What Is Covered Under Collision Insurance?

Collision insurance covers damage to your vehicle in an automobile accident when you are at fault. Collision insurance is an "optional" coverage not required by state law, but without it you will be responsible for paying ther entire cost of repairs to your vehicle in an "at fault" accident. If you are driving a financed car, you may be required by the lender to carry collision insurance.

The standard collision insurance coverage pays for any repairs only up to the fair market value of your car, not up to the amount of your car loan. If your loan amount is greater than the fair market value of your car, consider purchasing "gap" insurance. Gap insurance pays the difference and protects your investment.