Collision Insurance for Cars: What Is It and Do You Need It?

Collision Insurance for Cars – Collision insurance is a type of auto insurance that covers the cost of repairing or replacing your car if it is damaged in an accident with another vehicle or object. It is optional in most provinces, except for Manitoba and Saskatchewan, where it is mandatory. However, if you lease or finance your car, your lender may require you to have collision insurance.

How Collision Insurance Works

Collision insurance works in conjunction with other elements of your auto insurance policy, such as third-party liability, accident benefits, uninsured automobile, and direct compensation property damage (DCPD). Each of these coverages has a different purpose and applies in different situations.

Third-party liability covers the damage or injury you cause to others or their property in an accident. It is mandatory in all provinces and territories.

Accident benefits cover your medical expenses, income replacement, and other benefits if you are injured in an accident. It is also mandatory in all provinces and territories.

An uninsured automobile covers you if you are hit by an uninsured or unidentified driver, such as a hit-and-run. It is mandatory in most provinces and territories.

DCPD covers the damage to your car if you are not at fault for an accident that happens in a province that has no-fault insurance. This means that you deal with your own insurance company regardless of who caused the accident. DCPD is mandatory in Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador.

Collision insurance covers the damage to your car if you are at fault for an accident or if you hit a stationary object, such as a guardrail, a sign, or a tree. It is optional in most provinces and territories, except for Manitoba and Saskatchewan, where it is included in the basic coverage provided by the government.

If you have collision insurance and you are involved in an accident, you have to report it to your insurance company as soon as possible. They will assess the damage and determine if your car can be repaired or if it is a write-off. A write-off means that the cost of repairing your car exceeds its actual cash value (ACV), which is the amount your car would sell for on the market at the time of the accident.

If your car can be repaired, your insurance company will pay for the repairs minus your deductible. For example, if the repairs cost $5,000 and your deductible is $1,000, you will have to pay $1,000 and your insurance company will pay $4,000.

If your car is a write-off, your insurance company will pay you the ACV of your car minus your deductible. For example, if your car’s ACV is $10,000 and your deductible is $1,000, you will receive $9,000 from your insurance company.

What Collision Insurance Covers

Collision insurance covers the following scenarios:

You hit another car or another car hits you
You hit a stationary object, such as a guardrail, a sign, or a tree
You roll over or flip your car
Your car is damaged by a pothole or road debris
Your car is damaged by vandalism or theft (if you also have comprehensive insurance)

What Collision Insurance Does Not Cover

Collision insurance does not cover the following scenarios:

Damage or injury to other people or their property (covered by third-party liability)
Your medical expenses or income replacement (covered by accident benefits)
Damage caused by an uninsured or unidentified driver (covered by an uninsured automobile)
Damage caused by fire, flood, hail, windstorm, earthquake, or other natural disasters (covered by comprehensive insurance)
Damage caused by animals or birds (covered by comprehensive insurance)
Wear and tear or mechanical breakdown of your car
Personal belongings inside your car
Rental car fees or towing costs

How Much Collision Insurance Costs

The cost of collision insurance depends on several factors, such as:

Your driving history: If you have a clean driving record with no accidents or tickets, you will pay less for collision insurance than if you have a history of claims or violations.
Your car’s value: The more expensive your car is, the more it will cost to repair or replace it in case of an accident. Therefore, collision insurance will be more expensive for newer or luxury cars than for older or economy cars.
Your car’s type: Some cars are more prone to damage or theft than others. For example, sports cars, SUVs, or convertibles may have higher collision insurance rates than sedans, hatchbacks, or minivans.
Your deductible: The higher your deductible, the lower your collision insurance premium. However, you also have to consider how much you can afford to pay in case of a claim. A lower deductible may save you money in the short term, but a higher deductible may save you money in the long term.
Your location: Collision insurance rates may vary depending on where you live and drive. For example, urban areas may have higher collision rates than rural areas due to more traffic and congestion. Similarly, provinces with no-fault insurance may have lower collision rates than provinces with tort-based insurance due to less litigation and fraud.

The best way to find out how much collision insurance costs for your car is to compare quotes from different insurance providers. You can use online tools like Ratehub.ca or MoneySense to compare car insurance quotes with collision insurance coverage from Canada’s top providers.

