Are you shopping for auto insurance? Auto insurance is a very complicated financial product with a large set of different terms and coverage options that policyholders must understand. If you are looking for a basic explanation of what collision auto insurance coverage is, who should carry this coverage, and how to keep premiums low when you select this optional cover. Read this straightforward explanation on collision insurance, and learn everything you need to know to build the perfect policy that suits your families needs while still fitting your budget.
What Does Collision Coverage Cover?
Collision auto insurance is a physical damage coverage that is designed to pay for the vehicle listed on your policy if it is damaged due to a collision. A collision is defined as not just an accident with a vehicle, but also an accident with anything else including poles, fences, trees and properties. While collision coverage will pay regardless of who is deemed at fault for an accident, if you are not at fault, the other parties insurance will either pay for your claim or reimburse your insurer if your insurer paid for the claim in an effort to have your vehicle repaired as quickly as possible.
When you use your collision coverage, you are responsible for paying your deductible before the insurance company will pay out. If the damages total less than the deductible, you will not file a claim. If the damages are higher than the deductible, the deductible will be subtracted from your claims payment unless it is recouped from the other party’s insurance company. Keep in mind that insurance companies will pay up to the fair market value of the vehicle for repairs. If the value is less than the cost of repairs, the vehicle will be considered totaled and you will have the option to receive a total loss payment or to keep your vehicle
Who Needs to Carry Collision Auto Insurance Coverage?
Not everyone needs collision insurance. If your vehicle is paid off, it is important to weigh the costs of the coverage to the value of your vehicle to decide if the cost is justified. For example, vehicles valued at less than $2000 probably do not need collision insurance. This is because the premiums, plus the deductible you carry, will probably tally up to the total cost to pay for the vehicle out-of-pocket. If your vehicle is financed, the finance company will require that you purchase and maintain collision coverage. Some auto lenders even require deductibles of $500 or less. Be sure to ask your lender about deductible requirements if your vehicle is financed.
If you have decided that it is in your best interest to carry collision coverage, make sure to select a deductible that you can afford. The higher the deductible, the lower your premiums for collision coverage will be. Remember, you are not required to pay for your collision deductible if you are not at-fault for an accident and the other party’s insurance accepts liability. Compare the premiums for collision coverage from several different insurers, select the right deductible, and make a wise choice when building your policy.