Collision Insurance Cover

All motorists are required to maintain state-minimum liability insurance coverage for bodily injury and property damage that you may cause. Liability coverage is used to pay for damage incurred by others. Drivers have the option of adding comprehensive and collision coverage to pay for damages to your car. Serious car accidents are a reality for motorists. In 2017, there were over 37,000 people fatally injured—roughly 1,000 in Arizona alone. Collision coverage allows for the repair costs or replacement of your vehicle following a collision. Collision coverage applies regardless of fault.

When Does Collision Coverage Apply?

Among the many types of auto insurance, collision coverage is used in various scenarios. One example is if you crash into another car or object such as a tree or light post. This coverage would also be used if you drove off the road into a ditch. It is also commonly confused with comprehensive auto insurance coverage.

Differentiating Collision and Comprehensive Coverage

The primary difference between collision and comprehensive auto insurance is whether the vehicle was under the driver’s control at the time. Comprehensive is generally thought of as being applicable following “acts of God” or nature. Examples would include damage from a hailstorm, vandalism, or theft. Both types of coverage are usually sold together and make up what is referred to as “full” coverage.

Collision Coverage Required

Those financing or leasing their vehicle are going to be required to maintain full coverage. The lender that you are making payments to implements this requirement for their protection. If the vehicle became severely damaged, the lender wants to know their asset is covered.

Collision CoveragePricingAverage2012-2016 [1]
StateCollision |Liability |Comprehensive
New Mexico290.17495.33178.38

Factors That May Impact Collision Insurance Rates

There are a host of reasons why a motorist may see increased premium pricing for collision coverage some of which include:

  • Traffic violations or infractions
  • Other drivers within your household
  • A recent history of insurance claims
  • The type or value of the vehicle being insured
  • The location of your residence

Policy Deductible

The majority of collision and comprehensive policies have a deductible amount. This is an amount that the policyholder must “pay out of pocket” in an insurance claim. Collision deductible amounts are commonly $250, $500, or $1,000.

We will use an example where your car incurred $5,000 in damage and your policy has a $500 deductible. You would pay the initial $500 toward the repair and your insurer would then pay the remaining $4,500. Choosing a higher deductible amount will generally lower the amount of your premium.

Stacking and Indemnity in Collision Coverage

It is possible that multiple insurance policies could potentially be used to cover the same damages from a single accident. This could create an opportunity for abuse if the insured filed a claim with both policies. The insurance industry implemented provisions to prevent this problem where the insured may potentially profit from a claim. The principle of indemnity seeks to prevent this practice. If more than one insurance policy could potentially cover a loss coverage is limited to the amount of the highest single policy limit. These measures are often called “anti-stacking” protections.

Actual Cash Value

In situations such as when a vehicle is damaged beyond repair, your collision coverage will pay for a replacement. If the vehicle is “totaled”, the amount the insurer pays is generally based on the actual cash value. Keep in mind that your vehicle begins depreciating in value it is purchased. Actual cash value can be summarized as the replacement cost minus the estimated depreciation.

Replacement Cost Value

Some auto insurers recently have been advertising “guaranteed better vehicle replacement” or “full new vehicle replacement” policies. Keep in mind that these policies are likely to have some extra costs factored into the premium. Motorists now have many online resources for quickly and accurately estimating their car’s current value. Sites including Edmunds and Kelley Blue Book are two of the more popular options.

Should I Maintain Collision Coverage on an Older Car?

Cars over 10 years old with a value of less than $3,000 may not be worth maintaining collision coverage on. This evaluation needs to be made on a case-by-case basis. You should analyze the cost of the collision policy premium compared to how much the car is worth.

Coverage for Rental Cars

Traditionally, those who rent a car are covered by their collision rental coverage provided by their credit card. Your existing auto insurance policy would provide liability coverage. In recent years, many credit card companies have started no longer including this form of coverage in the card user agreement. It is critical that when renting a car you check your credit card agreement and auto insurance policy. If coverage is not provided or insufficient, you will want to purchase added coverage options from the rental car company.

Coverage for an Interim Rental Car

Another potential coverage benefit within your collision policy is for a rental car to use while your vehicle is being repaired. Often these policy provisions are called “loss of use” coverage and usually specify a daily rate of rental reimbursement. For example, your policy may provide $35 per day for a rental car with a maximum limit of $500.

Independent Insurance Agency in Arizona

Finding auto insurance that provides a combination of superior coverage and excellent value can be a challenge. Often key policy features and benefits are buried in paragraphs of fine print making it difficult to truly compare competing policies. At the Gebhardt Insurance Group, we will properly evaluate your needs and identify the best options from dozens of insurance carriers. Contact our team of professionals today in Casa Grande at (520) 836-3244.