Collision coverage on your auto insurance policy is designed to cover damage to your own car after an accident. When you finance a vehicle, your lender will require it, but it’s not mandated by insurance laws in any state. Here are key things to know about collision insurance and what it covers.
In this article:
What does collision insurance cover?
Collision insurance pays to repair or replace your car after a collision with another vehicle or an object. It’s offered on an optional basis for each vehicle, which means you can add it to one or more of the cars on your policy, or none at all.
Collision usually covers damage you cause. If your car is damaged in an accident caused by another driver, the at-fault person’s property damage liability usually pays to repair or replace your vehicle. However, there are a few occasions when collision insurance does cover damage caused by someone else.
For example, if your car is damaged by a driver with no insurance or not enough insurance to cover the repairs, you could apply your collision coverage to the loss. This type of damage could also be covered by uninsured or underinsured motorist property damage insurance, if you have these coverages.
| Situation | Usual coverage | Other applicable coverages |
|---|---|---|
| You crash into another car or an object | Collision | None |
| Your parked car is damaged in a hit-and-run | Uninsured motorist property damage | Collision |
| Your car is damaged by an uninsured motorist | Uninsured motorist property damage | Collision |
| Your repair costs exceed the at-fault driver’s property damage liability limit | Underinsured motorist property damage | Collision |
In states with partial fault laws, collision coverage can also apply to your share of your car’s repair costs if you are found to be partially responsible for an accident.
How much coverage does collision insurance provide?
Your insurance company caps the payment on a collision claim at the vehicle’s actual cash value, which is the value of the car after depreciation. If your car is valued at $20,000 and needs $25,000 in repairs, the insurance company will most likely declare it a total loss and send you a check for $20,000, minus your deductible.
How does a collision deductible work?
When you place collision coverage on a vehicle, you also choose your collision deductible, which is the portion of repair costs you pay before insurance funds kick in. If you choose a $1,000 deductible and your repairs cost $5,000, the insurance company pays $4,000.
Insurance companies typically offer deductibles in increments from $0 to $2,500. Increasing your deductible lowers your rate.
If responsibility for the accident is in dispute, your insurance company may initially apply your collision coverage to your vehicle’s repair bills and file a property damage liability claim with the other driver’s insurance company to get its money back. Many insurance companies waive your collision deductible if an investigation determines the other driver was at fault.
Comprehensive vs. collision coverage
Though collision coverage is usually sold in tandem with comprehensive coverage, the two are separate and unique. Comprehensive is also known as other-than-collision, because it covers damage to your vehicle from causes other than a collision with a vehicle or object.
This can include fire, flood, a falling tree, vandalism, collision with an animal or glass damage. Comprehensive also pays to replace your car if it is stolen. Like collision, comprehensive coverage is offered with its own deductible.
Liability vs. collision coverage
Liability insurance covers injuries and damage you cause to other people or their property. Your bodily injury liability pays for other people’s medical bills, and your property damage liability pays to fix other people’s cars. Your collision insurance pays to repair your own car.
What is a collision deductible waiver?
Some insurance companies offer a collision deductible waiver, which spares you from having to pay your collision deductible if your car is damaged by an uninsured driver.
A collision deductible waiver is similar to uninsured motorist property damage coverage. However, the latter often also covers hit-and-run damage and comes with a small deductible. A collision deductible waiver usually does not cover hit-and-run, but does typically free you of having to pay a deductible for qualifying repairs.
Is collision coverage required by law?
Collision coverage is not required by any state law. However, you usually need to have collision and comprehensive coverage in order to finance or lease a vehicle.
Your lender or leasing company has a financial interest in your car. Both require collision and comprehensive coverage to protect this interest if your car is wrecked or stolen.
How much does collision coverage cost?
Collision coverage can add a few hundred dollars or more to your annual car insurance premium, depending on your vehicle and insurance history.
It’s also important to know that a collision claim will usually increase your future insurance rates, particularly after an at-fault accident. If you back your vehicle into a light post or a tree, you’re usually better off footing the repair bill yourself and saving your collision coverage for large claims.
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When should I get collision insurance?
Though it’s not cheap, collision coverage is usually worth keeping or getting when your vehicle’s value exceeds the amount of money you have on hand to replace it. Ultimately, this is a personal decision that depends on your vehicle’s value, your financial resources and your risk tolerance.
When is collision insurance worth it?
If you’ve paid off your loan and your car is still valued at more than $10,000, it’s a good idea to keep collision coverage on the vehicle.
No one ever expects to cause a car accident. However, you can be blamed for an accident just because there are no witnesses available to corroborate your side of the story. If this happens, it’s usually a lot less painful to file a collision claim than it is to come up with several thousand dollars to repair or replace your vehicle.
Do I need collision insurance on an old car?
If your car is old and its depreciated value has dwindled down to a few thousand dollars or less, you might be better off omitting or removing collision coverage. You can apply the money you save on your insurance premiums to car maintenance or the future purchase of your next car.
It’s a little trickier if your car’s value is more than a few thousand dollars. If it’s a spare car that you would not want to fix or replace if damaged, you may be comfortable without collision coverage on it.
On the other hand, if it’s your daily driver and you don’t have ample reserves in the bank, you may want to add collision coverage, just in case. In certain cases, even a small insurance settlement can go a long way toward getting you back on the road.
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