Collision Insurance is a type of car insurance that covers the cost of repairing or replacing your vehicle if it is damaged in an accident with another car or object. It is usually optional unless you have a loan or lease on your car, in which case your lender or leasing company may require it. This type of insurance can protect you from paying out of pocket for expensive repairs or losing your car altogether if it is totaled in a crash.
In this article, we will explain what collision insurance is, how it works, what it covers and does not cover, how much it costs, and how to decide if you need it.
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What is collision insurance?
Collision insurance is one of the main types of car insurance, along with liability and comprehensive insurance. Liability insurance covers the damage and injuries you cause to others in an accident, while comprehensive insurance covers the damage to your car from non-collision events, such as theft, fire, vandalism, weather, or animal collisions. Collision insurance covers the damage to your car from a collision with another car or object, regardless of who is at fault.
This insurance is usually sold as an add-on to your basic car insurance policy. You can choose the amount of coverage you want, which will affect your premium and deductible. The premium is the amount you pay for the insurance, while the deductible is the amount you pay out of pocket before the insurance kicks in.
For example, if you have a $500 deductible and your car is damaged in an accident that costs $2,000 to repair, you will pay $500 and your insurance will pay $1,500. If your car is totaled in an accident that costs $15,000 to replace, you will pay $500 and your collision insurance will pay $14,500.
How does collision insurance work?
Collision insurance works by reimbursing you for the cost of repairing or replacing your car after an accident. You can file a claim with your own insurance company or with the other driver’s insurance company, depending on who is at fault and what state you live in.
If you are at fault or live in a no-fault state, where each driver’s insurance pays for their own damages regardless of fault, you will file a claim with your own collision insurance. If the other driver is at fault and you live in a fault-based state, where the driver who caused the accident pays for the damages, you can file a claim with their liability insurance. However, if their liability insurance does not cover the full cost of your damages or they are uninsured or underinsured, you can file a claim with your own insurance to make up the difference.
To file a claim with your collision insurance, you will need to contact your insurance company as soon as possible after the accident and provide them with the details of the incident and the damage to your car. You may also need to provide a police report, photos of the scene and your car, witness statements, and repair estimates. Your insurance company will then review your claim and determine how much they will pay for your damages. They may also send an adjuster to inspect your car and negotiate with the repair shop.
Once your claim is approved, you will receive a check from your insurance company for the amount of your damages minus your deductible. You can then use this money to pay for the repairs or replacement of your car.
What does collision insurance cover?
It covers the damage to your car from a collision with another car or object. This includes:
- A car crash with another vehicle
- A car crash with an object, such as a fence, pole, guardrail, or tree
- Another car crashing into your parked vehicle
- A hit-and-run accident
- A rollover accident
It covers both partial and total losses. A partial loss means that your car can be repaired for less than its actual cash value (ACV), which is the amount your car is worth at the time of the accident. A total loss means that your car cannot be repaired or that the cost of repairs exceeds its ACV. In this case, these insurance will pay you the ACV of your car minus your deductible.
What does collision insurance not cover?
It does not cover:
- Damage to another person’s car
- Injuries to yourself or others
- Damage to your car from non-collision events
- Damage to objects that you hit
- Normal wear and tear or mechanical breakdowns
If you want coverage for these situations, you will need other types of car insurance or endorsements. For example:
- To cover damage to another person’s car or injuries to others in an accident that you cause, you will need liability insurance.
- To cover injuries to yourself or your passengers in an accident, regardless of fault, you will need personal injury protection (PIP) or medical payments (MedPay) coverage.
- To cover damage to your car from non-collision events, such as theft, fire, vandalism, weather, or animal collisions, you will need comprehensive insurance.
- To cover damage to objects that you hit in an accident, such as a fence or pole, you will need property damage liability insurance.
- To cover normal wear and tear or mechanical breakdowns of your car, you will need a warranty or mechanical breakdown insurance.
How much does collision insurance cost?
