Understanding Collision Insurance: What Is It And What Does It Cover

Understanding Collision Insurance: What Is It And What Does It Cover

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When you're involved in a car accident, it's a time-consuming hassle. Not only is a significant portion of your day taken up attending to matters like talking to your insurance company and the police, but you're also tending to your possibly undrivable vehicle.

It can be easy to take for granted how valuable cars are in daily life, transporting us here and there to take care of essential tasks like driving to work or buying groceries. Without a car at the ready, no longer can we go where we please, whether it be for work or enjoyment.

Even in a minor accident, repair costs can run high, into several thousands of dollars, whether for new body panels or mechanical damage. This is where the collision policy on your auto insurance saves the day, paying for necessary repairs, so your vehicle's restored to roadworthy condition.

What exactly is collision car insurance? What does collision insurance cover? Let's look at the specifics of collision coverage.

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Types of car insurance

Car insurance isn't simply a "one size fits all" way of reimbursing you for expenses when damage to your vehicle occurs. An auto insurance policy contains several unique areas of coverage that provide different amounts of reimbursement.

Collision insurance pays for necessary repairs or even vehicle replacement when you collide with another car or a stationary object like a fence or wall. Before collision coverage kicks in, usually you're responsible for a deductible, such as $500 or $1,000. 

When your vehicle sustains damage due to events beyond your control, like hail damage, theft, or vandalism, the comprehensive policy on your car insurance goes to work, reimbursing you for time spent in a repair facility. Similar to the collision coverage on your car insurance, a deductible first applies before you receive reimbursement.

Uninsured and underinsured motorist coverage provides financial relief when a driver with minimal auto insurance, or none at all, collides with you and causes vehicle damage or physical injuries. 

The liability coverage on your car insurance provides a financial safety net should you be found at fault in an accident. Liability coverage contains two separate elements: bodily injury liability and property damage liability. Bodily injury liability helps cover the medical expenses of persons injured due to an accident you cause. Property damage liability covers the cost of other drivers' vehicle repairs if you're at fault in a collision.

Personal injury protection, also known as PIP, assists with medical costs after an accident. Additionally, PIP helps with additional monetary assistance for things like lost income or daycare expenses. 

Medical payments coverage, or MedPay, covers the cost of medical treatment when you, your passengers, or family members who are driving at the time sustained injuries in a collision. 

Driving a vehicle in excellent mechanical condition helps you avoid collisions. The ability to accelerate, brake, and stop quickly enhances your safety out on the road. When you're in the market for a used car, where can you go to find a vehicle in great shape at a fair price? At Shift, certified mechanics perform 150-point inspections on every car sold, and you get a free Carfax report for the ultimate in transparency. Shift offers fair, no-haggle prices driven by powerful machine learning algorithms and tons of data. Not only that, but if you live in one of Shift's many service areas, a concierge will drive to you, so you can take a test drive before signing the papers.

What is collision car insurance?

Collision coverage reimburses you for repair-related expenses in the event of a collision with another vehicle, a stationary object, or a single-vehicle accident. 

Even if you're at fault in an accident, your collision coverage helps you with repair costs, so your vehicle's fixed and renewed to its prior condition.

However, collision coverage doesn't help with certain costs like injuries to another driver, damage to their vehicle, theft, or events beyond your control like hail or vandalism.

When choosing a specific car insurance policy, your collision coverage pays repair costs up to a specific monetary limit that you select. You're usually required to first pay a deductible before being reimbursed, like $500 or $1,000. The lower the deductible on your collision car insurance, the higher your premiums, and vice versa. 

Typically, the maximum financial benefit of your collision coverage is the actual cash value of your vehicle while taking into account depreciation.

As an illustration, if your vehicle is totaled in an accident and needs replacement, your collision coverage first requires your deductible payment, then pays the actual cash value for your car.

Do I need collision car insurance?

Collision car insurance isn't mandatory in any state, but if you're currently paying off an auto loan or leasing your car, usually you're required to have it.

With vehicle repairs possibly costing you thousands of dollars, it makes sense to have collision coverage on your car insurance policy. That way, you can drive with peace of mind, knowing your costs are covered if your car needs to spend time in a repair facility.

And in the event your vehicle's totaled, receiving the money to put toward a replacement rescues you from difficult circumstances, helping you return to your regular routine.

Owning a vehicle comes with several expenses, such as fuel, maintenance, and insurance premiums. Finding ways to save money here and there on vehicle-related costs helps keep extra cash in your bank account. Securing an advantageous auto loan can help reduce your expenses, both month to month and over the long term. When you're buying a used vehicle, whether a pickup truck or an electric car, where can you go for an excellent car loan? Shift works with a network of trusted lenders who compete for your business, so you get a great deal on financing.

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Collision insurance in summary

Collision coverage gives you a valuable financial safety net when you're in an accident, and your vehicle needs repairs. Today's cars are high-tech machines that can be costly to fix, and collision car insurance financially rescues you from those often substantial costs.

Though collision car insurance doesn't cover vehicle damage in all situations – such as bodywork dents from hail or someone stealing your car – it gives you peace of mind should accident-related repairs be needed.

First, you must pay a deductible on most collision car insurance policies before receiving reimbursement for needed repairs. Deductible amounts vary and are up to you when you select your specific collision coverage plan. Though it might be nice to have a low deductible, say $100, you'll also be responsible for higher premiums as a result. 

Collision coverage isn't a requirement in any state, nor if you own your vehicle outright, but the financial safeguard it provides makes it worth the expense. What if your car is totaled and you don't have transportation? The financial assistance provided by collision car insurance can help you return to getting things done without missing a beat.

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Author
Shift Editorial Team