An insurance contract is one where an insurer agrees to pay an indemnity amount to the insured when he suffers an injury or when his property is damaged or destroyed during accidents. This presupposes that the insured will pay a certain amount to the provider. If no loss or injury occurs, a provider gets to keep the money paid, except in some cases where a client gets a percentage return of what he paid. This is the business of indemnity coverage.
In auto collision insurance, coverage is paid only in case of a mishap involving vehicles. Usually, the company will pay only when the owner of a car is not at fault. However, there are instances when a company will still pay the amount regardless of who is at fault. In this case, the amount of premiums paid is usually higher. Auto collision insurance is often sold by dealers as part of the sale of a car or by another company after a vehicle is assessed and appraised.
Some terms of insurance provide that in case of collision, a car will be repaired at the expense of insurers. In other cases, an insurer will give a certain amount to the insured for him to be able to spend for the car’s repair. With dealers offering auto collision insurance, dealers also commit to replace damaged parts with new ones, or to provide owners with a temporary replacement car of a lower value while his vehicle is undergoing repairs. There are some arrangements also that require dealers to provide a new vehicle for the insured to replace the one that got destroyed, although this arrangement is quite rare.
However, what you should know is that an insurer is not always eager to pay the amount of the indemnity agreement. In case you get involved in a collision, expect a lot of formalities and red tape before you get paid. In certain cases, and when an insurance company is convinced that you deliberately caused the collision just to collect on the amount, expect an intensive grilling session where they would do all they can just to avoid paying up. What you can do is to prove that you were not negligent and that you did all you could to prevent collision from happening. When you have proven that, the insurance company will pay your coverage.
A good thing about auto collision insurance is that in case an accident does occur, you do not have to worry about having your car fixed. Try not to expect getting a new car; however, you can be sure that getting a repair on your car is guaranteed.