Collision insurance is a type of coverage that pays to repair or replace your vehicle if it is damaged in a collision with another car or object. Unlike liability insurance, collision insurance isn’t legally required in any state. However, that doesn’t mean the coverage isn’t worth carrying. In fact, collision insurance can help you avoid a hefty bill if your car is significantly damaged following an accident.
To better help you understand your auto policy, let’s explore collision insurance coverage and why it may be worth it.
To better help you understand your auto policy, let’s explore collision insurance coverage and why it may be worth it.
Collision Insurance: What Does it Cover?
As the name suggests, collision insurance covers damage to your car following a collision with another vehicle or object. This differs from state-mandated liability insurance because payouts go toward your car, not the vehicle of the other party involved. Furthermore, your collision coverage will still apply even if you are found at fault for the accident. So, what does collision insurance cover?
With collision insurance, you’re covered if your car is damaged from…
With collision insurance, you’re covered if your car is damaged from…
- A collision accident with another car, including if your vehicle is parked.
- A collision with a stationary object, such as a light pole or guardrail.
- Single-vehicle accidents, such as rollovers.
Note: although not required by law in any state, most lenders often require you to carry collision insurance whenever financing or leasing a new car.
What Does Collision Insurance Not Cover?
Although collision insurance can protect you in multiple situations, it won’t always apply. For example, collision insurance will not cover the following:
- Car damage unrelated to a collision accident, such as theft or weather damage (this is covered by comprehensive insurance).
- The damage you cause to another person’s vehicle or property (this is covered by property damage liability insurance).
- Third-party medical bills related to an accident you caused (this is covered by bodily injury liability insurance).
Collision Insurance Deductibles and Limits
A collision insurance deductible is an amount you must pay out-of-pocket before your insurer covers the rest, up to your policy’s limits. Insurance providers typically allow you to select your deductible amount, which can range anywhere from $200 to $1,000. However, carefully choose your deductible, as the number you select will ultimately affect your premium. Generally, a high deductible will result in a lower premium, and a low deductible will result in a higher premium. Therefore, always choose an amount you feel comfortable paying should you be involved in an accident.
Exact coverage limits can vary from policy to policy, but providers typically set limits that reflect your vehicle’s market value at the time of the accident. This is referred to as a vehicle’s actual cash value. Let’s review a fictional (but possible) situation to see how collision insurance works.
Diana owns a relatively new car and carries collision insurance with a $500 deductible. One morning on the way to work, Diana hits a light pole which causes significant damage to her car. How will collision insurance apply in this situation? If Diana’s car is repairable, she’ll pay her $500 deductible, and her insurer will cover the rest. But, if the damage is extensive and her vehicle is declared a total loss, she’ll receive a payout equal to her car’s actual cash value minus her deductible.
Exact coverage limits can vary from policy to policy, but providers typically set limits that reflect your vehicle’s market value at the time of the accident. This is referred to as a vehicle’s actual cash value. Let’s review a fictional (but possible) situation to see how collision insurance works.
Diana owns a relatively new car and carries collision insurance with a $500 deductible. One morning on the way to work, Diana hits a light pole which causes significant damage to her car. How will collision insurance apply in this situation? If Diana’s car is repairable, she’ll pay her $500 deductible, and her insurer will cover the rest. But, if the damage is extensive and her vehicle is declared a total loss, she’ll receive a payout equal to her car’s actual cash value minus her deductible.
Why Should I Purchase Collision Insurance?
As mentioned, lenders typically require collision coverage when leasing or financing a car. However, if you own your vehicle, there are a few things to consider that will help you determine if collision insurance is right for you.
First, consider your car’s value. If you own a relatively new vehicle, adding collision coverage is likely worth it to help cover expensive repairs. On the other hand, if you have an older model, collision coverage may not be an ideal choice if your vehicle is worth less than your policy’s deductible plus the cost of coverage. Second, consider your ability to pay for vehicle repairs. If you are involved in an accident, can you cover repair or replacement costs on your own? If not, collision insurance may be worth it for financial peace of mind.
First, consider your car’s value. If you own a relatively new vehicle, adding collision coverage is likely worth it to help cover expensive repairs. On the other hand, if you have an older model, collision coverage may not be an ideal choice if your vehicle is worth less than your policy’s deductible plus the cost of coverage. Second, consider your ability to pay for vehicle repairs. If you are involved in an accident, can you cover repair or replacement costs on your own? If not, collision insurance may be worth it for financial peace of mind.
How Does Collision Insurance Differ from Comprehensive Insurance?
When shopping for a new policy, you’ll typically see collision coverage bundled alongside comprehensive insurance. Both coverages will pay for damages sustained to your vehicle but cover different scenarios.
Collision insurance covers your car after a collision, but what if your vehicle is damaged in a non-collision accident? That’s where comprehensive coverage steps in. Comprehensive insurance covers damage to your vehicle after it’s been involved in a non-collision event. For example, comprehensive insurance covers theft, vandalism, and damage from natural disasters such as hailstorms. Like collision insurance, comprehensive coverage is optional but is typically required when leasing or financing.
Collision insurance covers your car after a collision, but what if your vehicle is damaged in a non-collision accident? That’s where comprehensive coverage steps in. Comprehensive insurance covers damage to your vehicle after it’s been involved in a non-collision event. For example, comprehensive insurance covers theft, vandalism, and damage from natural disasters such as hailstorms. Like collision insurance, comprehensive coverage is optional but is typically required when leasing or financing.
Get the Coverage You Need in the Golden State
As we all know, driving in California can sometimes be stressful, especially during rush hour. But, no matter where you’re heading, carrying the proper insurance coverages will help you avoid hefty repair bills if involved in an accident. At Orion Indemnity, we work to provide California drivers with insurance coverages that work best for them. Our team of insurance agents will work with you and answer any questions you may have about building your ideal insurance policy.
To learn more about how we can help with your insurance needs, call us today at (833) 336-7466.
The information in this article is obtained from various sources and offered for educational purposes only. Furthermore, it should not replace the advice of a qualified professional. The definitions, terms, and coverage in a given policy may be different than those suggested here. No warranty or appropriateness for a specific purpose is expressed or implied.
To learn more about how we can help with your insurance needs, call us today at (833) 336-7466.
The information in this article is obtained from various sources and offered for educational purposes only. Furthermore, it should not replace the advice of a qualified professional. The definitions, terms, and coverage in a given policy may be different than those suggested here. No warranty or appropriateness for a specific purpose is expressed or implied.
