Assume you've parked your automobile on a steep slope and haven't used the emergency brake. Imagine your amazement when you return and discover your automobile has slid down the hill and into a tree. You have auto insurance, but is it going to cover anything like this? You faintly recall your insurance salesperson mentioning collision coverage, but what exactly is collision coverage and what does it cover?
We've got you covered! We'll go over everything you need to know about collision insurance and how it may help you avoid getting into financial difficulties with your automobile.
What Is Collision Insurance and How Does It Work?
One of the most common forms of automobile insurance is collision coverage. If you get into an accident, it might assist cover the cost of repairing or replacing your car. Although it is not needed by state law, your lender may request it if you lease your car or if it is still financed. Even if you own your car entirely (congratulations! ), collision coverage is likely to be necessary. In a moment, we'll explain why.
What Is Collision Insurance and What Does It Cover?
What is covered under collision insurance? It's simple: If your car is damaged in an accident, such as crashing into a tree, colliding with another vehicle, crashing into your own garage door (oops! ), or colliding with anything else, collision insurance will assist pay the cost of repairing or replacing your car.
Collision insurance may preserve your rear end after an accident, depending on your deductible (the amount you must pay before your insurance policy kicks in) and the amount of coverage you chose.
What Does Collision Insurance Not Cover?
Collision insurance isn't a one-size-fits-all solution. All of your vehicle's problems can be fixed with a Band-Aid. The following items are not covered by collision insurance:
Damage to another person's car
Natural disasters, such as hail or floods, may inflict significant damage.
Hitting a living creature (like a deer)
Remember that collision insurance only covers damage to your car, not the vehicle of another person.
Collision Insurance: How Much Does It Cost?
Collision insurance costs around $378 per year on average.
However, the price you'll pay for it is determined by a few factors:
Your record as a driver. You'll pay less for collision insurance if you can demonstrate that you've always been a careful driver.
Your car's resale value. A two-year-old Mercedes or a ten-year-old Honda Civic: which is more costly to repair or replace? The Mercedes, most likely.
The amount of money you have to put down as a deductible. Your collision insurance rate will be cheaper if you have a bigger deductible. (A premium is the amount of money you pay for car insurance.)
Let's take a closer look at deductibles.
What Is a Deductible on Collision Insurance?
Deductibles are normally offered in two sizes: $500 and $1,000. For instance, if Steve is in a vehicle accident, the repairs will cost $3,000.
If Steve has a $500 deductible, the repairs will cost him $500. The remaining $2,500 will be covered by his insurance.
Steve will owe the first $1,000 and his insurance will cover the remaining $2,000 for repairs with a $1,000 deductible (which means he'll pay lesser rates).
Keep in mind that collision insurance coverage does not provide an unlimited sum of money to use toward repairs or a new car, regardless of your deductible. Sorry, but you can't destroy a Hyundai and then upgrade to a BMW. There are boundaries. The collision insurance limit for your automobile is determined by its actual cash value (ACV). The ACV is the vehicle's value less depreciation.
Know that we're here to assist you figure out whether you need collision insurance before your brain begins spinning like a vehicle on black ice.
Should You Get Rid of Your Collision Insurance?
Don't simply go out and cancel your collision coverage! If you're thinking about avoiding collision, there's one crucial thing to ponder. Are you able to replace your automobile if it is totaled?
Remember that collision coverage only pays for repairs or a new car up to a specified amount and excludes damage to another driver's vehicle. That would fall under your plan's liability section. (I'll get to it in a second.)
If you can't afford to repair or replace your vehicle with cash, whether you drive a brand-new automobile (please don't purchase a brand-new vehicle!) or anything old, you should keep your collision coverage.
Is Collision Insurance a Good Investment?
Collision insurance is purchased by almost three-quarters of all drivers (74%).
Keep collision insurance if you can't afford to repair or replace your automobile with cash, as we previously said. It's one of those situations when it's preferable to be safe than sorry.
Collision coverage is also a good idea for novice drivers who haven't had much experience on the road (yeah, we're talking about you, adolescent drivers).
Is Collision Insurance Required for an Old Car?
