pocket after an accident, then choosing the higher deductible will save you money on your car insurance premiums. However, paying a little extra on your premiums may be worth it so you don't have to pay as much upfront if you are ever in an accident.

Does insurance cover a hit-and-run collision?

Yes, collision insurance usually covers hit-and-run accidents. However, hit-and-run accidents may not be eligible for collision deductible waivers. In many hit-and-run accidents, you don't know the identity of the at-fault driver, which is required for waivers.

At what point does collision insurance stop being beneficial?

Collision insurance stops being beneficial when the cost of the coverage (premium and deductible) exceeds the potential payout after a claim. This has to do with the value of your vehicle, which declines over time. If your vehicle is older and has decreased in value, it may no longer make sense to pay for collision coverage, especially if the deductible plus the premiums add up to more than you'd receive if the car were totaled. A common rule of thumb is that you should drop collision insurance if that coverage costs more than 10% of your car's current value.

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Bottom line

A collision deductible waiver can be a valuable option if you're concerned about accidents with uninsured drivers, especially in areas where these incidents are common. While this coverage isn't available everywhere and doesn't apply to hit-and-run situations, it can spare you from paying a hefty deductible if you get in an accident where you aren't at fault. If your insurer offers these waivers, you should weigh the potential cost savings against any increases to your premiums.

If collision deductible waivers aren't available to you, there are alternatives you can look into like UMPD coverage, vanishing deductibles, or simply saving for emergencies. Your insurance agent can help you review your policy details and compare your options to help you find the best coverage for your needs.

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