Auto Insurance – Understanding the Different Types of Collision Insurance

When choosing auto insurance there are several options to keep in mind when trying to build a policy that best suits your needs. Everyone knows that in almost all of the states, to drive a vehicle legally, you must have at least liability coverage on your car – but what about other types of insurance? Well, one of the most important options is your collision coverage.

If you finance a vehicle for purchase or lease, your lender is going to insist that you have collision coverage, and the more the better. For example, in the state of New Mexico, if you were to lease a Cadillac, the company responsible for the lease will likely insist that you purchase the maximum collision coverage available. There are levels of collision coverage that you must become familiar with to make the correct choice for your situation.

The least amount of collision offered would be called the “Limited” option. If you choose this option and you rear-end another car, which would be your fault, your Limited policy would pay nothing. If you got rear-ended, making this the other person’s fault, you would pay your chosen deductible, and then the insurance company would pay the rest. So, if you are better than 50 percent responsible for a collision and you have Limited collision coverage, you foot the bill.

The middle of the road collision choice is called the “Standard” option. In this instance, if you broad-side another car or they side-swipe you, you will be responsible for your chosen deductible, ranging anywhere from $250 on up to $1000. Basically, with the Standard option, what you pay is the same no matter whose fault the accident is. Some states offer a zero deductible choice, but the premium rates would be considerably higher. The Standard collision option is most commonly chosen by the average driver.

The highest and most expensive collision option is called the “Broad Term” option. In this instance, if you are responsible for the collision–or at least better than 50% at fault, you will be responsible for your deductible and the insurance company will cover the rest. If you are not at fault for the collision and you have Broad Term collision coverage, you pay nothing. The insurance company would pay for everything for you at 100%.

Also keep in mind that the insurance company is only responsible to cover damages up to the value of the car. So, if you really get into a huge pile-up and your car is crushed and will cost more to repair than its actual value, it will be declared totaled–just food for thought.

So, shop carefully for your auto insurance policy, choose your options wisely, be a safe driver, and make sure that you are covered as best as your budget allows.