What is Collision Coverage?

Collision coverage pays for the damage to your car if you hit another car, object or roll over. This coverage will pay to either repair or replace your vehicle depending on the extent of the damage and the value of your vehicle. This coverage can also be confused with Property Damage Liability. However collision pays for damage to your car while property damage liability pays for damage to the person's car you were in the accident with.

You may be wondering who decides if your car gets replaced or repaired in the event of an accident. Well, that would be the insurance company. When you sign up for insurance it is indeed a contract and in that contract it's stated that the insurance company can choose to repair or replace the vehicle depending on which is cheaper. Keep in mind there is also a deductible associated with collision coverge so in the next paragraph I'll explain how this works.

For this examples let's say you crash your car that is worth $11,0000, according to the insurance company. After an insurance adjuster inspects your vehicle is it reported that the damage is $7,500. Keep in mind your deductible will be paid by you first so if you carry a $500 deductible, you'd be receiving a check for $7,000 to finish the repairs, Total Repair Estimate – Deductible = Check $$. If the value of your car had been only $5000 you'd be getting a check for a totaled vehicle instead. It's whichever option costs the insurance company less money.

If you have a loan on your car or are leasing the company financing will insist you carry collision coverage and list them as an additional insured. They want to be sure in the event of an accident they're going to get paid.

If your vehicle is paid off than you definitely have the option of carrying collision or not. That decision is based on how much you save vs how much the car is worth and how much risk are you comfortable shouldering in the even of an accident.