What is collision insurance and what does it cover?

What is collision insurance and what does it cover?
What is collision insurance and what does it cover?

As the name implies, collision insurance compensates the insured for damage from the actual collision.  It does not cover damage due to theft or vandalism.  It also does not cover damages paid under another driver’s policy if the other driver was at fault.

  Collision coverage can reduce your out-of-pocket expenses by making it easier to repair or replace your car.  Instead of having to cover the costs of damages yourself, you will only need to pay the deductible, and the rest will be covered by your car insurance.

  How does collision insurance work?

  Let’s say your car collided with another vehicle or object (such as an underground parking lot, garage door, street sign) and was damaged in some way.  If you had collision coverage, the cost of repairing or replacing your vehicle would be paid1.  It doesn’t matter who was to blame for the accident – given the collision, you will mostly be covered.  The specific benefits vary from province to province, but the general advantage of collision coverage is that there will be no cost2, except for deductibles and possibly car rental.

Will I have to pay collision insurance deductible if not at fault?

  If you have an accident and another driver is completely to blame, his property liability insurance will compensate for the damage to your car.  Assuming they have it, you would first claim their insurance.  This coverage is mandatory in every state except New Hampshire, which does not require car insurance.

  However, in many states the minimum limits are low – only 5,000 or 10,000 US dollars.  A driver who only has property damage limits set by the state will not have enough coverage to pay for a new vehicle if it is charged.  Then your collision insurance will work.

  How much does collision insurance cost?

  The cost of any insurance policy varies not only from state to state, but also from driver to driver.  Personal information, such as your age, gender, marital status and driving experience, takes into account the cost of the car policy, as well as information about the vehicle you are driving and where you live in your state.  You can reduce your costs by setting lower policy limits or higher deductibles.

Is collision insurance mandatory?

  Unlike liability insurance, collision insurance is not mandatory in any US state.  However, if you are financing or renting a vehicle, the lender or leasing company will most likely require you to insure against collisions during the term of your loan or lease.

  Lenders and leasing companies often require this type of coverage because they take the risk by lending you money to buy a car (car loan financing) or allowing you to rent a car (leasing).  Thus, they often require drivers to purchase full coverage, which includes collision insurance as well as comprehensive and liability insurance.

ALSO CHECK: What is comprehensive insurance and what does it cover?

Who does collision insurance protect?

  Collision insurance not only protects your lender or leasing company.  Let’s say you owe $ 20,000 for your car, but you got into an accident that caused it to be damaged and unrepairable.  If you do not have collision insurance and the loss is not covered by another type of insurance, you will need to repay the remaining $ 20,000 on the car loan.

  Even if you do not rent or finance a car, there are still circumstances when collision insurance can be a worthy investment.  This is especially true if you have a new car and its cost exceeds the insurance premiums and deductible deductibles.  It can also be a good idea if you can’t afford to repair or live without an available car.

  However, there may come a time when collision insurance may not be worth the investment.  For example, if the value of your car is less than what you pay in premiums and deductibles, collision insurance may no longer make sense.

  What does collision insurance cover?

  • Weather damage – floods, fires, winds and hail
  • Damage from falling trees or objects
  • Hit animals such as deer
  • Theft and vandalism
  • Explosion

What does collision insurance not cover?

  • Medical bills and lost wages (yours, passenger’s or other driver’s).
  • Damage to another person’s vehicle or property.  (This should be taken into account in your liability policy.)
  • Injuries caused by hitting an animal that ran on the road, or damage caused by weather events such as hail, floods or strong winds.  (This will be covered by your full coverage.)

How does collision insurance deductible work?

Let’s say you choose a $ 1,000 franchise.  Then you get into an accident, and the damage is $ 2,500.  The insurance company will reimburse you $ 1,500, and you will be on the hook for the remaining $ 1,000 (your deductible).  Many people choose a higher deductible to save money on their premium.  A driver who charges $ 1,000 for the veComprehensiver franchise for $ 250 is at greater risk.  Therefore, choosing a franchise can be a balance between your comfort, risk and your budget.

  When you decide to buy collision insurance, calculate the annual savings compared to the cost of the deductible.  If the three-year savings are less than the cost of the higher deductible, it may be better to choose a lower deductible.  But there are definitely other things to consider when choosing a franchise for collision insurance.  Your solvency is one.  Also consider the cost of your car.

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