Collision insurance is a type of car insurance coverage that provides financial protection in the event of a collision with another vehicle or object. It pays for damages to your car in the event of an accident, regardless of who is at fault.
Here’s what collision insurance typically covers:
- Damage to your vehicle: Collision insurance covers the cost of repairing or replacing your vehicle if it is damaged in an accident. This includes damages from hitting another vehicle, hitting a stationary object (such as a tree or a wall), or if your car rolls over.
- Deductible: The deductible is the amount you pay out-of-pocket before your insurance coverage kicks in. The deductible can be chosen by the policyholder and is typically a trade-off between lower monthly premium costs and a higher deductible.
- Towing and Labor costs: Collision insurance often covers the cost of towing your vehicle to a repair shop after an accident. It may also cover labor costs associated with the repair.
- Rental car reimbursement: If your vehicle is damaged in an accident and needs repairs, collision insurance may cover the cost of a rental car while your vehicle is being repaired.
- Uninsured/Underinsured Motorist Coverage: Collision insurance may also include coverage for damages caused by drivers who do not have insurance or do not have enough insurance to cover the damages.
It’s important to note that collision insurance does not cover medical expenses, property damage to other vehicles, or liability claims from other drivers in the event of an accident. Those types of coverage are typically provided by other types of insurance, such as liability insurance.
Additionally, it’s important to understand the limits of your collision insurance policy. There may be limits on the amount of coverage for your vehicle and certain types of damages may not be covered, such as damages caused by theft or vandalism.
In conclusion, collision insurance can provide financial protection in the event of a collision with another vehicle or object. It covers the cost of repairing or replacing your vehicle, towing and labor costs, rental car reimbursement, and uninsured/underinsured motorist coverage. However, it’s important to understand the limits of your policy and the types of coverage not included, such as medical expenses or liability claims from other drivers.
What does collision insurance cover?
Essentially, collision insurance is meant to shield you from yourself. It doesn’t cover every circumstance, but it does cover a lot of them. Collision insurance provides “first-party” protection for your car and maybe any other vehicles you might be operating.
Your insurance provider offers collision coverage to take effect in the following situations:
- Imagine you hit another car, causing harm to both your own vehicle and theirs. The damage you cause to the other car is covered by your liability insurance, but not by your own. Collision insurance serves this purpose: In the event of a total loss, it gives you the actual monetary value of your automobile or covers and pays for the repairs required to restore your car to its pre-accident state.
- As you’re driving along, one of your tires bursts out, causing you to lose control and crash into a guardrail. Or perhaps your brake lines fail, resulting in a crash involving just one car. Or you could just become preoccupied and fall into a ditch.
- Collision coverage has got your back in each of these scenarios.
- If someone hits you but doesn’t have enough insurance to pay for the full cost of repairs to your car, collision insurance also shields you from financial loss. Additionally, your collision insurance will cover damages to your automobile if you are hit by an uninsured driver or if that driver flees the scene of the collision (the dreaded hit and run).
Is collision insurance required?
It varies. Contrary to liability insurance, collision coverage is not mandated by law. You can decide not to get the coverage, but you might later come to regret your choice.
You would be liable for any damage you inflict to your own car if you cause an accident and it was your fault. That could cost you tens of thousands of dollars and force you to completely replace your vehicle.
Even if your state of residence won’t compel you to have collision insurance, if you haven’t paid for your automobile fully, your lender almost always will. If you finance your vehicle through a bank, like the majority of people do, the bank will require you to purchase full coverage insurance that includes collision coverage. This is also necessary whether renting a car, making a new or used financed purchase, or leasing a vehicle.
Why does it matter if you have collision insurance for your lender? Because they retain your car as collateral for your loan, lenders require that you have auto insurance coverage. They may take your car to settle the debt if you stop making payments. Your bank can be liable for the loan if you have an accident and your car is totaled or undrivable.
Collision coverage policy limits
Each component of your auto policy has a cap on the various types of auto insurance coverage. In the event of a claim, your insurance will only pay up to that maximum.
In contrast, collision insurance typically has a maximum equal to the car’s real cash worth (minus your deductible, of course).
Here’s an illustration of how it functions: Consider a scenario in which your car slides on black ice and lands in the median.
It’s a costly slip, indeed: Your car has sustained about $10,000 in damage. Your car is evaluated, and the adjuster determines that its true cash value is $26,500.
This situation wouldn’t be a total loss because the damage is less than the automobile’s actual cash value, and the insurance provider would pay the cost of repairing your car, less your deductible. If your deductible in this instance was $1,000, the insurance provider would pay out $9,000 ($10,000 in damage minus $1,000 in deductible) to cover the cost of your car’s repairs.
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