October 6, 2009

What Is Covered In Collision Insurance?

The National Highway Traffic Safety Administration estimates that 6 million accidents occur on U.S. roads each year. State mandates require motorists to purchase liability insurance, which pays for medical expenses and vehicle damages for other drivers. But what if you are at fault for the accident? This can happen even to the safest of drivers. For this reason, you may want to consider additional auto insurance coverage. Since most accidents are due to collisions, purchasing collision auto insurance may be an appropriate investment " especially if you own a new car.

Collision coverage reimburses you for damages resulting from a collision with another vehicle or an object. If you hit another car or object, or overturn your vehicle, you will be compensated for the repairs and possibly the replacement costs of your vehicle. However, most auto insurance companies offer actual cost coverage, which pays for the actual market value of your car, which is determined by the age, condition and features of your vehicle. Unfortunately, this may not provide you with the amount of money you need to purchase another vehicle. If you are financing or leasing a car, the money you owe can also be greater than the car's market value. In this case, some drivers opt to purchase gap auto insurance, which pays the difference between the actual cash value of the vehicle and the outstanding balance on your loan or lease. You can also purchase replacement auto insurance coverage, which will give you enough money to buy the year, make and model of your car, or comprehensive coverage, which covers theft fire, vandalism or forces of nature, such as hurricanes and floods. Knowing your options can safeguard you from paying out-of-pocket expenses not covered in your auto insurance plan.

There are three types of collision coverage you can purchase: standard form, limited form and broad form. The standard form of collision coverage will pay for the damage to your car regardless of who caused the accident, but you will have to pay the deductible. Broad form is the best coverage one can buy, but is also the most expensive. It will pay for the damages of your car, plus your deductible if the other driver is found to be 50 percent or more at fault. Limited form covers damages if the other driver is at fault, but you will be responsible for the costs if you are 50 percent or more at fault.

With such high accident statistics reported annually, even the best drivers can cause an accident. If you have a new car or are financing or leasing, you may want to ask yourself: Is purchasing collision auto insurance a worthwhile investment? The answer just might be yes so take this into account when looking at an auto insurance quote.