What is Collision Auto Insurance?

All states in the U.S. have laws regarding a minimal level of liability insurance that must be carried by anyone operating a vehicle on public roads and highways. This coverage is meant to protect you against lawsuits and protect others whom you may be involved in an accident with. There are other types of insurance coverage as well, including collision insurance, as well, but what is it and what can it do for you?

Protection for Your Vehicle

Say you get into an auto accident. No matter whose fault it is, your liability insurance may kick in to provide for the repair and/or medical costs for the other car and driver involved. What about the damage done to your car? Liability insurance provides no coverage for your own vehicle in an accident. The level of insurance coverage provided by a collision policy is determined by the premiums you choose to pay for it. With some policies you can choose coverage as low as a few thousand dollars or as high as $100,000 to replace a very expensive, totaled vehicle. In some cases, depending on your particular policy, you may be reimbursed for rental car costs while your vehicle is repaired.

Collision Insurance Downsides

Most people stop carrying liability insurance after their car reaches a particular age or value level, since collision insurance will usually only provide coverage up to the value of your vehicle, not what you paid for it. This means that a car you paid $20,000 for five years ago may only receive a payment of maybe $12,000 if it is totaled in an accident. This depreciation or loss leads many to feel that the premiums paid for collision insurance is not worth the reward.

Insurance Required by Lenders

If you finance a new or used vehicle through a bank or credit union, they will most likely require that you carry collision insurance sufficient enough to replace the vehicle if it is lost in an accident. This requirement is to protect both you and the lender as well, so that you do not end up having to pay for a vehicle that was lost in an accident and you are no longer driving.

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