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Home » Buying Collision Insurance? Here’s How it Works
August 5, 2020

Buying Collision Insurance? Here’s How it Works

Buying Collision Insurance? Here’s How it Works 


If you finance your car, then your lender will likely require collision insurance. This is important coverage to have because it insures your car against damage. While in some cases, it is optional protection, it is still important to have. So, regardless of requirements, always consider adding this coverage to your policy. 


What is collision insurance?  

Buying a car costs money, and you want to make it last. You also want to be able to get a good return on the investment when it comes time to sell. 


If you have a wreck, any damage could not only damage or destroy car, but you might also lose a lot of the value on the vehicle. So, if you do have an accident, then it is important that you have the vehicle repaired.  


However, when it comes down to the cost of parts and labor, vehicle repairs often are not cheap. Replacing your car wouldn’t be either. Collision insurance will help you pay for that damage using your auto policy. It will pay if you have a wreck, hit another vehicle or hit an object like a building. 


Is it optional?  

Texas does not require collision insurance on its mandatory car insurance. However, if you finance your car, then the lender might require this coverage. Because they have an investment in your car, they will want to be able to recoup their losses in case of damage to the car.

Ask your lender their requirements upon finalizing your line of credit.  


How much will it pay me?  

Upon buying collision coverage, conditions will apply to how much your policy will pay. 

  • If the car has custom parts, then collision insurance might not cover the damage. You might need to add a special coverage item for such accessories.  

  • Most policies include collision deductibles. Your insurer will subtract the deductible from the final settlement they send you. If you make a damage claim and the cost of the damage is less than the deductible cost, then you won’t have coverage. Always choose a deductible you can afford to pay.  

  • If your insurer totals your car, they will likely settle with you for the car’s actual cash value. The car’s value will decrease over time. So, you likely will not recover the full cost to replace a used car with a new one. However, you can sometimes buy coverage for the car’s replacement cost.  

  • You might also need to buy gap insurance. This coverage will help you pay off the value of your car loan if you only receive a cash value settlement for your car.  


To optimize all the perks of your collision insurance, don’t hesitate to talk to one of our agents. We’ll help you choose the right balance of coverage. 

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