What is collision insurance and what does it cover? – Forbes Advisor

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There were more than 5.25 million police-reported car accidents in the US in 2020, according to the latest data from the Bureau of Transportation Statistics. That’s more than 14,000 car accidents a day.

While that’s a lot of car accidents, we’re likely to see a higher number this year. This is because there has been a 22% drop in police-reported accidents in 2020, mainly due to fewer kilometers being driven during the early stages of the pandemic. It is likely that police-reported accidents will return closer to the average of 6.6 million per year from 2015 to 2019.

And then there are the unreported accidents, such as your little fender benders in grocery store parking lots and drivers who accidentally turn into a pole.

All this to say, car accidents are quite common. And if you want car insurance coverage to replace or repair your car after a car accident, you’ll need collision insurance. Without this type of optional coverage, you could be stuck paying thousands of dollars out of pocket.

What is Collision Insurance?

Collision insurance pays to replace or repair your car after a car accident, minus your deductible. It’s usually optional coverage, which means you’ll have to pay extra to add collision coverage to your auto insurance policy.

If you have a car loan or lease, your lender or leasing company will most likely require you to have collision insurance.

What does Collision Insurance cover?

Collision insurance covers car repair bills if your car is damaged in an accident or pays to replace your car if it’s totaled in an accident, such as

  • A car accident with another vehicle
  • A car collision with an object, such as a fence, post or guardrail
  • Another car collides with your vehicle, such as hit and run
  • Your car rolls over

What collision insurance doesn’t cover

Collision insurance does not cover:

  • Damage to another person’s car
  • Weather-related damage to your car, such as hail damage or flood damage
  • Car theft
  • Repairs an object you collide with, such as a fence or pole

If you want coverage to repair or replace your car for problems such as car theft, flood, fire, hail, falling objects (like a tree branch) and animal collisions, you’ll need to buy comprehensive insurance. Comprehensive insurance is usually sold with collision insurance and is usually required if you have a car loan or lease.

Connected: Does comprehensive car insurance cover it?

How does the collision insurance discount work?

Your car insurance deductible applies to collision insurance claims. The insurance deductible is the amount that is deducted from an insurance claims check. For example, if you have a $500 deductible and your car accident repair bills are $3,000, you will receive an insurance check for $2,500 ($3,000 – $500 = $2,500).

When you buy collision insurance, you’ll be able to choose your deductible. Deductible amounts can range from $100 to $1,000 or higher, with $500 being a fairly common choice. If you choose a higher deductible, you will usually pay less in car insurance rates. This is because your insurer will pay less if you file a collision insurance claim.

How Much Does Collision Insurance Cost?

Nationally, the average annual cost for collision insurance is $381, according to the National Association of Insurance Commissioners (NAIC). See the average in your state below.

Average annual cost of collision insurance by state

Do you need collision insurance?

If you own your own car, collision insurance is optional coverage, meaning you don’t have to buy it if you don’t want to. If you have a car loan or lease, you will likely be required to purchase collision insurance. This is because your lender or leasing company wants to protect their financial investment if your car ends up in a car accident.

But even if you’re not required to buy collision insurance, it’s still worth considering. The national average collision claim was $4,601, according to the most recent data from the NAIC. If you caused a car accident and did not have collision insurance, you would not have coverage for your car repair bills. And if your car is deemed a total loss, you’ll have to pay out of pocket to replace it.

Connected: Solving total car insurance problems

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What if another driver crashes into my car?

If someone crashes into your car, you’ll have two choices:

Make a claim for your collision insurance

Your collision insurance will pay for your car’s repair bills, minus your deductible. If your car repair bills were $3,000 and you had a $500 deductible, you would receive an insurance check for $2,500.

If the other driver is at fault for the accident, your insurance company may be able to get a full or partial refund of your deductible through a process known as “substitution.” The laws for this process vary by state and can take up to a year (or longer) to resolve.

Make a claim against the other driver’s liability insurance

If the car accident is the fault of the other driver, you can make a claim against their liability insurance. You will have to deal with the other driver’s insurance company. This process can get a little complicated depending on the state you live in. That’s because some states have comparative negligence laws for car accidents, which assign a certain percentage of fault to each driver.

For example, the other driver’s insurance company may decide that their driver is 75% at fault for the accident and you are 25% at fault. In this scenario, the other driver’s insurance company may only pay 75% of your claim. So if your car repair bills were $3,000, you would receive an insurance check for $2,250 ($3,000 x 75% = $2,250) before the deductible is deducted. The details of how the fault is divided vary by state.

Connected: The tricky business of determining fault after a car accident

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