What Is Collision Auto Insurance?

Collision insurance covers damages to your car related to any accident you cause.

Collision insurance covers damages to your car related to any accident you cause.

Causing an accident isn't something you plan on doing, but it can happen. When you're the one at fault, you may have many things to worry about, including damage to your car. Collision auto insurance can help alleviate this aspect. It gives you the options you need to make sure you can get around after an accident, even if your car is in the repair shop.

Purpose

If another person collides with you and the accident is not your fault, the other driver's insurance should cover damages to your car, according to Kiplinger. Collision insurance covers the damage to your car when you cause an accident. Your coverage will depend on your specific insurance policy, but most will cover damage regardless of whether you hit another car, a tree or an animal. Collision insurance is a supplement to no-fault insurance. It will not cover damage to another person's vehicle or property.

Laws

Each state has its own insurance laws to protect citizens in the event of accidents; however, these laws protect people or property you hit, not your vehicle. That's why states don't require residents to have collision insurance policies. While state laws don't require collision insurance, your car loan provider may require you to carry collision coverage until you pay off your car loan. If you don't have collision coverage and you cause an accident, you will still have to pay the remaining balance on your car loan.

Types

Insurance companies offer three types of collision insurance, according to the state of Michigan. Limited collision insurance covers damages to your car only if you are 50 percent responsible for an accident. This can occur when another driver may be at fault, too, such as when a person rear-ends your car or hits it from the side. In cases where you are 50 percent at fault, a police officer may give both drivers a ticket. Your insurance company may also determine your percentage of fault based on the type of accident you had. With standard collision coverage, the insurance provider will pay for damages regardless of whether you are 50 percent or 100 percent at fault. Broad-form collision coverage pays damages for both percentages. Unlike the other two types of collision insurance, broad form does not require you to pay the deductible if you are only 50 percent at fault. You will have to pay the deductible if you are 100 percent at fault.

Deductibles

One of the factors that will affect the cost and the coverage amount of your collision insurance policy is the deductible. This is the amount you are willing to pay out of pocket before the insurance provider has to pay for damages. The higher the deductible, the lower your premium will be for the insurance. Getting a lower bill may seem like a good idea, but you need to pick a realistic deductible — the insurance company will not issue its portion of payment until you pay the full deductible.

Considerations

The type of car you drive, as well as your driving record, can affect the price of collision insurance coverage. If you drive a sports car or another vehicle associated with a higher risk of accidents, your coverage will cost more. You also need to consider whether collision insurance makes sense to carry. The insurance provider will max out the coverage at the market value for your car. If your vehicle is only worth a few thousand dollars, you aren't going to get enough from the policy to buy a brand new car.

 

Photo Credits

  • Voiture accidentée, tonneau image by Paul Laroque from Fotolia.com