Collision Coverage
Auto insurance that pays for damage to your vehicle when it collides with another car, object, or overturns, regardless of who is at fault. This coverage is typically required if you have a car loan or lease.
Example
“When Lisa's car slid on ice and hit a guardrail, her collision coverage paid $8,000 to repair the damage minus her $500 deductible.”
Memory Tip
Collision Coverage = Car Crashes into things - it covers when your car physically hits something else.
Why It Matters
Collision coverage protects your investment in your vehicle and ensures you can repair or replace it after an accident, even when you're at fault or the other driver is uninsured. Without it, you'd pay out-of-pocket for potentially thousands of dollars in vehicle repairs or replacement costs.
Common Misconception
Many drivers think collision coverage is unnecessary if they have liability insurance, not realizing that liability only covers damage to other people's property, not their own vehicle. Others believe collision coverage will pay to replace their car with a new one, when it actually pays the depreciated actual cash value.
In Practice
Mike's 2020 Honda worth $22,000 is totaled when he rear-ends another car. His collision coverage with a $1,000 deductible will pay $21,000 ($22,000 minus his deductible). If Mike only had liability coverage, he would receive nothing for his totaled vehicle and would need to buy a replacement car entirely out-of-pocket.
Etymology
From Latin 'collidere' meaning 'to strike together,' this insurance term developed alongside the automobile industry in the early 20th century as cars became more common and expensive to repair.
Common Misspellings
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Related Terms
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See Also
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