How to Decide If You Need Collision Insurance

Collision insurance is not mandatory in most provinces and territories, except for Manitoba and Saskatchewan. However, it may be required by your lender if you lease or finance your car. In that case, you have no choice but to have collision insurance until you pay off your loan or return your car.

If you own your car outright, collision insurance is optional. You can decide whether to add it to your policy or not based on your personal preferences and circumstances. Here are some questions to ask yourself before making a decision:

How much is your car worth? If your car is new or expensive, collision insurance may be worth it to protect your investment. If your car is old or cheap, collision insurance may not be worth it because the cost of repairing or replacing it may be lower than the cost of paying premiums and deductibles.
How much can you afford to pay out of pocket? If you have enough savings or income to cover the cost of repairing or replacing your car in case of an accident, you may not need collision insurance. If you don’t have enough money to pay for such expenses, collision insurance may be a good idea to avoid financial hardship.
How likely are you to get into an accident? If you are a safe and cautious driver who rarely gets into accidents, you may not need collision insurance. If you are a risky or inexperienced driver who often gets into accidents, collision insurance may be a smart choice to reduce your liability.
How much do you drive? If you drive frequently or long distances, you may have a higher chance of getting into an accident. Collision insurance may provide you with peace of mind and security. If you drive infrequently or short distances, you may have a lower chance of getting into an accident. Collision insurance may be an unnecessary expense.

Ultimately, the decision to get collision insurance depends on your personal risk tolerance and budget. You have to weigh the pros and cons of having it versus not having it and choose the option that suits your needs and preferences.

Conclusion

Collision insurance is a type of auto insurance that covers the cost of repairing or replacing your car if it is damaged in an accident with another vehicle or object. It is optional in most provinces and territories, except for Manitoba and Saskatchewan, where it is mandatory. However, if you lease or finance your car, your lender may require you to have collision insurance.

Frequently Asked Questions(FAQ): Collision Insurance for Cars: What Is It and Do You Need It?

Should you include collision coverage in your car insurance policy?

Collision coverage is optional in most provinces and territories, except for Manitoba and Saskatchewan, where it is mandatory. However, if you lease or finance your car, your lender may require you to have collision insurance. Collision insurance can protect you from paying out of pocket for expensive repairs or losing your car altogether if it is totaled. However, it also comes with a deductible, which is the amount you have to pay before your insurance company pays the rest.

What is collision insurance & how does it work?

Collision insurance is a type of car insurance that covers damage to your car from a collision with another vehicle or a stationary object. It also pays for damage from single-car accidents like rollovers. If you carry collision insurance, it reimburses you for the cost of vehicle repairs minus your deductible.

What happens if you don’t have collision coverage?

Without collision coverage, you’ll have to pay for all of the repairs to your vehicle out-of-pocket (in addition to other expenses, like a rental car). Or, if your car is damaged beyond repair, you will have to pay for your replacement vehicle.

What is the difference between collision and comprehensive insurance?

While collision coverage pays for collisions, comprehensive insurance pays for non-crash damage to your vehicle, such as fire, hail, or theft. The combination of collision and comprehensive insurance, combined with liability insurance, is typically referred to as full coverage car insurance.

What are deductibles?

Your deductible is the portion of the claim you pay. For example, if the repairs cost $5,000 and your deductible is $1,000, you will pay the first $1,000 and your insurance company will pay the remaining $4,000.

How do limits and deductibles impact my premium?

Your premium will be higher if you have a higher limit and a lower deductible. When choosing the deductible that’s right for you, think about how much you could afford to pay if you were involved in an accident that resulted in damage to your car.

Does my insurance policy cover someone else who drives my car?

Your policy covers most licensed drivers who have permission to drive your car but there are certain exceptions. Speak to your agent for additional details.

Will I automatically receive a replacement vehicle if my car is being repaired?

If you have added Loss of Use or Transportation Replacement endorsement to your policy, we will cover the cost of alternate transportation such as a rental vehicle while your car is being repaired. This endorsement is not automatically included in your policy.

What happens if I have an accident and need to make a claim?

You have to report it to your insurance company as soon as possible. They will assess the damage and determine if your car can be repaired or if it is a write-off. A write-off means that the cost of repairing your car exceeds its actual cash value (ACV), which is the amount your car would sell for on the market at the time of the accident.

Does collision insurance cover uninsured motorists?

No, collision insurance does not cover uninsured motorists. You need uninsured automobile coverage to protect yourself from drivers who do not have insurance or cannot be identified.