What is the need for auto collision insurance?

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Auto collision insurance is a type of insurance that helps to cover the expenses incurred on repairing or replacing a vehicle damaged during an accident. The insurance deals with the accidents that occur when the vehicle is driven by the insured person and the same can be claimed for the vehicle. If any damage occurs to any other property other than the insured person’s vehicle, it is not covered under this type of insurance and the same can be claimed with auto liability insurance. Similarly, damages other than accidents like theft, vandalism, etc are not covered under this type of insurance and these damages are covered by auto comprehensive insurance.

The terms and the features of Auto collision insurance are not clearly understood by many. It is not a statutory insurance required by law like auto liability insurance. It is an optional or additional insurance that can be added along with the auto liability insurance. But at some specific instances like lien on vehicle, or for a leased vehicle, the lien holder may require auto collision insurance as a part of lease agreement or loan agreement.

The policy limits and other terms of the auto collision insurance are generally determined by the insured party. The limit fixed by the insured party is the maximum amount that the insurance company will pay for covering the damages. The standard coverage limit differs according to insurance companies and the insured party can raise or lower the amount of policy.  A deductible amount, which is usually deducted before claiming the compensation, can also be determined by the insured party. The deductible amount as decided by the insured party or the insurance company will be paid by the insured party. The insurance premium will be determined by the amount of policy and the deductible amount. With the higher coverage and lower deductible amount, the premium amount will be higher and vice versa. To pay the lower amount of insurance premium, many people choose lower policy coverage with higher deductible amount.

When the insured person’s vehicle gets damaged due to an accident, the insurance company works upon the precise value of damages, that occur and determines the cost of replacement of the damaged vehicle. After deducting the viable amount as fixed by the insured party, from the insurance total amount of coverage, the balance amount will be paid to the insured party or the repair shop directly by the insurance company.