Many loan companies and banks
will require collision auto
insurance when they loan money to buy a car. They do this
so that they can protect their investment. A collision policy
covers essentially accidents in which your car is involved
and usually pays the owner of the policy even if that person
is at fault. Collision is often defined as an accident between
two cars or when your car hits something like a fence or a
house or a barn.
This policy is often sold together with comprehensive
auto insurance which covers just about everything else
that can happen to your car that is not covered by collision.
This policy covers expenses such as repairs, damage to the
contents of the car, and also towing and possibly storage.
The payout is limited to the amount stated in the policy.
Generally an insurer will not pay more than the value of the
car, known as the 'cash value'. This means that if the total
damage to your vehicle exceeds the value of your car, the
company will only pay the value of your car, usually declaring
your auto to be a 'total loss'.
Unlike liability insurance, raising the policy limit beyond
the value of your car, will not offer you additional protection,
since most companies will only pay up to the market value
of the car.
Like many insurance policies, there is a deductible the owner
must pay first, before the insurance company will pay for
any damages. Policy holders can save a considerable amount
of money by raising the deductible for this type of insurance.
As a general rule consumers can save money over time by paying
small loses out-of-pocket while using insurance policies to
cover large loses.
The amount that a company will pay after an accident is usually
determined by an 'insurance adjuster' who will look at your
car and then get estimates for the repairs. At this point
you may negotiate with the adjuster for a somewhat higher
payout. If you are not satisfied with the offer made by an
adjuster, you can appeal the settlement offer through either
the attorney general's office or the department of insurance
in your state. This is usually done after an extended period
in which there was no resolution.
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