What Is Collision Coverage Insurance?

When collision coverage exists on a vehicle, payment is made regardless of fault.

Collision insurance is automobile insurance coverage for direct and accidental loss or damage to an automobile caused by collision with another vehicle, object or overturn. Collision coverage will pay to repair or replace your covered automobile less the deductible. When collision coverage exists on a vehicle, payment is made regardless of fault.

Types of Collision Coverage

According to allinsuranceinfo.org, "there are two types of Collision Coverage depending on the insurance options they provide. You can either get a replacement-cost coverage, or the actual cash value coverage. In the first case, you will be given enough money to buy a car of the same make, model and year of your totaled vehicle. The wear and tear of your car is usually not taken into consideration here. You should expect an extra premium for this coverage type, however the expenses are worthwhile.

With the actual cash value coverage you will be given a check for the actual value of your car at the moment of the crash. As you may understand, it can be not the same amount you will need to replace the wrecked car. Your car may have high mileage and not be in an excellent condition, and the loan on your car can be higher at the time of the accident, than your vehicle's actual cost."

Premiums

Collision insurance premiums are determined by the type of vehicle and the value. Vehicles that experience frequent thefts and expensive vehicles will have higher premiums than less expensive vehicles and ones that are not stolen as often. Premiums can be reduced by selecting higher deductibles. A deductible is a portion of a covered loss that is paid by the policyholder and not the insurance company.

Who Needs Collision Insurance?

If your vehicle is financed or leased by a bank or finance company, you will be required to carry collision insurance to protect the vehicle. If your vehicle is newly purchased, you may want to purchase collision insurance to avoid the out-of-pocket expense of replacement or repair.

Examples of Collision

If "Steve" is liable for an accident, in which he sustains damage to his car, the collision coverage of his auto policy will pay for the damage to his car. If "Steve" is involved in a two-car accident in which the driver of the second automobile is liable, Steve can file a claim with the at-fault driver's auto insurance or he may file a claim under his collision coverage to repair or replace his vehicle.

Rental Cars

Most insurance companies will allow their collision coverage to cover a rental car rented by the policyholder. If this is the case, the collision damage waiver offered by many rental car agencies can be declined.

References

• All Insurance Info: Collision Insurance Coverage
• "Kiplinger": Collision Coverage: Don't Take Chances