Coverage Regardless of Fault
Accidents and damages that fall into this category of coverage include roll-over accidents, a collision with another vehicle or costs resulting from an encounter with a fixed object like a pothole, guardrail or light post. Collision coverage applies only to your vehicle, it doesn’t cover whatever your vehicle collided with – that would be covered under property damage liability coverage if you were found legally responsible for the accident.
Collision coverage is usually sold with a deductible amount. A deductible is the out-of-pocket expense you agree to pay before any payment from the insurance company kicks in. Deductibles range from $0 – $2,000, but limits of $250, $500 or $1,000 are most common. Generally, the rule of thumb is the higher the deductible, the lower the corresponding coverage premium.
Although collision insurance is not required by any state, your lending institution may require this coverage if you are financing your auto. If your vehicle is involved in an accident and considered “totaled” (when the repair costs exceed a certain threshold of the vehicle’s value), you and your lending institution would be protected up to the actual cash value (ACV) or “fair market value” of the vehicle. Depending on the term of your loan, it’s possible that the vehicle will depreciate more quickly than the value of your loan. To avoid paying the difference to the lender out of pocket, you can purchase gap insurance, which typically covers the difference between a vehicle’s actual cash value and the sum owed to the lender.