Collision insurance offers financial protection to cover the costs of repairing or replacing your vehicle in case of a collision with another vehicle or object, such as a fence or tree. If you are leasing or financing your car, lenders typically mandate collision coverage. However, once your car is completely paid off, collision coverage becomes an elective inclusion in your car insurance policy.
It is widely known that individuals who own vehicles in Illinois must possess a specific amount of liability auto insurance. However, you might be curious about whether or not you should also have collision coverage. Collision coverage is an essential form of car insurance as it can protect you from significant financial losses in the event that you are responsible for an accident. Take a look at this comprehensive guide to understand the distinctions between collision coverage and liability insurance, as well as whether it is obligatory in Illinois.
There were over 5.25 million police-reported car crashes in the United States in 2020, as per the latest data from the Bureau of Transportation Statistics. This translates to more than 14,000 car crashes occurring daily.
Despite the significant number of car crashes, it is anticipated that this year will witness an even higher figure. This is due to a 22% decline in police-reported car crashes in 2020, primarily due to reduced mileage driven during the initial phases of the pandemic. It is probable that police-reported crashes will revert closer to the annual average of 6.6 million from 2015 to 2019.
Additionally, there are unreported accidents, such as minor fender benders in supermarket parking lots and instances where drivers accidentally collide with a pole. Car accidents are quite prevalent. If you wish to have car insurance coverage to cover the costs of replacing or repairing your vehicle after an accident, collision insurance is essential. Without this optional coverage, you may find yourself responsible for paying substantial amounts out of your own pocket.
Collision insurance covers the cost of replacing or repairing your vehicle following an accident, with the deductible subtracted. This type of coverage is usually considered optional, so you may need to pay an additional fee to include collision insurance in your auto insurance plan.
If you are financing or leasing a car, the lender or leasing company will likely mandate that you carry collision insurance.
Collision insurance is a form of automobile coverage that provides reimbursement to the policyholder for any damage incurred by their personal vehicle as a result of their own fault. It is commonly included as an additional component of a standard auto insurance policy, offering protection to drivers in case of collision-related damages.
How Collision Insurance Works
Collision insurance provides coverage specifically for damages resulting from a collision, as the name suggests. This type of insurance does not extend to damages caused by theft or vandalism, nor does it cover damages that are covered by another driver’s policy in cases where the other driver is deemed responsible. It is crucial to have collision coverage to safeguard your vehicle from financial losses associated with physical damage. Accidents can happen unexpectedly, and having the right insurance can make a significant difference in protecting your assets.
Difference Between Collision Coverage and Liability Coverage
Collision coverage and liability coverage are two distinct types of insurance included in a comprehensive auto insurance policy. Collision coverage helps with repair or replacement costs if your car is damaged or totaled in an accident you cause, including single-vehicle collisions. However, it does not cover non-driving related damage like flood damage or theft. On the other hand, liability insurance covers damages for the other motorist if you are at fault in an accident, including medical bills and vehicle repairs. It does not provide financial assistance to the at-fault party but can protect from financial loss and legal issues.
What Collision Insurance Covers
Collision insurance provides coverage for repairing your car in the event of damage caused by an accident, as well as for replacing your car if it is deemed a total loss. This includes scenarios such as colliding with another vehicle, hitting an object like a fence or pole, being struck by another vehicle in a hit-and-run incident, or experiencing a rollover.
What Collision Insurance Doesn’t Cover
Collision insurance does not provide coverage for the following:
1. Damage caused to another person’s vehicle.
2. Injuries sustained in an accident.
3. Damage to your own vehicle caused by weather conditions, such as hail or flood damage.
4. Theft of your vehicle.
5. Repairs to any objects you collide with, such as a fence or pole.
If you wish to have coverage for repairing or replacing your vehicle in case of problems like theft, flood, fire, hail, falling objects (such as a tree branch), and collisions with animals, you will need to purchase comprehensive insurance. Comprehensive insurance is typically bundled with collision insurance and is usually mandatory if you have a car loan or lease.
How Does the Collision Insurance Deductible Work?
Your collision insurance deductible is the portion of the claim that you are responsible for paying. This amount is subtracted from the total claim payout. For instance, if your deductible is $500 and your repair costs amount to $3,000 following an accident, you will receive $2,500 from the insurance company ($3,000 – $500 = $2,500).
When purchasing collision insurance, you have the option to select your deductible. Deductibles typically range from $100 to $1,000 or more, with $500 being a popular choice. Opting for a higher deductible often results in lower insurance premiums. This is because the insurer’s payout decreases when you file a collision claim.
How Much Does Collision Insurance Cost?
The National Association of Insurance Commissioners (NAIC) reports that the average yearly expense for collision insurance is $381 on a national scale.
Do You Need Collision Insurance?
Collision insurance is an optional coverage for car owners, meaning it is not mandatory to purchase if you do not wish to. However, if you have a car loan or lease, you will likely need to acquire collision insurance to protect the financial interests of your lender or leasing company in case of a total loss due to a car accident. Even if it is not a requirement, it is advisable to consider getting collision insurance, as the average collision claim in the country is $4,601 according to the latest data from the NAIC. Without collision insurance, you would be responsible for covering your car repair expenses if you caused an accident, and if your vehicle is declared a total loss, you would have to bear the cost of replacing it.
