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Collision Insurance

Collision Insurance Definition
What is collision insurance definition - Collision insurance pays for physical damage to your auto as a result of an accident. What is collision insurance for? Collision insurance will pay for repairs or replacement of your auto when damaged by a collision with another vehicle or a stationary object such as a tree, signpost or concrete barrier etc.

Collision Insurance

What does collision insurance cover? The damage done to your auto when you caused the accident. Specifically, collision insurance is relevant only where you were at fault or the cause of the accident. I this case, collision insurance pays for the damage done to your own auto.

collision auto insurance

If another driver caused the collision and the accident was not your fault then that person's insurance is called on to cover the cost of damage done to your auto. In an accident scenario, If you were not at fault, then the other driver's liability coverage should pay for the damage done to your auto.

Why Buy Auto Collision Insurance?

collision auto insurance  Auto collision insurance is an optional coverage, that is the law does not require you to hold it in order to legally operate an auto. Given the fact that where another driver causes the accident, their insurance covers your auto damage, you may wonder do I need collision insurance. You can also sue a person that you believe is to blame for an accident that damaged your auto. Why buy? Is collision insurance worth it?

There are some very good reasons why you need collision auto insurance.

1. Collision auto insurance is required under the terms of a loan.

If you lease or auto finance your vehicle with a loan then the finance company requires you to hold collision insurance under the terms of your financing agreement. They do this in order to protect their loan collateral - your auto.

If you are not holding collision insurance on a financed auto and you cause an accident you will remain liable for the loan balance.

2. Even the best drivers cause accidents or accidentally come into contact with stationary objects.

This might include parked cars and reversing mishaps. If you are the driver held at fault or liable for an accident then the other party's insurance is not going to pay for damage done to your auto. You need your own collision insurance to handle the cost of your auto repair bill.

Furthermore, if you cause an accident and your auto is totaled then you are left with nothing without collision insurance. Collision insurance pays for damages, even if the damage was your own fault. If there was no other vehicle involved, for example you backed into a pole, collision insurance will pay for the damage.

3. Even if you are adamant that another driver was the cause of an accident and ready to sue, that person may simply disagree giving rise to protracted legal proceedings and a decision that still may not go your way.

If you have collision insurance coverage your insurer can take care of the cost of repairs to your auto and collision insurance coverage allows them to take over the case against the other person.

4. Collision insurance helps ensure that if you are involved in an accident with a motorist who has no or inadequate liability insurance, you can get your auto repaired and paid for.

5. Some insurers extend collision insurance to cover any rental car that you hire. This could allow you to take the risk of declining CDW cover on a hired auto.

Collision Insurance Cost

In some cases in order to purchase collision insurance you may be required to also purchase comprehensive, which is a separate coverage. 

Accidents or collisions are the reason for the majority of insurance claims. For this reason collision insurance is a significant cost component to a policy. Collision insurance may account for about one third (33%) of the total annual cost of a standard policy containing. Getting better rates and savings requires shopping around.

Collision insurance is subject to a deductible amount that you may choose. Often the choice may come in increments of $250, e.g. $250, $500, $750, $1,000. By selecting a higher deductible you can lower he cost of your collision insurance but remember that this is the amount that you forgo or stand the cost of yourself in the event of a claim.

Collision insurance cost normally decreases as your auto ages or depreciates. Collision insurance premiums are higher for expensive, often stolen and problematic repair autos. The cost of collision insurance may be cheaper for autos with good durability.

Collision Insurance

Collision insurance should reimburse you the cost of repairs less your deductible. The amount paid for repairs can depend on the actual damage and extent of, including the use of new, refurbished or OEM parts. If you hold collision insurance and your auto is totaled or deemed a write-off then by default the insurer is obligated to pay you the actual value of the auto prior to the accident less salvage value. The collision insurance payout for a totaled auto is determined by the age and condition of the auto and features that impact the value. Auto insurance collision payouts are based on fair market value. The auto insurance collision payout might be an amount similar to the private sale value of the auto immediately prior to the accident. Claims adjusters look to determine what the offer will be. If you are financing an auto then it is possible that the amount you owe on the loan is greater than the amount that the insurer will pay. Similarly, if you purchase a new auto regardless of financing, once you drive off the lot the value drops significantly.

These risk situations can be negated by coverages additional to basic collision damage insurance. Some insurers can offer replacement cost with their collision insurance instead of the actual market value approach for an additional premium. Alternatively there is the option for what is collision insurance supplemental coverage called gap coverage.


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