Vehicle Damage: What Insurance Covers?

Vehicle damage insurance is an important financial safety net for car owners. It covers the cost of repairing or replacing a vehicle following an accident, natural disaster, fire, theft, or vandalism. Depending on the type of insurance, it may also cover damage caused by the policyholder to their own vehicle or property, or damage caused by an uninsured driver. When making a claim, it's important to be aware of what your policy covers and what it doesn't, as well as any excess or deductible you may need to pay.

Collision coverage

In the US, collision coverage is optional, and it is not mandatory to cover damages to your own car. However, nearly four out of five drivers choose to purchase this coverage. Collision coverage is particularly beneficial for vehicle owners who drive a car worth protecting, including leased or financed vehicles, newer and more expensive vehicles, and older vehicles that still maintain good value.

If you damage your own car, collision coverage will typically cover the cost of repairs or replacements. This includes situations where you run into an object or another vehicle, even if the accident is your fault or no other drivers are involved. For example, if you accidentally hit your family's second car while backing out of your driveway, collision coverage would pay for the repairs, minus your deductible.

It is important to note that filing a collision claim may cause your premium to increase when you renew your policy. This is because car insurance rates typically increase after an accident, as it indicates a higher likelihood of future accidents. However, your insurer may offer accident forgiveness for loyal customers with clean records, first accidents, or minor accidents.

In summary, collision coverage provides financial protection for vehicle owners in the event of a collision, giving peace of mind and helping to avoid out-of-pocket expenses for repairs. It is a valuable option for drivers who want to ensure their vehicles are covered in case of accidents, regardless of fault.

Comprehensive coverage

When deciding whether to add comprehensive coverage, consider the value of your vehicle, your personal preferences, and your financial circumstances. Comprehensive coverage has a deductible, which is the amount you must pay out of pocket before the insurance company starts paying for damages. Typically, a higher deductible results in lower insurance costs. Comprehensive coverage will pay up to the actual cash value of your vehicle at the time of the damage, so it may not be worth the cost if your vehicle is older and has little value.

Liability coverage

Bodily injury liability coverage (BI coverage) assists in paying for the medical expenses of individuals injured as a result of your actions, for which you are deemed legally liable. This includes medical bills, pain and suffering, lost wages, and even funeral costs. Additionally, it covers defence and court costs in the event of a lawsuit.

Property damage liability coverage (PD coverage), on the other hand, helps pay for repairs to another person's or company's property that has been damaged or destroyed during a covered event. This includes repairs to vehicles, buildings, fences, and other structures, as well as damage to personal property such as electronics or belongings inside a vehicle. PD coverage also covers the cost of a rental vehicle for the other driver while their car is being repaired. Like BI coverage, it also includes defence and court costs if legal action is taken against you.

It is important to note that liability coverage does not extend to your own injuries or property damage. To ensure coverage for personal injuries, you may need to consider additional insurance options such as personal injury protection or health insurance. Similarly, for repairs to your own vehicle, you would need collision coverage.

The cost of liability coverage varies depending on factors such as the state you live in, your age, driving history, and the make and model of your car. However, it is generally recommended to purchase higher coverage limits than the minimum required by your state to ensure adequate protection.

Own damage cover

To raise a claim under own damage cover, you can follow these steps:

• Intimate the insurance company about the damages sustained by your vehicle.
• The insurance company will send a surveyor to inspect the damages.
• Provide certain important documents for claim verification.
• The insured vehicle will be sent to a network garage for repairs.
• Once the repairs are done, the insurance company will settle the cashless claim with the network garage.
• If the insured vehicle was repaired in a non-authorised network garage, the insurer will reimburse the entire claim amount after the repairs.

Write-offs

When a vehicle is damaged, an insurance company will decide if the vehicle is a write-off, and how much they will pay out. A write-off is a term used when an insurance company determines that a vehicle is a total loss. This means that the cost of repairing the vehicle is more than its value. When a vehicle is written off, the insurance company will pay the owner the current value of the vehicle, instead of covering the cost of repairing it.

There are several categories of write-offs, which are used to rank the seriousness of accident damage. In the UK, these categories are labelled A, B, S, and N.

Category A write-offs are vehicles that are beyond repair and must be crushed, including all parts. These vehicles are so badly damaged that they should never reappear on the road.

Category B write-offs are vehicles that must be broken up, but some parts may be salvaged if they are deemed roadworthy. The body shell should be crushed, and these vehicles should never reappear on the road. However, some parts can be salvaged and used in other road-going cars.

Category S write-offs are vehicles that have suffered structural damage, such as a bent or twisted chassis, or a crumple zone that has collapsed in a crash. This type of damage is more than just cosmetic, and the vehicle will need to be professionally repaired before it can be safe to drive again.

Category N write-offs are vehicles that have not sustained structural damage, so the issue may be cosmetic or a problem with the electrics that is not economical to repair. However, this does not mean that these vehicles are drivable, as non-structural faults may include brakes, steering, or other safety-related parts.

In Australia, there are two main categories of insurance write-offs: statutory write-offs and repairable write-offs. A statutory write-off means that the vehicle is too severely damaged to be repaired to a safe standard, and these vehicles are usually deregistered and sold for parts. A repairable write-off means that the vehicle can be repaired, but it is not economically viable for the insurance company to do so as the cost of repair exceeds the market value of the car.

Frequently asked questions