What is Collision Insurance?

Accidents happen, and when they do, collision insurance becomes your shield against the financial burden of repairing your damaged vehicle. While this insurance is optional if you own your vehicle, it becomes a requirement if you have a car loan or lease. Lenders and leasing companies necessitate this insurance to protect their financial investment should the vehicle be totalled in an accident.

It’s important to note that this insurance has its limitations. Understanding the coverage and limitations of this insurance empowers you to make informed decisions about your auto insurance needs.

In the following sections, we will discuss everything you should know about this type of insurance.

What is Collision Insurance?

When an accident occurs, this type of car insurance becomes crucial in safeguarding against the financial burden of physical damage to the insured vehicle.

The deductible is a significant factor in collision insurance claims. It refers to the amount subtracted from an insurance claim. For instance, if you have INR 35,000 deductible and your car repair expenses after an accident amount to INR 2,00,000, you will receive an insurance cheque for INR 1,65,000 (INR 2,00,000 – INR 35,000 = INR 1,65,000).

When purchasing this insurance, policyholders can choose their deductible amount. Opting for a higher deductible generally results in lower car insurance rates as the insurer’s payout decreases if a claim gets filed.

When making a claim on your insurance, you will receive a cheque for the repair costs after deducting the chosen deductible. If the other driver is at fault, your insurer might attempt to obtain a refund of the deductible through a process called “subrogation,” which varies in duration depending on the State of your residence.

Alternatively, if the accident is the other driver’s fault, you can make a claim against their liability insurance.

Collision Policy: Pros and Cons

Having collision insurance offers several benefits that can save you significant expenses in case of covered incidents. The advantages of collision coverage include coverage for accidents, rollover protection, pothole damage, single-car crashes, and protection for parked cars.

One of the main drawbacks of collision insurance is that it increases your insurance premium. Additionally, collision coverage has limitations, including the exclusion of medical bills and damage to other vehicles, and remains limited to crash-related damage.

Understanding these pros and cons of insurance can help you make an informed decision about whether to include it in your car insurance policy. Simply put, it provides valuable protection from physical damage to your vehicle resulting from collisions. However, it does not cover medical expenses or damage caused by non-collision events.

Conclusion

Collision insurance is a crucial component of car insurance coverage that provides financial protection for vehicle owners in the event of collision-related damage. It ensures that repairs to your vehicle are covered, regardless of fault, offering peace of mind on the road. Choosing the right deductible amount allows policyholders to balance insurance rates and out-of-pocket expenses. Individuals can make well-informed decisions by understanding the coverage and limitations of this insurance.