Pays for physical damage to the insured person’s car when it collides with another object, such as a tree or a second vehicle. This type of coverage is not required by law, but may be required by the lender who holds the note on the car.
Collision coverage allows owners of newer vehicles to make repairs when needed and return vehicles back to their pre-accident condition. However, many insurers recommend dropping collision coverage on any vehicle worth less than $2,000 because policyholders are likely to pay more money in insurance premiums than they’d ever receive as the result of a collision claim.
One other important note: insurance companies are only required to cover the insured’s financial expenses-not to replace the vehicle. If the cost of repairs on an older vehicle exceeds its worth, the insurance company will “total” the car and reimburse the owner what the car was worth, rather than fixing it.