Collision Car Insurance: What is it and do you need it?
UPDATED: July 21, 2020
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What you need to know...
- Collision car insurance coverage applies to damage to your car
- If an accident is not your fault, your damage may be covered by the other driver's liability coverage and your own collision coverage
- Collision coverage is required when you finance a car, but is optional after that
What does collision car insurance meaning? Collision car insurance definition: Collision insurance covers damage to your car when you're driving. It is one of the three basic types of auto insurance coverage: liability, collision, and comprehensive.
It doesn't matter whether you were in an accident that was your fault, someone else's fault, or caused by some circumstance out of your control like an object in the road or a blown-out tire.
Auto collision insurance coverage is not mandatory like liability insurance (which most states require). A lot of drivers who bought their cars may find out that their car insurance package still contains collision coverage, though.
Read on to find the answers to frequently asked questions about vehicle collision insurance coverage.
If you don't find the answer to your question or are having a dispute with your insurer, most auto insurance lawyers are happy to provide free consultations. You can find an experienced car accident attorney near you by entering your ZIP code in our search tool.
Frequently Asked Questions: Auto Collision Insurance
These are many of the most common questions on auto insurance collision policies, costs, and benefits.
What is collision coverage in auto insurance?
Collision coverage is the form of insurance that covers your vehicle for damage while you (or another covered driver) are driving. It is not mandatory to legally drive in a state, but is often a term of an auto loan. Before you have paid off your car, the lender has an interest in making sure that the car (that the lender still owns) is covered for damage.
After you finish paying off your car, you can drop collision coverage in most circumstances. However, if you get into a car accident without collision coverage
- if you are at fault, your liability insurance will only cover other drivers. You will have to pay your own repair costs out of pocket.
- if you are not at fault but the other driver is uninsured or underinsured, you may not be able to recover for your damages even though they would be the other driver's responsibility.
- if you are involved in a single-car accident (hitting a tree, for example), you likely will not be covered by liability insurance.
Remember that auto insurance collision coverage has limits as well as a collision deductible. The deductible is what you'll have to pay before the insurance will pay for the rest of the repairs, but only up to the limit.
For example, if you have a $500 deductible and $10,000 limit, a minor accident that costs $300 to repair would have to come entirely out of your pocket. If the accident totals your car and the actual cash value (see below) is $12,000, your insurer will — after you pay the $500 deductible — only pay up to the limit of $10,000.
When should you drop collision insurance on your car?
Knowing when to drop collision insurance depends on a number of factors. Some people may want to drop their collision insurance coverage as soon as their car is paid off and they are permitted to.
For most people, though, the question should be based on the value of your car. If you are paying $100 per month and your car is only worth $1,000 it is probably not worth the cost. Depending on your driving record, personal finances, and the specifics of your policy, however, you may make a different decision.
A good rule of thumb is that if the annual cost of your auto collision insurance is greater than the value of your car, it's time to drop it. If you have a high deductible, it may be worth considering dropping collision coverage much sooner.
What is the difference between comprehensive and collision coverage?
Comprehensive vs collision insurance vs. an "umbrella" insurance policy can be confusing. Basically, auto comprehensive insurance covers your car when no one is driving it, and collision coverage applies when a covered driver is behind the wheel. Understanding your collision and comprehensive auto insurance policies isn't that simple, but that's the basic idea.
If you drive into a tree or are in a wreck that's your fault, collision insurance will cover the costs. If your car is parked and a tree falls on it or a fire damages it, comprehensive insurance is going to pay for those costs.
What is an "umbrella" policy? An "umbrella" policy may sound like it means the same thing as comprehensive coverage but actually provides additional liability coverage on top of another liability policy.
A minimum amount of auto liability insurance is required in most states.
How much does collision insurance cost?
According to the Insurance Information Institute, the average cost of collision insurance in 2017 was $363.
How does my auto insurance company determine the value of my car?
The insurance company pays what the car is worth on the market, based on, for example, the Kelley Blue Book value. This is known by auto collision insurance as actual cash value (A.C.V.). Rather than "replacement value," you will only be paid for the replacement value of your car minus depreciation.
You can haggle over the classification the insurance company uses ("My car was a four-door, not a two-door, and it had air conditioning"), and that might increase the value. A qualification within the same category ("My car was in perfect condition" ) probably won't get you much more money.
The Last Word
Collision insurance covers damage to your car while it's in use. It is often required for cars that aren't fully paid off but may be worth keeping even after the vehicle is no longer the subject of a loan. Because collision coverage can be expensive, it will eventually make sense to stop carrying it as the value of your vehicle decreases.
Did we answer all your questions about automobile collision insurance?
If you have questions about collision insurance, a dispute with your insurer, or if there are injuries as well as property damage from an accident, you may want to consult with an insurance attorney.
To begin your search for an experienced auto accident attorney near you, enter your ZIP code into our search tool below.