What Is Collision Insurance and What Does it Cover?
When you buy or rent a car, one important thing you need to consider is car insurance. Many states require drivers to at least carry liability insurance. If you’re making payments on your car, then chances are that whomever you bought the car from will require you to carry additional coverage —comprehensive coverage or collision insurance.
Out of the two, collision insurance pays to make any repairs to your car if it is damaged in an accident, while comprehensive insurance covers everything else. The two insurances work together to protect you and your car.
Depending on the make and model of your car, comprehensive auto insurance and collision insurance can get quite expensive. Just make sure you research available insurance options to determine what types and the amount of car insurance coverage you need. Different insurance companies will offer different rates, even for the same car insurance policy.
What is collision insurance?
When you have an accident and file a claim, either with another car or an object, your collision insurance pays to repair the damage to your vehicle. With an average cost of around $342 per year, according to the Insurance Information Institute, your costs can vary by the state you live in, the type of car you buy, and how much of a deductible you choose. The higher your deductible, the lower your auto insurance premiums will be.
If your car is paid for, collision insurance is considered optional coverage. If you own a car that has a lot of value, such as a sports car, then you should consider keeping collision coverage, even if you have paid the car off. If you haven’t fully paid off your car or are leasing it, collision insurance may be required.
How much does collision insurance cover?
Like many types of car insurance, collision coverage does have a maximum amount it will cover in an accident. The amount you need depends on the value of your car — also known as the actual cash value. When buying an insurance policy, ask your insurance agent how your carrier calculates actual cash value.
You want enough coverage to be able to repair your car if it is damaged in an accident and to pay it off if it is totaled. Otherwise, you could be left paying for what your collision insurance does not cover. Collision insurance doesn’t just cover accidents with other cars — it also covers you if you hit an object, such as a pole. Collision insurance also pays to repair your car if you are involved in a roll-over accident or suffer damage to your car from a pothole. Collision coverage would not cover theft or damage done to the car when it is not being driven.
The only time you should consider dropping your collision insurance is when your annual car insurance premiums are worth 10% of your car’s value. So, if your car is only worth $1,000 and the cost of your collision insurance is $100, then you can safely drop it.
Does collision insurance cover if I’m at fault?
If you live in an at-fault state and you have a car accident that is your fault, your collision coverage will pay to repair your vehicle while your liability insurance will pay for the other driver’s damage. If the accident was the other driver’s fault, their liability insurance will pay to repair the damage to your car.
If for some reason the damage to any vehicle involved in the wreck exceeds the maximum coverage amount of the insurance, then the vehicle owner will be left to cover the difference. In cases such as this, it is up to the other driver to sue the at-fault driver in court for these uncovered repairs.
In no-fault states, each driver’s insurance company would cover the repair costs for their own vehicle. Anything over the maximum coverage amounts that the insurer has would have to be paid out of pocket. In some no-fault states, drivers have the option of taking the at-fault driver to court to sue for any unpaid damages.
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