Is Collision Coverage Compulsory in Illinois?
No, collision coverage is not required to drive legally in Illinois. However, when seeking auto financing, full coverage is necessary, including comprehensive and collision coverage. This is to ensure that the lender can recover their funds if your vehicle is severely damaged or totaled in an accident. If your car is fully paid off, you have the choice to forgo collision coverage.
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While not mandated by law, collision coverage is a valuable protection to have. If you only have the minimum liability insurance required by the state, you will be responsible for covering repair costs if your vehicle is damaged in an accident that is your fault. Repair expenses can be substantial and impact your finances significantly. Additionally, if your car is beyond repair, you may need to purchase a new one while still repaying the loan for the previous vehicle.
What Are the Specific Auto Insurance Requirements in Illinois?
Illinois law mandates that all vehicle owners in the state must have liability insurance. The required minimum coverage is as follows:
– $25,000 for one person’s injuries or death in an accident caused by you.
– $50,000 for all injuries or deaths in an accident caused by you.
– $20,000 for property damage in an accident caused by you.
This basic liability insurance covers medical bills, property damage, and other expenses for those involved in an accident you cause, up to the coverage limits. It is advisable to consider higher coverage in case of a severe accident resulting in significant injuries and damages. It is important to understand that you will be personally responsible for any remaining expenses once the policy limits are reached.
Your liability insurance also applies if a family member or someone with your permission is driving your vehicle. In some cases, it may also protect you when driving a rental car and causing an accident. An advantage of having liability insurance in Illinois is that it includes uninsured motorist coverage with the same limits as your injury liability coverage.
Remember that driving a registered vehicle without liability insurance in Illinois can result in a minimum fine of $500. Operating a vehicle with a suspended registration due to lack of insurance may lead to a fine of at least $1,000. However, these fines are likely to be much less than the financial consequences of being in an accident without insurance.
Determining the Need for Collision Coverage
If you are the sole owner of your vehicle, you may be contemplating whether it is necessary to invest in collision coverage. To make an informed decision, it is important to consider the following factors:
1. Value of your vehicle: Over time, as your vehicle depreciates, the value of collision coverage diminishes as well. This is because the payout from the insurance will never exceed the worth of your car. If you possess an older vehicle with high mileage, the maximum payout you receive is likely to be minimal and may not justify the cost of the insurance. Conversely, if you own a new or luxury car with expensive components, obtaining collision coverage would be more advantageous.
2. Deductible: The maximum payout for a collision claim is calculated by subtracting your deductible and insurance premium from the current value of your car. For instance, if you pay $200 every six months and choose a $1,000 deductible, the coverage for a $4,000 vehicle will only amount to a maximum of $2,800. In such a scenario, purchasing collision insurance may not be financially beneficial.
3. Your accident risk: Assessing your driving history can assist in determining the likelihood of making a collision claim in the future. If you frequently use your vehicle or have been involved in multiple accidents in the past, it may be wise to reconsider skipping collision coverage.
Whether you require collision coverage for financing purposes or simply for added peace of mind, you can rely on American Auto Insurance to provide you with the most favorable options. Contact us today to receive a complimentary quote for collision insurance.
What if my car gets involved in a collision caused by another driver?
In the event of a car crash, you have two options available to you:
1. File a claim with your own collision insurance. Your collision insurance will cover the cost of repairing your car, minus your deductible. For instance, if your car repair expenses amount to $3,000 and you have a $500 deductible, you would receive an insurance payment of $2,500.
2. File a claim against the other driver’s liability insurance. If the accident was caused by the other driver, you can seek compensation from their liability insurance. However, navigating this process can be complex, especially in states with comparative negligence laws that assign a percentage of fault to each driver. For example, if the other driver’s insurance company determines that their driver is 75% at fault and you are 25% at fault, they may only cover 75% of your claim. This means that if your car repair costs were $3,000, you would receive an insurance payment of $2,250 ($3,000 x 75% = $2,250) before deductibles are applied. The specifics of how fault is apportioned can vary depending on the state.
Conclusion
Collision insurance provides coverage to cover the expenses of repairing or replacing your vehicle in the event of an accident with another vehicle or object, like a fence or tree. Lenders usually require collision coverage if you are leasing or financing your car. However, if your car is fully paid off, collision coverage becomes an optional addition to your car insurance policy. The cost of collision coverage in Illinois can be influenced by several key factors, including the driver’s age, driving history, the type of vehicle insured, and the specific coverage options chosen. While it’s challenging to provide an exact figure without considering these individual variables, the average cost for collision coverage in Illinois can range from a few hundred to over a thousand dollars annually.
Ultimately, it’s crucial for Illinois residents to carefully assess their insurance needs and budget constraints when determining whether to purchase collision coverage. While this type of insurance can provide valuable protection in the event of an accident, it may not be necessary for all drivers, especially those with older vehicles or limited financial resources.
To obtain the most accurate and competitive rates for collision coverage in Illinois, it’s recommended to obtain quotes from multiple insurance providers and consider bundling policies or qualifying for available discounts. Additionally, maintaining a safe driving record and choosing a higher deductible can help lower premiums and make coverage more affordable in the long run.