If you’ve been paying attention to auto insurance costs lately, you’ve probably noticed that collision insurance keeps getting more expensive. You might be wondering what collision insurance actually is and how it affects your wallet. Let me break this down for you. Collision insurance is a type of policy that’s pretty much necessary, but you should understand what you’re buying before you decide whether you want it. It covers damage to your vehicle when you’re in an accident or other incidents that are out of your control.
The collision insurance definition usually starts with “A collision” followed by “occurrence”. This basically means that when there’s a crash, both cars might be at fault, but someone has to pay for all the damages. There are some exceptions to this rule, like when one of the cars is driven by an authorized driver who caused the accident, which protects that driver’s rights. If another car gets involved in the collision, that vehicle also falls under the coverage.
You can break collision insurance into two main types: collision and comprehensive. Collision coverage only pays for damage to your actual car, while comprehensive coverage handles damage to your property and your body. Comprehensive coverage usually comes with a deductible you’ll need to pay. Most insurance companies make you carry at least the minimum liability coverage. Some also require uninsured motorist coverage, which pays for damage to someone else’s car if they get hurt in an accident with you. To learn about the difference between comprehensive vs collision insurance, check out Joywallet’s article.
Here’s something important about collision insurance: it doesn’t cover damage to other people or their stuff. So if you slam into someone’s car or house, you’re definitely not covered for that. This kind of damage falls under Personal Injury Coverage, which helps pay medical bills and repair costs for the injured person or their family. If someone’s riding in your car and you get in an accident, they need to call an Auto Insurance Professional right away, because Personal Injury Coverage won’t pay for the damage to their vehicle.
There’s one part of collision insurance that trips up most people: the deductible. The deductible is what you have to pay out of your own pocket before the insurance company starts covering the other person’s claim. Remember that the deductible never goes higher than what you’ve already paid from your savings. If you’ve saved enough money, you won’t need to go over your deductible. The deductible will always be less than the total cost of all the damage to your car.
If someone else hits your car but you don’t have Personal Injury Coverage, the person who hit you becomes responsible for the rest of your claim, including medical bills and repair costs. When someone hits you, your auto insurance will usually make you pay a deductible too. But here’s the thing: collision insurance doesn’t specify who has to pay out of pocket first. If you still haven’t paid your deductible after the crash, you might end up responsible for the rest of the claim.
Sometimes collision coverage won’t cover everything. For example, if the other car gets stolen and the victim’s vehicle is totaled, the insurance company will often pay for the full cost of the stolen car, including any damage to the car itself. But this usually won’t cover the collision damage to your vehicle. Your car insurance policy will probably list “full coverage” as one of the services it provides.
“Full coverage” or “complete coverage” is pretty vague terminology. It typically means your auto insurance policy gives you the most complete protection you can get. With full coverage, you get help paying for physical and legal expenses, plus any damage your vehicle might take during a collision. But many people think they’re getting more than they actually paid for when they buy this type of insurance. That’s why many states have laws requiring car owners to buy “comprehensive coverage.” You might not pay as much for collision insurance as you would without comprehensive coverage, but you should always think about the trade-off between how much protection you get and how much coverage you’re actually paying for.