Collision Coverage Basics

Collision coverage is the auto insurance term for coverage that pays for repairs to your car should you get into an accident. Collision coverage will apply regardless of whos at fault.

How Collision Coverage Works

For example, lets say youre driving down a snowy street. Youre driving carefully, and youve got the right tires for this kind of weather and terrain but unfortunately, you skid out on a patch of ice, and your car ends up banging into a tree. The damage to your car is significant, and will cost several thousand dollars to fix. Your auto insurance carrier will pay for the repairs to your car (minus the deductible). So, if you decided to go with a higher deductible in order to get a lower monthly payment, you will have to pay that first, and then the insurance company will pay the rest. Under this scenario, if you have a deductible of $1,000, and the damage done to your car totals $3,000, you will have to pay up the first $1,000 and the insurance company will pay the remainder. If, on the other hand, you decided to pay a higher monthly premium in order to have a lower deductible of, say, $500, then thats what you will have to pay first, and then the insurance company will pay the remaining $2,500.

Who Benefits from Collision Coverage?

Collision coverage may not be the best choice for all drivers, however. If your car is brand new then yes, you should think about getting it. But if your car is an old beater and not worth very much, you might want to think about why you need it after all, an insurance company pays for repairs based upon the value of your car. Therefore, if you drive a car with a book value of $1,000, you can get collision coverage if you want, but if damages cost more than the value of your car the insurance company wont pay for it.

As with all decisions concerning car insurance, when it comes to collision coverage benefits, be sure to speak to a qualified insurance expert to answer any and all questions you may have about collision coverage and car insurance.