Whether you drive an older vehicle, you may be thinking if removing collision coverage may help you save money. If your automobile is paid off and you don't have a lender that requires collision coverage, you could be asking this question.
The most important consideration is if you have the funds in the bank to replace it if anything goes wrong. Even if your car is paid off, you may still want assistance from an insurance provider to replace it.
It also depends on the value of your vehicle. If you just spent $500 for it, having it damaged is probably not worth it since you could easily acquire another automobile in that price range if you wanted to. However, if you're driving a $10,000 minivan that's your family's main mode of transportation, it's advisable to acquire collision coverage.
How Do Collision vs. Comprehensive Coverage Compare?
You may be wondering how collision and comprehensive vehicle insurance compare. Collision insurance covers you if you collide with anything, even another vehicle or your own mailbox. However, collision insurance does not cover the other driver's repairs or medical expenses. Natural disasters, such as a tornado or a landslide, are not covered by collision insurance.
Comprehensive insurance, on the other hand, is a different story! Comprehensive vehicle insurance covers almost every natural or man-made calamity you can think of. Is your gas line chewed up by a squirrel? Covered! Is your windshield chipped or cracked? Covered! Have you ever hit a huge armadillo and wrecked your front bumper? Covered!
The term "comprehensive" refers to a policy that covers everything. If your automobile is stolen or damaged in a natural catastrophe, a collision with an animal or road debris, or by another person, it pays to repair or replace it.
What's the Difference Between Collision and Liability Insurance?
So far, we've discussed the differences between collision and comprehensive insurance. What about liability protection? What does it mean in terms of collision? When most people think of automobile insurance, they think of liability insurance. It's the granddaddy of insurance, and it's required by law in every state save New Hampshire and sections of Alaska. So, yes, it's a significant event!
Liability insurance pays for the medical bills and property damage of the individual whose automobile or property you collided with. You'll need liability insurance, and you'll want others to carry it as well. Everyone on the road is protected by liability insurance. However, unlike liability insurance, collision insurance will assist you even if you are at fault.
You have complete coverage when you have collision, comprehensive, and liability insurance. That's where you'll find the sweet spot. You should also buy a full coverage insurance if you can afford it.
What If You Don't Have Collision Insurance?
We all know that accidents happen, as much as we would want to assume that none of us would ever crash with anything. So, if you don't have collision insurance, what happens?
Unfortunately, this means you'll be responsible for the whole cost of repairing or replacing your car. If you're at fault, your liability insurance (which you're supposed to carry) only covers the expenditures of the other motorist. So, if you can't afford to fix or replace your own car, collision coverage is a must!
Is the Other Car Covered by Collision?
It doesn't work that way. Collision coverage, as we've seen, does not cover the costs of damage to another person's car, including medical expenses. For that, you'll need insurance.
Is a Hit-and-Run Accident Covered by Collision?
While we hate being imprecise, it is necessary. If someone impacts your car while it is parked, collision insurance may cover part of the damages. It does not, however, cover physical injuries.
Is Theft or Vandalism Covered by Collision Insurance?
Theft is not covered by collision insurance. Your complete coverage should usually cover this. The same may be said of vandalism. If graffiti artists decide your automobile is their new canvas, collision won't help. That's when a thorough approach generally comes in handy.
Does Collision Cover Accidents in a Rental Car?
It's not easy to get rental automobile insurance. If you get into an accident while driving a rental vehicle, your collision coverage may provide some protection, depending on your insurance. However, you should always double-check with your insurance provider and the rental vehicle business before getting behind the wheel.
The Most Appropriate Automobile Insurance Policy for You
Some vehicle insurance providers seem to be deliberately attempting to make obtaining automobile insurance as tough as possible. We're going to have to say no to it. It should be quick and straightforward to get the correct vehicle insurance policy, including collision coverage. When you deal with one of our Endorsed Local Providers, it is just that (ELPs). They are RamseyTrusted and would be delighted to assist you in finding the most appropriate insurance for your requirements. Not only will the appropriate plan protect you and your loved ones, but it will also save you money and help you achieve your financial objectives faster!