What is collision insurance?

Collision Insurance Can Be a Financial Lifesaver

If you are unfortunate enough to be involved in an automobile accident, you will be much happier if you have insurance, particularly collision coverage.

There are several types of auto insurance, and each plays an important role in protecting you and your finances, but when it comes to anything from a minor fender bender to a full-fledged interstate pileup, collision insurance provides the most protection.

Before you ask yourself, "Do I need collision insurance?" It is critical that you understand every aspect of your policy. To begin, you may be wondering what collision coverage is.

So, let's take a few moments to define collision coverage and explain the difference between comprehensive insurance and collision coverage.

What is collision insurance?

Collision insurance is a type of policy that protects you if your vehicle is damaged while it is in motion. So, what exactly is collision insurance and what does it cover?

Collision insurance covers everything from colliding with another vehicle to hitting a pole, a tree, a pothole, or anything else involving an accident while your vehicle is in motion.

All of that would be covered by your collision insurance.

It's important to remember that if you get into an accident, you'll have to pay your collision deductible. Your collision deductible is the amount you must pay out of pocket before your collision insurance kicks in.

In other words, suppose you get into a car accident that will cost $5,000 to repair and you have a $500 collision deductible. In this case, after you pay the $500 collision deductible, your collision insurance will pay you $4,500 for the damages.

Read your collision insurance policy carefully, because some insurers allow you to choose any body shop you want to have your vehicle repaired at, whereas others require you to use one of their preferred shops.

Comprehensive vs. collision

Collision insurance and comprehensive insurance are not the same thing, despite the fact that they are frequently mentioned in the same sentence. As a result, the average policyholder may be perplexed about the distinction between collision and comprehensive insurance.

Comprehensive and collision insurance, unlike liability insurance, are not mandated by law. However, if you purchased your vehicle with a car loan or a lease, your lender will require you to have comprehensive and collision insurance policies.

While collision insurance protects you while your vehicle is in motion, comprehensive insurance protects you from other types of damage such as falling objects (such as tree branches or hail), theft, fire, flood, windshield repair, and so on. However, once your car is moving and collides with another object, collision insurance usually kicks in.

Comprehensive and collision coverage is frequently extended to your rental car. However, if you drive a friend's car, your collision insurance is no longer valid – insurance follows the car, not the individual. So, if your friend drives your car, your collision insurance will cover it, but if you drive your friend's car, her collision insurance will have to take over.

Although it is usually a good idea to have both comprehensive and collision insurance, there comes a time when you should consider dropping collision insurance. That time is usually a) after the vehicle has been paid off and b) when the vehicle's value is around two to three times the cost of the collision deductible.

When your vehicle is still worth a lot and you have a loan, these are not the times to wonder if you need collision insurance. When you are in a tight financial situation, it is even more important to pay for collision insurance, even if it means stretching your budget.

While this appears to be counterintuitive, it makes sense. If you're having trouble affording collision insurance, consider how bad things would be if you didn't have it and then got into an accident. Then things will have gotten even worse.

To summarize comprehensive vs collision insurance, collision insurance generally covers you while your vehicle is in motion. Other types of damage are covered by your comprehensive insurance. While comprehensive and collision coverage are not always strictly required, they are frequently a very good idea.

And we should all be aware that liability insurance is required by law and covers you whenever you cause harm or damage to another person or property.