Phillips was driving Grady to a secluded and romantic Conway, Arkansas, field for the surprise proposal on March 26, when a truck driver lost control of his vehicle and hit them head on. The couple's Ford Taurus spun off the road and into a nearby ditch.
Grady fainted, her bruised body seizing as she and Phillips waited for an ambulance to take her to Conway Regional Medical Center.
"Seeing Katie after the crash really sent a shock through me," Phillips, 25, tells PEOPLE. "I was terrified of losing her."
Grady, 28, says she blacked out, but remembers Phillips staying by her side the entire time.
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"He didn't leave me," she tells PEOPLE. "We got so lucky. The accident – as bad as it was – could have been so much, much worse. Luckily, I only came out with a lot of bruising."
When doctors at the medical center told Phillips that Grady was going to be okay and only sustained minimal injuries, he figured "now was as good a time as any" to propose!
Phillips called his brother – who was waiting in the park with the ring and a camera to take engagement photos – to bring both items to the hospital.
"I got there 15 minutes later and I could tell Chase was really stressed," Phillips' brother, Colton, tells PEOPLE. "I slipped him the ring so he could propose after her CT scan."
"He wanted to ask her despite everything. He wasn't going to let anything keep him from popping the question."
Grady says that when Phillips pulled out the box, it was "like fireworks."
"He is the best at cheering me up, no matter the situation," she says. "He managed to make what was a pretty crummy day into the best day of my life. And I will NEVER forget the smile on his face when he asked me to be his wife."
The couple are planning to wed on October 22, 2016.
"I am so excited!" says Grady.