Collision – A Coverage in Auto Insurance for Damage Due to the Impact with Another Vehicle
Unwanted surprises, like car accidents, are stressful enough—understanding your insurance coverages shouldn’t be. Insurance policies can be complex, filled with technical jargon that may cause more confusion than clarity. Today, let’s break down what collision coverage is in the world of auto insurance and understand why it matters, not just to insurance agents, but to you
TL;DR
- Collision coverage is a part of your auto insurance that pays for damages to your car in an accident where you are at fault or have hit a stationary object.
- This type of coverage is important in managing financial risks arising from a car crash which may be expensive to repair.
- A common error is thinking that you’re automatically covered for all types of collisions, but certain types are excluded.
- A quick win for agencies is to accurately illustrate collision coverage to clients using real-world examples to emphasize its importance.
What Is Collision Coverage in Insurance?
For a layperson, when we mention collision, it is simply referring to a car crash or a traffic collision where one vehicle strikes another or other stationary objects.
From an insurance perspective, collision coverage is more specific. It’s a part of your auto insurance policy that covers damage to your own vehicle when it collides with another vehicle or object (like a tree or wall). Often, it’s outlined in your insurance policy documents under the physical damage section along with comprehensive coverage.
Whether you’re a role play in colliding objects intentionally to provide a demonstration or sadly involved in a head-on collision, collision coverage may play a significant part in assuring financial protection.
Key Related Terms to Know
- Conservation of Momentum: In the context of vehicle collisions, this physical principle states that if no external forces act on a system of colliding objects, the total momentum before and after the collision remains constant. Insurance professionals might use this term when discussing multi-vehicle collision.
- Coefficient of Restitution: This scientific term describes the level of elasticity in a collision where kinetic energy is conserved. For instance, in the case of a perfectly elastic collision, the kinetic energy before and after the crash remains intact.
- Inelastic Collision: Refers to a type of collisions where two vehicles collide and travel together after the impact.
- Elastic Collision: Describes a collision in which both kinetic energy and momentum are conserved. In this type of collision, both vehicles bounce off each other after the impact.
- Perfectly Inelastic Collision: This collision describes a situation when the colliding objects stick together after the impact, minimizing kinetic energy. In insurance terms, a perfectly inelastic collision may cause more damage, potentially leading to more expensive claims.
Common Questions About Collision Coverage
What does collision coverage pay for?
Collision coverage mainly handles the repair costs or replacement cost of your vehicle if it is involved in a collision with another vehicle or object. For instance, say you’re taking your kids to the park and accidentally back into a lamp post. Collision coverage will cover the damage to your vehicle, after you’ve paid your deductible.
Why should I consider collision coverage if it’s not legally required?
While collision coverage isn’t legally required, it is financially prudent to consider it. Often just a minor accident can result in extensive damage which could lead to expensive repair costs. Collision coverage can help cover these costs and protect you from considerable out-of-pocket expenses.
How does the deductible apply to collision coverage?
The deductible is the amount you’re responsible for paying before your collision coverage applies. For example, if you have a $500 deductible and $2,000 worth of damage due to a collision, your insurance company would pay $1,500 toward the repair cost.
What’s the difference between collision coverage and comprehensive coverage?
Collision coverage protects you if your car is damaged due to a collision with another vehicle or stationary object. On the other hand, comprehensive coverage concerns damages arising from non-collision instances like theft, vandalism, or natural disasters.
Collision Coverage vs. Comprehensive Coverage
Both collision and comprehensive coverage offer financial protection against the unexpected, but their areas of coverage differ:
Comparison Area | Collision Coverage | Comprehensive Coverage
|
Primary Use Case | Damage due to a collision with another vehicle or object | Damage due to non-collision related events (theft, vandalism, natural disasters) |
Coverage Type | Covers car’s repair or replacement costs after a collision | Covers car’s repair or replacement costs due to non-collision-related damage |
Typical Exclusions | Does not cover damage due to theft, vandalism or weather-related damage | Does not cover damages due to collisions with other vehicles or objects |
Who is Most Affected by Errors | Owners of high-value cars, and frequent drivers | Owners of cars in areas prone to theft, vandalism or severe weather conditions |
Common Mistakes | Misunderstanding that collision coverage applies to all types of collisions | Assuming it covers collision-related damages |
Real Claim Examples Involving Collision Coverage
Scenario 1: A mother of two backs her car into a lamp post while parking. The backside of the car is severely damaged. Fortunately, she had collision coverage, which after she paid her deductible, covered the repair costs of the backside of her vehicle.
Scenario 2: Bob, a Nashville resident, was on his way home when his car skidded on black ice, causing him to collide with a guard rail. His car took significant damage due to the impact. He was relieved when his collision coverage covered the repair costs after he paid his deductible.
Scenario 3: A tourist, unfamiliar with the local roads in Los Angeles, misjudged a turn and collided his rental car with a concrete barrier. Thanks to the collision coverage he added to his rental insurance, he was covered for the repair costs after paying his deductible.
Limitations and Common Mistakes
- Collision coverage does not cover damage due to events like theft, vandalism, or weather-related damage.
- It does not cover medical payments or injuries caused by the collision. It is limited to the insured vehicle’s damages only.
- It’s a common misconception that collision coverage applies to all types of collisions, but certain types, like collisions with animals, are typically covered under comprehensive coverage, not collision coverage.
- Many assume collision coverage is a mandatory coverage by state or lenders. It is optional unless required by a lender or leasing company.
- Clients often fail to report minor collisions to their insurance companies. Failing to report can have severe consequences if other latent damages are discovered later.
How to Explain Collision Coverage to Clients
To a Personal Lines client “It works like this: if you hit another car or a stationary object like a lamp post, collision coverage could cover the cost of repairing your car. You’ll only have to pay your deductible first.
To a Small Business owner “Consider collision coverage as a way to protect your company vehicles from out-of-pocket repair costs if one of your vehicles collides with another vehicle or object.”
To a CFO or Risk Manager “Having collision coverage means protecting the company’s financial liability if one of the company’s vehicles is involved in a collision. Remember, it’s limited to damage to your vehicles, not for medical expenses of any injured passengers.”