What Does Auto Collision Insurance Cover?

Everything you need to know about collision coverage in auto insurance.

Auto insurance is pretty common, as it should be. It is an important insurance policy that everyone should have if they own a vehicle or drive it. But in order to purchase an auto insurance policy, it is important to know what it covers and how much you have to pay in premiums. One integral part of auto insurance policy is the collision coverage which we shall explore below.

What is Collision Insurance?

As per the collision insurance definition, it is an auto coverage that provides reimbursement to the policyholder for any damage sustained to the insured vehicle due to the policyholder’s own fault. It’s likely added as an extension to the basic auto insurance policies.

Collision insurance will only pay for damages due to a collision. Damages sustained from theft, vandalism or crime will not be paid under this policy. Moreover, if the other driver was at fault, collision damage will not pay for the damages sustained by the other driver.

It’s not difficult to purchase collision insurance as it might be available with your basic auto insurance. Although accidents are an unfortunate thing, they can happen. And whenever an accident happens, someone is always at fault. It could be you and it would help for you to have collision insurance so you would not have to pay hefty amounts in damages.

What Does Auto Collision Insurance Cover?

Auto collision insurance coverage includes:

  1. A collision with another vehicle.
  2. A collision with another object like a tree or a fence.
  3. A single car accident that made the car roll over or fall over a steep place.

However, when purchasing an auto collision insurance, it is important to keep in mind what it does not cover so you can make sure you are buying the policy for the right reasons. A collision insurance coverage will not include:

  1. Damage to your vehicle that is not related to driving.
  2. Damage to another vehicle which is not yours.
  3. Medical bills.

Although there are other policies that cover medical expenses from an accident such as personal injury protection, collision insurance does not provide any coverage regarding personal or bodily injury. The only coverage available under a collision policy is for the damages to your vehicle in an event of a collision.

Comprehensive vs Collision Insurance

Another component of auto insurance policy is comprehensive insurance coverage.

The main difference between comprehensive and collision insurance is what the driver can control. Collision insurance includes coverage for accidents where the insured hits another car, fence, tree or any such object. Whereas comprehensive coverage is usually for nature’s incidents like a deer hitting the car, a heavy hailstorm or carjacking.

For example, in case of a thunderstorm, a telephone pole fell down on your car and damaged it. That’s something collision insurance will cover. However, if you swerved to avoid a falling tree and crashed into a pond, that is where comprehensive coverage will be applied.

It is important to determine what your insurance needs are. To help, here are a few questions you should ask yourself:

Collision insurance may cost you a couple hundred bucks. Moreover, if you have been previously involved in accidents or are prone to accidents, your rates may even go up further.

  • Can you afford repairs?

One of the benefits of collision coverage is that it will cover all the repairs. If you cannot afford to pay for the repairs, you should opt for collision insurance.

  • What is the value of your vehicle?

Cost of repairs also depends on the kind of vehicle you drive. If your vehicle is expensive, the cost of repairs will also increase. If you cannot afford to pay repairs that expensive, collision coverage will be a good option for you.

  • What is the risk?

The cost of repairs are not the only thing you need to consider. If you work an important job, you might not be able to give your car for repairs for more than 2 days. Or if your car is valuable or has sentimental value, there is more at risk for you.

These factors can help you in determining whether or not you should go for collision insurance coverage.

The next thing to consider are the collision deductibles and how much they should be.

What is Collision Deductible?

A deductible is the small amount you have to pay before your collision coverage kicks in. The coverage then pays the remaining amount needed for the damages. Each time your car has been in an accident and requires coverage insurance, you will have to pay a deductible.

Deductibles are set according to your preference. You choose a deductible amount in accordance with your financial situation, affordability or what you would reasonably have to pay in case of an accident.

This does not mean you should go for the lowest deductible you can choose. Sometimes paying a higher deductible might be cheaper for you. For example, a lower deductible will lead to higher insurance premiums. You will end up paying more than you would have if you chose a higher deductible amount where your premiums would be low.

However, choosing a higher deductible might cause financial strain for people who do not have the money available on such a short notice. Accidents can occur any time and you might not be prepared with the money. Which is why it is important to find the correct balance between what you can afford and what will cost you better in the long run.

When to Drop Collision Insurance?

It’s important to know when to drop collision insurance. If the value of your car has depreciated over time, much of your collision insurance coverage will not be of much worth anymore. You might want to consider dropping collision insurance if your premiums reach 10% more than the potential payoff from these coverages. This means you will basically be paying 10% more than what you would be getting out of it.

Moreover, you might also want to consider dropping if your overall collision premiums plus deductibles will more than the value of your car. There is no need to pay so much to insure something which is not even as valuable.

Another reason to consider dropping is if your car is too old for you to fix. You might then want to save up using the collision insurance premiums to get a new car.

What should be your next step?

After this guide, there is not much you need to do but talk to an insurance agent near you so you can figure out what the best move for you would be considering the value of your car, the level of risk you have etc. You should now be clear about what auto collision insurance covers and how you can protect your car from any damages or you from having to pay hefty amounts in repairs.

John Otero

John Otero

John Otero is an industry practitioner with more than 15 years of experience in the insurance industry. He has held various senior management roles both in the insurance companies and insurance brokers during this span of time. He began his insurance career in 2004 as an office assistant at an agency in her hometown of Duluth, MN. He got licensed as a producer while working at that agency and progressed to serve as an office manager. Working in the agency is how he fell in love with the industry. He saw firsthand the good that insurance consumers experienced by having the proper protection. John has diverse experience in corporate & consumer insurance services, across a range of vocations. His specialties include Major Corporate risk management and insurance programs, and Financial Lines He has been instrumental in making his firm as one of the leading organizations in the country in generating sustainable rapid growth of the company while maintaining service excellence to clients.

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