Car Collision Coverage:

Collision coverage part of the car insurance covers against damages to your car caused by collision with another vehicle or object. The coverage will compensate for the damages to the car irrespective of the cause of the collision and whether you are at fault or not. It includes compensation for collisions that occurs either, while you are driving or the car is parked and is hit by another car or object. Note that if the cause of the collision was another car then you might be able to get compensation through their property damage liability without deductibles. Alternatively, your insurance policy will cover the loss after subtracting the deductible. There are two different coverage calculation methods for collision compensation. You have to choose the method that best suits your particular situation.

Actual Cash Value:

With an ACV based plan and your car is damaged beyond repairs. The insurer will pay compensation equal to the amount that the vehicle would cost at the time of loss in the open market. In other words, the compensation amount is equal to the depreciative value of the car.

New for Old Replacement:

Replacement coverage plan allows replacement of the damaged vehicle with a new one of similar makes and model’s. This means that the coverage is equal to the actual cost of replacement at the time of loss. Usually this option is available only for new cars and costs high. Furthermore, there may be certain additional charges as well. As far as the compensation calculation for repair costs are concerned, there are several mechanisms to choose from.

• Replacements with original parts: Parts of the car that are broken and/or malfunctioning are replaced with the new and original parts from the car manufacturer. This is an expensive option.

• Replacements with third party parts: Replacement parts repair are bought from third party manufacturers.

• Replacement with old parts: some insurance companies even allow use of old (but workable) parts for replacements.

In regards with deductible for collision insurance, it is usually an expensive but vital policy. There are certain misconceptions regarding deductibles for collision policy, which often leads people to assess cost vs. coverage benefits wrongly. Deductible is the amount of money that you need to pay toward repairs etc.

For example, people think that for a new car a low deductible on the policy would give them a better price/benefit ratio. The reality though is that by paying higher deductibles for collision coverage you would save more on new (high value) cars. The rule for estimating your deductible is that you first realistically evaluate the risk and then compare it with saving that you will make by having higher deductible.

Another misconception regarding collision deduction is that people often think that higher deductible would give them better coverage against their old cars. The simple point to realize in this case is that the value of older cars is low and therefore their cost of collision coverage is low – which means you do not need high deductible.