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Q: What is Collision Coverage?

December 17, 2013 12:53 PM

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Collision coverage is a type of auto insurance coverage that provides for both accidental and direct damage, as well as the loss of a vehicle resulting from a collision with an object or another vehicle. Collision coverage provides payment for replacement or repair to the covered vehicle, minus the deductible. When a vehicle is protected by collision coverage, payment will be made regardless of whether you are at fault in the accident. This type of insurance coverage does not pay for medical expenses related to you as the driver or for those of any occupants of the vehicle.

Many insurance companies offer two different types of collision coverage. One option involves replacement-cost coverage, and the other involves the cash value of the vehicle. In replacement-cost coverage, the insurance company will provide you with enough money to purchase a vehicle of the same year, make and model as the totaled vehicle. Wear and tear on the covered vehicle is typically not taken into consideration. There will usually be an additional premium for this type of coverage. Although the cash value coverage will pay for the value of the vehicle at the time of the collision, this may not match the value that is required to replace the vehicle. If a vehicle is not in excellent condition and/or has high mileage, the loan on the vehicle could be higher at the time of the incident than the value of the vehicle.

The premiums for collision insurance coverage are based on the value and type of vehicle. You can often offset the premium by selecting a higher deductible. This is the part of the covered loss that you pay. The insurance company pays the remainder. Other factors that can affect the premium for collision coverage include car safety factors. Vehicles that are determined to be safer by the insurance company may cost less to protect with collision coverage.

If your vehicle is leased or financed, you will be required to carry collision coverage in order to protect the vehicle. The term comprehensive coverage is also frequently used along with collision coverage. Comprehensive coverage provides a type of blanket coverage for your vehicle. It will provide coverage for almost any type of damage to your vehicle that is not covered by collision coverage. This type of coverage will provide protection against losses that might result from incidents that are not collision related, such as vandalism, theft and acts of nature. Although it is not required by law, the lender typically does require you to carry comprehensive coverage if you are financing your vehicle. Even if your vehicle is not financed, you may still find it beneficial to cover the vehicle with collision coverage in order to avoid the out-of-pocket expenses related to repairing or replacing it, should you be involved in a collision. Collision coverage will also often cover rental cars. If your insurance company allows this, you may be able to waive the coverage offered by the rental company.

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