What Is Collision Insurance?

Collision insurance is a protection that helps pay to fix or replace your car if another vehicle or object, such as a fence or a tree, is damaged in an accident. If you’re leasing or financing your vehicle, the lender usually needs crash coverage. Collision is an extra coverage on your auto insurance policy if your car is paid off.

What Does Collision Insurance Cover?

Collision insurance helps pay for the vehicle’s repair or replacement if it is damaged by:

  • A collision with a separate car
  • A collision, such as a fence or tree, with an entity
  • A single-car collision involving rolling or falling over

What is not covered by collision insurance?

Insurance against accidents does not include:

  • Harm to your car that is not correlated with driving (examples: hail or theft)
  • Harm to the car of another person
  • Medical bills (yours or those of another individual)

Deductibles And Limitations Of Crash Coverage

There is a deductible in Collision compensation, which is the amount you pay until your coverage helps pay for your lawsuit. When you obtain coverage, you can usually pick the sum of your crash deductible.

You will have many deductible rates to choose from, depending on your insurer — usually $0, $500 or $1,000. Your premium would likely rise if you want a lower deductible. Likewise, your premium will decrease if you choose a higher deductible. Bear in mind, however, as part of an insured claim, you would have to pay the deductible out of pocket for vehicle repairs. So, if you want a deductible of $1,000 and your vehicle is destroyed later in a covered crash, you will have to pay $1,000 in repair costs. Popular deductibles usually range from $250 to $1,000, but when calculating your deductible amount, the value of your vehicle is a significant aspect to bear in mind.

Collision coverage has a cap, which is the maximum amount that would be charged for a covered claim by your policy. Usually, the crash coverage cap is the real cash value of your car (its value minus depreciation).

For instance, say that in a covered collision your car is totalized. Your insurer will cut you a check minus the deductible for the depreciated value of the vehicle. Bear in mind that “depreciated value” means you will not be able to substitute one of a newer make and model for your old car. To do that, you’d probably have to use some of your own money.

Why buy coverage for Collision?

If you owe your car money, or if you’re leasing it, collision coverage is typically not optional; it is mandated by most lenders and lease holders. However, once your vehicle is paid off, you can choose whether to purchase crash coverage.

One thing to consider: how much it would cost if your car was damaged or destroyed in an accident to fix or replace it. If you can’t afford to repair your car or buy a new one after a crash, it could give you some peace of mind to buy accident coverage.