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

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

While that’s a lot of car crashes, we’re likely to see a higher number this year. That’s because there was a 22% drop in police-reported car crashes in 2020, largely due to fewer miles driven during the early stages of the pandemic. Police-reported crashes are likely to approach the average of 6.6 million per year from 2015 to 2019.

And then there are the unreported accidents, like your minor fender benders in grocery store parking lots and drivers accidentally backing into a pole.

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

What is collision insurance?

Collision insurance pays to replace or repair your vehicle after a car accident, minus your deductible. It’s usually optional coverage, meaning 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 is damaged in an accident in general, such as:

  • Accident with another vehicle
  • A car crash with an object, such as a fence, post or guardrail
  • Another car crashes into your vehicle, such as a hit and run
  • Your car flips over

What Collision Insurance Does Not Cover

Collision insurance does not cover:

  • Damage to someone else’s car
  • Injuries
  • Weather-related damage to your vehicle, such as hail or flood damage
  • Car theft
  • Repairing an object you bumped into, such as a fence or pole

If you want cover to repair or replace your car for issues such as car theft, flood, fire, hail, falling objects (such as a tree branch) and collisions with animals, you will 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 the car’s comprehensive insurance cover this?

How does a collision deductible work?

Your auto 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 deductible of $500 and your car repair bills after a car accident are $3,000, you will receive an insurance check for $2,500 ($3,000 – $500 = $2,500).

When you buy collision insurance, you will be able to choose the deductible amount. Deductible amounts can range from $100 to $1,000 or more, 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 of 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 country

Do you need collision insurance?

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

But even if you’re not required to buy collision insurance, it’s worth considering. The national average collision claim is $4,601, according to the most recent data from the NAIC. If you’ve been in a car accident and don’t have collision insurance, you won’t 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.

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What happens if another driver crashes into my car?

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

Make a claim on your own collision insurance

Your collision insurance will pay your car 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 was at fault for the accident, your insurance company may be able to recover all or part of your deductible through a process known as “subrogation.” The laws for this process vary by state and can take up to a year (or more) to resolve.

Make a claim against the other driver’s liability insurance

If the car accident was the fault of the other driver, you can file a claim against their liability insurance. You will need to deal with the other driver’s insurance company. This process can get a bit complicated depending on the country you live in. This is because some states have comparative negligence laws in car accidents that 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’d get an insurance check for $2,250 ($3,000 x 75% = $2,250) before your deductible is taken out. The details of how the fault is divided vary by state.

Connected: The hard work of determining fault after a car accident

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