The cost of this insurance depends on several factors, such as:
- The amount of coverage you choose
- The deductible you choose
- The make, model, year, and value of your car
- Your driving record and history of claims
- Your age, gender, and marital status
- Your location and mileage
- Your credit score
According to the National Association of Insurance Commissioners (NAIC), the average annual cost of collision insurance in the U.S. was $363.08 in 2018. However, this is just an average and your actual cost may vary depending on the factors mentioned above.
To get an idea of how much this insurance would cost you, you can compare quotes from different insurance companies online or through an agent. You can also adjust your coverage amount and deductible to see how they affect your premium.
How to decide if you need collision insurance?
Collision insurance is not mandatory in most states, but it may be required by your lender or leasing company if you have a loan or lease on your car. In this case, you will have to keep collision insurance until you pay off your loan or lease.
If you own your car outright, you can decide whether or not to buy this insurance based on your personal preference and financial situation. Some factors to consider are:
- The value of your car
- The cost of collision insurance
- The likelihood of getting into an accident
- The amount of savings you have
As a general rule of thumb, collision insurance is worth it if the value of your car is more than 10 times the cost of your collision insurance premium. For example, if your car is worth $10,000 and your collision insurance premium is $500 per year, it may be worth it to buy collision insurance. However, if your car is worth $2,000 and your insurance premium is $500 per year, it may not be worth it to buy collision insurance.
Another way to decide if you need this insurance is to compare the cost of collision insurance with the amount of savings you have. If you have enough savings to cover the cost of repairing or replacing your car in case of an accident, you may not need collision insurance. However, if you do not have enough savings to cover the cost of repairing or replacing your car in case of an accident, you may want to buy collision insurance to avoid paying out of pocket.
In conclusion, It is a type of car insurance that covers the cost of repairing or replacing your car if it is damaged in an accident with another car or object. It is usually optional unless you have a loan or lease on your car. Collision insurance can protect you from paying out of pocket for expensive repairs or losing your car altogether if it is totaled in a crash.
To decide if you need collision insurance, you should consider the value of your car, the cost of collision insurance, the likelihood of getting into an accident, and the amount of savings you have. Collision insurance may be worth it if the value of your car is more than 10 times the cost of your collision insurance premium or if you do not have enough savings to cover the cost of repairing or replacing your car in case of an accident.
Frequently Asked Questions (F&Qs)
What is the difference between collision and comprehensive?
Collision and comprehensive insurance are two types of auto insurance that offer protection when your vehicle is damaged. However, the type of damage they cover is very different. Collision insurance covers damage to your vehicle in the event of a covered accident involving a collision with another vehicle or object. This may include repairs or a full replacement of your covered vehicle.
Comprehensive car insurance, on the other hand, pays for damage to your vehicle caused by covered events such as theft, vandalism, or hail, which are not collision-related. In other words, the difference between comprehensive and collision insurance comes down to how your car was damaged. If you hit another car or a stationary object like a telephone pole (or if you roll over), you’ll be covered by collision insurance. If an animal or a non-stationary object such as a falling tree hits your car or it’s damaged by vandalism, fire, or a natural disaster, you’ll be covered by comprehensive insurance.
What is a collision vs non-collision accident?
A collision accident refers to an accident where the first harmful event is a collision event, which means that the motor vehicle strikes or is struck by another vehicle, person, or object. On the other hand, a non-collision accident refers to an accident where the first harmful event is a non-collision event, which means that the event is not necessarily harmful and describes events in the accident other than collision events. Examples of non-collision events include overturns, jackknifes, fire/explosion, running off-road, separation of units, downhill runaways, or cargo loss.
What is the definition of collision loss?
Collision loss refers to damage sustained to a personal automobile due to the fault of the insured driver. Collision insurance is a type of auto coverage that reimburses the insured for this type of damage. It is often added as an extension of a basic automobile policy to protect drivers in the event of damage from a collision.