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What Does Auto Collision Insurance Cover?

By John Miceli

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When you think of car insurance, the first scenario that pops into your head is probably related to a crash. Even though car insurance is required by law in almost every state, your vehicle isn’t financially protected in an accident unless you’ve got collision insurance.

Let’s take a look at everything you need to know about collision insurance.

What Does Auto Collision Insurance Cover?

Collision insurance covers damage to your car after an accident with another vehicle or object. This can include crashes with other cars, whether you’re at fault or not, and collisions with objects like trees, fences, or light posts. 

If you’re leasing or financing your car, auto collision insurance is generally required by your lender. If you’ve paid off your car, it’s still a good idea to have collision insurance due to the frequency of car accidents. However, there may come a time when your car’s value has depreciated enough to safely drop the coverage.

How Does Collision Insurance Work?

You could think about it like this: collision coverage protects you and your car when you’re behind the wheel, while comprehensive insurance can protect your car when you’re not behind the wheel. These two are often bought simultaneously and sometimes referred to together as “full coverage.”

But to fully understand collision insurance, it’s important to know how it works in conjunction with other forms of car insurance. Here’s a quick rundown.

Every driver in the United States (except in New Hampshire) is required to have some form of car insurance, called liability insurance. After an accident, your liability coverage will pay for the other driver’s medical expenses and car damage up to your policy’s maximum.

But your liability insurance won’t cover damages to you, your car, or your property. That’s what collision insurance is for, and that’s why it’s so commonly owned.

The third type of car insurance is called comprehensive insurance. Basically, comprehensive coverage protects your car from everything other than car accidents. Comprehensive insurance financially guards your vehicle against weather, vandalism, theft, and falling objects. 

How Much Is Collision Insurance?

As is usually the case with most insurance products, the cost of auto collision insurance varies by provider. You can expect to pay anywhere between $300 to $900 per year. Generally, the cost of your coverage will depend on the type of car you have, your driving history, and a few other factors.

There are also plenty of different discounts available, which make coming up with a specific estimate difficult. You could be eligible for student discounts, military discounts, safe driving bonuses and more. Always ask your provider about what options are available to lower your premium.

One certain thing, though, is that collision insurance is typically more expensive than comprehensive insurance. This is because collision claims occur more frequently.

Keep in mind that collision insurance has a deductible and a limit. Deductibles are commonly between $500 and $1,500. Be wary about filing a claim if the damage is around or less than your deductible, and you may know that raising your deductible is an easy way to lower your rate, although that can be risky.

Do You Need Collision Insurance?

If you owe money on your car, you likely won’t have a choice. Lenders typically require it. Even if you’ve paid off your car, collision insurance can be a safe investment depending on the age of your vehicle.

Lenders mandate collision insurance to protect their investment, but it also protects you. If you total your car right after you drive it off the lot, you’ll have to pay the remainder of your loan whether you can pay for repairs or not.

With collision insurance, at least your vehicle would get fixed so you can keep driving what you’re paying for. But that’s also what gap insurance is there for.

Collision insurance becomes less important over time, though. If you do file a claim, your provider will never reimburse you more than what your car is worth. So, it might be more cost-effective to drop collision insurance on a really old car.

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