What is collision insurance? | Kelley Blue Book
Collision insurance is one of the many types of coverage that you can include in your auto insurance policy. It can help protect you against financial loss by covering repairs to your vehicle if your car is damaged in an accident.
Definition of collision insurance
Collision insurance helps pay to repair or replace your vehicle if it is damaged in an accident with another car or a stationary object such as a telephone pole or railing. It can help protect you no matter who is at fault. Collision coverage is optional in all states. But your lender will likely require it if you take out an auto loan or lease.
What does collision insurance cover?
Collision coverage can help pay for repairs in several situations, including when:
- You are in an accident with another vehicle
- You are in collision with a fixed object such as a telephone pole or a fence
- Your car turns over – even if there are no other cars involved
- You hit a pothole
- Someone hits your car while it is parked
If you’re in an accident and another driver is at fault, their liability coverage should cover damage to your vehicle. But if they’re uninsured or don’t have enough coverage to pay for the damage, you may be able to file a collision claim with your insurer for reimbursement of repair costs.
What is not covered by collision insurance?
If you have collision insurance, it only covers damage to your vehicle in an accident. It will not cover:
- Damage someone else’s car if you hit them. You need liability insurance for this.
- Theft and vandalism. But if you have a comprehensive risk, your insurer will cover you.
- Skirmishes with animals. Collision covers many scenarios related to an accident, but it does not cover damage caused by an animal. You need complete information for this.
- Medical bills. Collision coverage only pays for property damage. It does not cover injuries to you or anyone else.
- Weather damage. The collision will not pay for the damage if a strong storm passes through your area and floods your vehicle. But global will.
- Falling objects. If hail rams your roof or a tree branch falls on your windshield and shatters it, the collision will not cover it. For this you need understanding.
How much does collision insurance cost?
According to Insurance Information Institute, the average cost of collision coverage is $ 290 per year. But you can pay more or less depending on a number of factors including your age, gender, marital status, driving history, where you live, what type of car you drive, deductible, etc.
Insurers base the price you pay for collision coverage in part on the value of your vehicle. So, you are more likely to pay a higher premium if you drive an expensive car.
What is a collision insurance deductible?
A collision damage waiver is the amount you have to pay before your insurance starts paying. Standard amounts range from $ 250 to $ 1,500, but vary depending on the insurer. When choosing a franchise, consider the following:
- Your premium. Typically, policies with higher deductibles cost less. But the amount you save usually decreases as your premium increases. So it’s a good idea to ask the insurer how much you can save if you increase your premium.
- How much you can afford to pay if you file a claim. Raising your deductible to lower your premium might sound like a good idea. But it could create financial hardship if you can’t afford to pay it after an accident. Choosing a deductible that you can comfortably afford to pay is crucial.
- The cost of repairing your vehicle. If the cost of repairing your car is low, having a high deductible may mean that you will have to bear most of the repair costs if you need to file a claim.
- The value of the vehicle. The maximum amount the insurance company will pay is the current value of the car minus your deductible. Thus, higher deductibles are generally better for more expensive vehicles, and lower deductibles are generally better for cheaper cars.
Are there any collision insurance limits?
The limits for collision coverage work differently from the limits for other types of coverage such as third party liability or uninsured / underinsured motorist coverage. You don’t choose the amount of coverage you want when you buy your policy. Instead, the insurance company pays up to the actual cash value of the vehicle if you file a claim.
For example, let’s say you are in an accident that causes $ 10,000 in damage to your vehicle, but the car is only worth $ 7,500. The insurance company will declare your car a total loss and give you a check for $ 7,500 less your deductible. They will not refund you the amount you paid when you bought the car or how much it would cost to buy a new version of the same car today.
What are the advantages and disadvantages of collision insurance?
Having collision coverage can help protect you against financial loss by reducing your out-of-pocket expenses if a collision damages your vehicle. But adding this coverage to your policy will increase your premium. It does not cover medical costs. And it only pays up to the actual cash value of your vehicle at the time a covered incident occurs. This is usually not enough to buy a new version of the car you are driving if the insurer claims it is a total loss.
Do you need collision insurance?
The answer to this question varies from person to person. As cars depreciate over time, the amount the insurer will pay also decreases over time. It is therefore preferable to compare the cost of your premium and your deductible with the value of your vehicle because this is the maximum amount that the insurer will reimburse you.
For example, if your car is worth $ 30,000, the insurance company will issue you a check for up to $ 30,000 (less your deductible) if you have to make a claim. But if your car is only worth $ 2,500, the insurer will write you a check for up to $ 2,500 (less your deductible). If your premium and deductible are higher (or close to) what the insurer will pay, the cost of coverage may not be worth it.
Is collision insurance mandatory?
There is currently no state in the United States that requires drivers to maintain collision coverage. But if you are leasing a car or financing it with a loan, your lender will likely need the coverage because it helps minimize their risk in the event of an accident.
If you need to file a collision claim, the insurer usually pays the lender first and then pays you if there is any money left over.