What is Collision Insurance?
By Malds Menzon Jr.
Special to USInsurance.com
Collision insurance is a type of automobile
insurance that protects cars involved that were involved in accidents. This
policy, like most types of car insurance, is
attached to the car and all rights that follow the car. So regardless of who the
driver is, it will apply if another car is hit or vice versa and if the insured
car hits an object. The policy is not required by law in most states however if
a car is bought under a financial plan, involved companies will normally require
it to protect their investment.
A basic collision
insurance policy will create an obligation for the issuer to pay for the
repairs or the replacement of a covered car minus the deductible if an accident
occurs. However because of the nature of an insurance contract both parties can
limit application of the policy or broaden it by agreement. Terms of a limited
collision insurance policy will only obligate the insurer to pay for repairs if
the other driver is at fault while a broadened policy will allow for the
reimbursement of the deductible in the same scenario.
Premiums for this insurance are dependent on the car it will attach to and
the deductible chosen by the potential policy holder. Generally insurance
companies will set higher premiums for cars that are expensive, prone to
loss or damage and difficult to repair. Likewise, premiums will scale inversely
with the amount of deductible chosen by the holder making it advisable to set
this amount to the largest that one is capable of shouldering.
Anyone
considering the policy should base judgment on the cost of the car to be
insured.
Collision insurance sets the limit of an insurer’s obligation to pay to the
market value of the car prior to the accident minus the salvage value
afterwards. If the car is expensive it is advisable to have it covered by this
policy. If the opposite is true, then attachment of the policy will only result
in high premiums for a relatively low payout.
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