What Is Collision Insurance?
Collision insurance is a type of auto insurance that pays the insured for damage to their own car that was caused by the insured driver’s negligence. To protect drivers in the event of damage from a collision, this kind of insurance is sometimes acquired as an addition to a normal automobile policy.
How Collision Insurance Works
Collision insurance, as the name suggests, compensates the insured for harm caused by a real collision. Vandalism and theft-related damage are not covered by it. Additionally, even if the other driver was at fault, it does not cover damage that is paid for by their own insurance.
- Collision insurance is a type of protection that pays the insured for damage done to their car when it is not their fault.
- Although sometimes added as an extension, this kind of insurance is distinct from a comprehensive auto insurance policy.
- Collision insurance compensates for the damage when two drivers are involved in an accident. It also covers damage from potholes and accidents involving inanimate objects.
- The cost of collision insurance is frequently high, but you can reduce your premiums by selecting a deductible of $500 or more.
- Auto insurance coverage for uncontrollable circumstances is comprehensive. Accidents that are within a driver’s control or when another driver hits your car are covered by collision insurance.
What Is an Example of Collision Insurance?
You may require collision insurance for a variety of reasons, including the fact that accidents can happen at any time. For instance:
- To avoid running into something in the road, you swerve, which causes your automobile to crash into your neighbor’s fence.
- After leaving your automobile parked to run an errand, you come back to find that someone had hit it.
- Rapid braking causes you to hydroplane into a telephone pole.
What Sets Collision Coverage Apart from Comprehensive Coverage?
If your automobile is damaged in an accident with another car or one involving a tree or fence, collision insurance can help with the repair costs. Comprehensive insurance, sometimes referred to as “other than collision,” is typically much more affordable and provides coverage for the following:
- Your vehicle or its parts being stolen or vandalized
- A tree crashing upon your vehicle
- damaged windshield
- If while driving, an animal is struck
- the occurrence of a hurricane or an earthquake
Factors to consider
You might be unsure of the necessity of having both forms of coverage. Consider the following when deciding whether you require collision insurance and comprehensive insurance:
The worth of your vehicle
The cost to repair or replace your car increases with its value! You can avoid having to pay those charges out of pocket by purchasing comprehensive collision coverage.
Risk of an accident
You might be more likely to be involved in an accident if you drive more, especially on roads with heavier traffic. You should make sure you get collision insurance if your risk is higher.
Your current savings
Have you saved enough money to cover the cost of repairing or replacing your car on your own? If not, getting insurance is essential.
There are some places that are riskier than others! A comprehensive auto insurance coverage can be a smart choice if there are frequent reports of vehicle damage caused by branches that fall from trees or animals that cross the road in your region.
When your automobile is damaged in an accident with another car or an object like a tree or fence, collision insurance can assist cover the cost of the necessary repairs or replacements. The lender will normally require collision insurance if you are leasing or financing your vehicle. Collision is an optional feature on your auto insurance plan if you have a paid-off vehicle.
Your car may need to be repaired or replaced if it sustains damage as a result of:
- an accident involving another car
- a run-in with a structure like a fence or a tree
- a single-car collision in which the vehicle rolls or overturns
Car-collision insurance excludes:
- Damage to your car that isn’t caused by driving (examples: hail or theft)
- Damage to a third party’s car
- (Your or another people) medical expenses
Collision coverage deductibles and limits
There is a deductible for collision insurance, which you must pay before your policy begins to pay for your claim. When you get coverage, you can usually specify the collision deductible amount.
You may have a few deductible options to pick from, usually $0, $500, or $1,000, depending on your insurance. The likelihood is that your premium will go up if you select a lesser deductible. Likewise, your premium may drop if you select a bigger deductible. However, keep in mind that as part of a covered claim, you will be required to pay your deductible out of pocket for car repairs. Therefore, if you select a $1,000 deductible and your automobile is later damaged in an accident that is covered, you will be responsible for paying $1,000 in repair costs. Common deductibles often run from $250 to $1,000, but it’s crucial to consider your car’s value when choosing your deductible amount.
There is a collision coverage limit, which is the most your insurance will contribute to a covered claim. The real cash worth of your vehicle often serves as your collision coverage limit (its value minus depreciation).
Consider the scenario where your car is totaled in a collision that is covered. You would receive a cheque from your insurer for the depreciated worth of the vehicle less your deductible. It’s important to remember that “depreciated value” means you might not be able to trade in your old car for a newer make and model. To do that, you’d probably need to use some of your own cash.
Why buy collision coverage?
The majority of lenders and leaseholders need collision coverage if you owe money on your automobile or if you’re leasing it. However, if your automobile is paid off, you can decide whether to purchase collision insurance.
One thing to think about is the expense of replacing or repairing your car if it were to be involved in an accident and get hurt or destroyed. After a collision, collision coverage may provide you with some peace of mind if you couldn’t afford to repair your vehicle or buy a replacement.
How collision insurance operates when the at-fault party is another driver
Your car’s damage is covered by the other driver’s liability insurance if they are solely to blame for a collision in which you are involved. You would submit a claim to the at-fault driver’s insurance company first, assuming they have this kind of coverage. Except for Virginia and New Hampshire, all states need auto insurance. Virginia and New Hampshire do not.
However, liability auto insurance minimum amounts are typically merely $5,000 or $10,000 in many jurisdictions. If their vehicle was totaled, a driver with only the state-mandated property damage limits wouldn’t have enough insurance to pay for a newer vehicle. If the at-fault driver’s liability limitations are insufficient and you are involved in an accident, your collision insurance would kick in to cover the cost of repairing your vehicle.
Comprehensive insurance covers damage to your car caused by things other than collisions, such as fire, hail, or theft, whereas collision insurance covers accident-related incidents. Full coverage insurance is the term used to describe collision, comprehensive, and liability insurance.