McAfee Secure sites help keep you safe from identity theft, credit card fraud, spyware, spam, viruses and online scams

Collision Insurance Coverage and Limitations

The collision coverage portion of any overall auto insurance policy is designed to cover the policy holder in a specific, limited set of circumstances. Collision insurance is only one component of a so-called "full coverage" insurance package. Collision coverage is an important and useful form of protection, but it may not be appropriate for all drivers in all cars. There are also some limitations to collision insurance coverage that all policy holders should be aware of before signing on the dotted line and enrolling in coverage.

In a broad sense, auto insurance collision coverage protects the insurance policy holder against the threat of financial loss due to the costs associated with repairing damage to a covered vehicle involved in a car accident. Collision covers accidents with other cars as well as other objects, such as telephone poles or buildings. Cars involved in roll over accidents are also covered by collision insurance. Generally speaking, if your car hits or is hit by some other car out on the road, or if you run into some other object, your collision coverage will go to work for you.

Who Should Carry Collision Coverage

However, in spite of its obvious value, auto collision insurance does have its limits, and it is certainly not a worthwhile investment for every vehicle out on the road. The trouble wit collision limiting its usefulness is the fact that monetary coverage on a policy is normally capped at the actual cash value of the covered vehicle. For this reason, cars that are not worth a lot of money are really not worth carrying a collision policy on. Spending even a few hundred dollars a year to protect a car worth little more than that does not make a whole lot of sense when instead of carrying a collision policy, you could just replace it out of pocket if you happened to wreck it in an accident.

Collision coverage is much more useful for vehicles that are newer or still worth some money. As a matter of fact, lien holders require collision as well as comprehensive insurance on vehicles they have an interest in. If you lease or finance your vehicle, collision is no longer an elective coverage but becomes a requirement. Lien holders will even assign you with a collision and comprehensive policy if you do not get coverage on your own, often at substantially higher rates than the average market cost. If you let this happen to you, it can be a real hassle getting that policy canceled or replaced by a more affordable one. It's best just to make sure you keep your coverage current while there is a lien on your car to avoid this type of situation.

The cost of collision insurance can be somewhat high for new cars; it usually costs quite a bit more than comprehensive coverage. Therefore it is imperative for most drivers to do everything they can to keep the cost of a policy down as low as possible. There are several ways you can save money on the annual premium of a collision policy. One of these ways is to simply raise your collision deductible. One element factoring in to the cost of coverage is the deductible you choose. A higher deductible saves you money because it effectively reduces the number of possible situations in which you would be likely to file a claim. For example, a minor accident resulting in minimal damage would be useless for you to claim if your collision deductible was $1,000 or higher.

Higher deductibles can save you money off the cost of your collision policy, but since they limit your ability to make a claim on your coverage, electing higher deductibles can actually cost you money in the long run if you have to repeatedly pay out of pocket for less serious accidents that would have otherwise been taken care of by your insurer. You are effectively hedging your bets against having to pay up to the increased deductible amount over and over again when you choose to raise your deductible. This action pretty much turns your collision policy into a catastrophic policy and not one that you would expect to use after any minor scrape. If you need to make this move to save money, do it with this change in mind.

Collision Limits: Liability Claims

The scope of what collision coverage takes care of is also limited. If you get into an accident and you are the at fault driver, your collision insurance will not cover damage to the other driver's car. The only car coverage that will apply here is your basic liability plan, which will contribute toward the cost of expenses incurred by the other driver and passengers in terms of medical care and auto damage. Collision is basically set aside to deal with the cost of repairing your own car.

The dollar amount limit of a collision insurance policy is normally limited to the actual cash or blue book value of the covered vehicle, less deductible. Other limits of coverage may also apply, some of which might be specific to individual insurers. It's very important to be aware of this, and to read up on your own collision coverage that you are fully aware of any terms and conditions that exist limiting your coverage. Do not make assumptions about what's covered and what is not in any area of your auto insurance policy.

Collision vs. Comprehensive Claims

Collision insurance is also limited to damage incurred when the covered car is in use, as evidenced by its name. In this sense, comprehensive coverage picks up where collision leaves off. However, one important limit of collision coverage involves car-deer accidents and any other accidents involving the vehicle striking the animal. In general, these accidents are covered by comprehensive and not collision. Insurers regard them as less avoidable than car accidents and thus group them with other comprehensive claims.

Auto insurance coverage is designed to offer consumers the chance to choose their own modes of coverage based on their individual needs. For this reason, many different elective forms of car insurance exist beyond the liability coverage most all of us carry as drivers. Collision insurance is certainly one of the most important investments you can make as a car owner to protect yourself from experiencing an uncompensated loss in the event of a serious crash. But its value is very limited in certain instances, such as when the value of the covered vehicle dwindles as it gets older. In spite of its value as a general rule, collision coverage is not the right choice for protecting every vehicle, and drivers need to understand exactly what kind of protection it is designed to provide in order to make the right decision on whether to include it in their stable of auto insurance coverage.

Car insurance consumers can do themselves a great deal of good by learning all they can about each form of insurance available on their policies. Having a correct understanding of the protection as well as the limits of each coverage form can help ensure you will not be oversold when it comes time to renew.

 

partners

FREE Quotes, Multiple Insurers

Zip Code