What Is Collision Insurance?
Collision insurance is a type of auto insurance that compensates the insured for damage to their personal vehicle caused by the insured driver’s negligence. This sort of insurance is frequently acquired as an add-on to a normal motor policy to protect drivers in the event of collision damage.
What is Collision Insurance and How Does It Work?
Collision insurance, as the name implies, compensates the insured for losses incurred as a result of a collision. It does not cover theft or vandalism-related damage. It also doesn’t cover damage covered by another driver’s insurance, even if the other motorist was at fault.
KEY TAKEAWAYS
- Collision insurance compensates the policyholder for damage to their vehicle that occurs while they are not at fault.
- This sort of insurance is not included in a comprehensive auto insurance policy, although it is frequently added as an add-on.
- Collision insurance covers damage caused by two drivers colliding, as well as damage caused by potholes and accidents involving an inanimate item.
- Collision insurance is frequently pricey, however, premiums can be reduced by selecting a $500 or greater deductible.
- Comprehensive auto insurance protects a driver from situations beyond his or her control. Collision insurance protects you from incidents beyond a driver’s control, such as when another vehicle collides with yours.
Collision coverage is critical for protecting your vehicle from the financial losses that can result from physical damage. It’s not difficult to be involved in a car accident. Someone is always at blame in an accident, and that someone maybe you.
Collision insurance may appear to be basic, but it does not cover all costs incurred as a result of a collision. When you hit another vehicle or an object like a lamppost or a fence, collision coverage pays to repair the damage to your own automobile. It may also cover you if another driver hits your car and doesn’t have adequate insurance to cover the costs.
Collision insurance isn’t required in any state, but it’s usually required by lenders if you finance or lease a vehicle. Here’s a rundown of what collision auto insurance will — and won’t — cover, as well as how to figure out if it’s worth the money.
What is covered under collision insurance?
Collision insurance protects your car from the following types of damage:
- You create a collision with another driver.
- A collision with a stationary object, such as a mailbox or a tree.
- Your vehicle is rolling over.
If another driver hits your car and they don’t have enough or any insurance to pay the costs of damage, and you don’t have uninsured/underinsured motorist property damage coverage, you could be sued.
If you’re in a car accident and another driver is totally to blame, their property damage liability insurance covers your vehicle. You’d file a claim with their insurance first, assuming they have it. Except for New Hampshire, which does not require auto insurance, every state requires this coverage.
However, several states have low minimum limitations, such as $5,000 or $10,000. If a vehicle is totaled, a motorist with only the state-mandated property damage limits will not be able to afford a newer vehicle. Your collision insurance would kick in after that.
For instance, suppose you swerved to avoid hitting a squirrel on the road and instead hit a lamppost, with a $1,000 collision deductible. The cost of repairing the damage to your car would be covered by your insurance provider, minus $1,000.
If the damage is less than your $1,000 deductible, you shouldn’t file a claim since your insurer won’t pay — and will most likely raise your rates as a result of the claim. Your insurer would deduct $1,000 from your car’s estimated worth before the incident and send you a payment for that amount if the vehicle was destroyed by the hit.
This deductible would also apply if your automobile was still drivable but the damage was too expensive to fix, and the insurer declared it wrecked. You may still fix your car, but it would be listed on the title as salvaged. Some insurers refuse to cover salvaged vehicles or charge a higher premium if they do.
Getting Your Collision Deductible Reduced or Waived
Keep in mind that your collision deductible applies even if you’re not at fault and the other driver’s insurance isn’t enough to cover the damage, and you don’t have underinsured or uninsured motorist coverage.
If paying to repair damage caused by someone else seems unjust, you might want to consider adding a collision deductible waiver to your policy. This waives your deductible if an uninsured motorist causes an accident and your collision coverage is required to pay. It is only available in a few states.
Adding “disappearing deductibles” (also known as “disappearing deductibles”) to your policy is another approach to lessen your collision deductible burden after an accident. For each year you go without an accident or a ticket, several auto insurance providers will reduce your deductible by a set amount – often $100. Details vary by provider, but it usually costs more and isn’t always worth it if you don’t get into an accident.
Collision insurance premiums
According to the National Association of Insurance Commissioners, the average yearly cost of collision coverage in the United States was around $363 in 2017, the most recent year for which data is available. Because this figure incorporates discounts and may account for group insurance, which is normally less expensive than individual coverage purchased online, your own cost may be greater.
You may not be able to purchase collision insurance without comprehensive coverage, or vice versa, depending on the company. This could be due to a current loan or lease that requires both, or because your insurer mandates you to buy one before you can buy the other.
Because collision claims are more common, collision insurance costs far more than comprehensive insurance. Higher deductibles can help you save money on your insurance premiums if you can afford the out-of-pocket expenses.
Find out more about the differences between comprehensive and collision insurance in our comprehensive vs. collision insurance comparison.
Also Read: