What Does Auto Collision Insurance Cover?

June 25, 2019

Accidents are scary and expensive. How will you cover the cost of fixing your car if you are in an accident? If you have auto collision insurance, you don’t have to worry about it. The only factor you have to consider is the cost of your deductible.

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Just what does auto collision insurance cover and how does it work? Keep reading to find out.

The Types of Collision

Not all auto accidents involve another vehicle, but that is the most common scenario. Auto collision insurance covers accidents with other cars. It also covers collisions with personal or commercial property, or even nature (running into a tree).

Collision insurance also covers single-car accidents. Whether you lose control of your car and roll over or you crash into a guardrail, collision insurance covers the incident in most cases. This is why collision auto insurance is important.

The Car Collision Insurance Coverage

It’s important to know that collision insurance covers the damage to your vehicle, not any others involved in the accident. If you were at fault, the collision insurance covers your car. Your liability insurance covers the damage caused to the other vehicles in the accident.

Before your insurance company will help pay for the damage to your vehicle, you’ll have to meet your deductible. You owe this amount first. You select your deductible when you buy the insurance. For example, if you have a $500 deductible for collision insurance, you would owe the first $500 to repair your car before the insurance company would start paying based on your coverage.

The insurance company determines your maximum collision insurance coverage. Usually, the base it on the cash value of your car. In other words, they won’t pay you more than your car is worth at the time of the accident.

How Collision Insurance Works

If you cause an accident (you are at fault), you will file a claim with your insurance company. The adjuster will assess the damages. He or she will then tell you to bring it into a body shop for an estimate. You can get multiple estimates if you wish.

Based on the estimate of the work necessary to fix the car, the adjuster will make a decision about your car. If the cost to fix it is less than the vehicle’s value, the insurance company will pay their portion of the bill. If the cost to fix the car is greater than the vehicle’s value, the insurance company may consider it a total loss. This means they won’t pay to repair the car. Instead, they will cut you a check for the following:

  • Actual cash value of the car today according to Kelley Blue Book
  • Minus any depreciation
  • Minus your collision insurance deductible

You can then use the money to replace your car. Depending on the make, model, year, and value of your car, though, you may have to either put your own money into the transaction or buy a less expensive car. Your collision insurance doesn’t cover the full cost of what you paid for the car. They consider depreciation. The longer you’ve had your car, the more it will likely depreciate.

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What Collision Insurance Doesn’t Cover

As we stated above, collision insurance only covers damages to your vehicle in an accident that you caused. It doesn’t cover:

  • Vehicle damage not caused by a collision – This includes damages from weather-related factors, theft, vandalism, and freak accidents (tree falling on your car).
  • Vehicle damage caused to other cars involved in the accident – Your liability insurance covers the damages caused to others.
  • Medical bills for you or anyone else involved in the accident. Your bodily injury liability insurance will cover injured parties in the other vehicles involved. Your medical coverage on your auto insurance will cover your medical needs.

Should You Drop Auto Collision Insurance?

Auto collision insurance is important, but not for everyone. As your car depreciates, it may not make sense to pay for the coverage. Calculate the cost of your annual premiums and compare it to your car’s value. Let’s say it costs you $500 a year for collision insurance and your car is only worth $4,000. If you have a $500 deductible, that coverage costs you $1,000. You receive a net payout of $3,000. This might seem logical to you and that’s fine. Others may think they’d rather keep the $500 in premiums and take their chances on an accident occurring.

Obviously, the more expensive your car is, the more important collision insurance becomes. It comes down to your capabilities. What can you afford? If you were involved in an accident, could you cover the cost to replace your vehicle? If not, keeping your collision insurance may be a good option.

Auto collision insurance helps protect you should you cause a car accident. While it has a deductible, it protects you financially should you total your vehicle or even if it needs extensive repairs. Consider the cost of auto collision insurance and how it compares to your car’s value to determine if it’s the right choice for you.

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