Collision insurance is one of the many types of coverage you can include in your auto insurance policy. It can help protect you from a financial loss by covering repairs to your vehicle if your car gets damaged in a crash.
Collision insurance helps pay to repair or replace your vehicle if it’s damaged in a crash with another car or a fixed object such as a telephone pole or guard rail. It can help protect you no matter who is at fault. Collision coverage is optional in all states. But your lender will probably require it if you carry an auto loan or lease.
Collision coverage can help pay for repairs in multiple situations, including when:
If you’re in an accident and another driver is at fault, their liability coverage should pay for the damage to your vehicle. But if they’re uninsured or don’t have enough coverage to pay for the damage, you may be able to file a collision claim with your insurer to get reimbursed for repair costs.
If you have collision insurance, it only covers damage to your vehicle that occurs in a crash. It won’t cover:
According to the Insurance Information Institute, the average cost of collision coverage is $290 per year. But you may pay more or less depending on multiple factors, including your age, gender, marital status, driving history, where you live, type of car you drive, deductible, and more.
Insurers base the price you pay for collision coverage in part on how much your vehicle is worth. So, you’re more likely to pay a higher premium if you drive an expensive car.
A collision insurance deductible is the amount you must pay before your insurance starts paying. Standard amounts range from $250 to $1,500 but vary by insurer. When choosing a deductible, consider the following:
The limits for collision coverage work differently than limits for other types of coverage like liability or uninsured/underinsured motorist coverage. You don’t choose the amount of coverage you want when you purchase your policy. Instead, the insurance company pays up to the vehicle’s actual cash value if you file a claim.
For example, let’s say you’re in an accident that causes $10,000 worth of damage to your vehicle but the car’s only worth $7,500. The insurance company will declare your car a total loss and write you a check for $7,500 minus your deductible. They won’t reimburse you for the amount you paid when you bought the car or how much it would cost to buy a new version of the same car today.
Having collision coverage can help protect you from a financial loss by reducing your out-of-pocket expenses if a crash damages your vehicle. But adding this coverage to your policy will increase your premium. It doesn’t cover medical bills. And it only pays up to the actual cash value of your vehicle at the time a covered incident occurs. That usually isn’t enough to buy a new version of the car you’re driving if the insurer declares it a total loss.
The answer to this question varies from person to person. Since cars depreciate over time, the amount the insurer will pay also decreases over time. So it’s best to compare the cost of your premium and deductible to how much your vehicle is worth because that’s the maximum amount the insurer will reimburse you.
For example, if your car is worth $30,000, the insurance company will write you a check for up to $30,000 (minus your deductible) if you need to file a claim. But if your car is only worth $2,500, the insurer will write you a check for up to $2,500 (minus your deductible). If your premium and deductible are more than (or close to) what the insurer will pay, the cost of coverage may not be worth it.
There are currently no states in the U.S. that require drivers to maintain collision coverage. But if you lease a car or financed it with a loan, your lender will probably require the coverage because it helps minimize their risk if you’re in a crash.
If you need to file a collision claim, the insurer typically pays the lender first and then pays you if there’s any money left.
