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Most drivers know they need car insurance, but the different types of coverage included in an auto policy can be confusing. One of the most common options is collision insurance, which helps pay to repair or replace your vehicle after an accident—understanding what collision insurance covers can help you decide whether it’s worth adding to your policy.
Key Points
• Collision insurance covers repair or replacement costs when a vehicle hits another car, strikes a stationary object, or is involved in a single-car rollover.
• Standard collision coverage excludes third-party damage, medical expenses, and non-collision incidents such as theft, vandalism, weather damage, or animal strikes.
• Policy payouts are generally capped at the car’s actual cash value minus the deductible, with higher deductibles resulting in lower monthly premiums.
• While not legally required by states, collision insurance is typically mandated by lenders or leasing companies until a vehicle is fully paid off.
• Collision insurance costs an average of $290 per year, though exact pricing depends on the vehicle’s market value, chosen deductible, and the driver’s accident history.
Understanding Collision Coverage
Knowing whether you have or need collision coverage in your auto insurance policy—and understanding what your policy does and doesn’t cover—can help you avoid costly surprises if you’re ever involved in a crash.
What Does Collision Insurance Cover?
Collision insurance is a type of car insurance coverage that helps you replace your car or pay for repairs when you’ve been in a crash with another vehicle, or you’ve hit a stationary object, such as a tree, a guardrail, or a retaining wall. It will also help pay for damage to your car if you’re in a single-car accident, if your car rolls over, for example.
What Collision Insurance Does Not Cover
Collision insurance does not pay to replace or repair other vehicles that were involved in an accident with your car. Those repairs are covered by liability insurance. And while collision insurance is optional if you own your car (your lender will likely require you to have it if you’re still paying off a loan), liability insurance is required in most states.
While liability coverage will also cover the cost of medical bills for other people that you’ve hurt in an accident, collision coverage will not.
Finally, collision insurance does not cover damage to your car that doesn’t involve a collision. For example, damage done during a hailstorm or if your car is stolen won’t be covered.
Recommended: How Does Car Insurance Work?
Collision Coverage Deductibles and Limits
Your insurance deductible is the amount you have to pay out of pocket toward replacement or repair of your vehicle before your insurance will kick in and pay the rest. For example, if you have a $500 deductible and you are in a collision that causes $2,000 worth of damage to your car, you will have to pay $500 first before your insurance company will step in and cover the remaining $1,500.
Deductibles tend to range in size from $250 to $1,000. But keep your car’s value in mind when choosing your deductible amount. A less valuable car may warrant a smaller deductible.
Incidentally, the size of your deductible is one of the levers you can pull that influence your monthly premium. The larger your deductible, the less risk your insurance company is taking on and the lower your monthly payments may be.
Collision coverage typically has a limit. This is the maximum amount a policy will pay, and it’s usually equal to the actual cash value of your vehicle—that’s the fair market value of your car right before the accident minus depreciation. If you were to total your vehicle, your insurer would give you the actual cash value minus your deductible.
Collision vs. Comprehensive Insurance
While collision insurance only covers the cost of damage from single-car accidents, accidents with other vehicles, and collisions with stationary objects, comprehensive insurance covers damage caused by other events. Comprehensive insurance provides coverage for damage from theft, vandalism, fire, falling objects (such as a tree branch), natural disasters (such as hail), and hitting animals, like a deer.
Both types of coverage carry a deductible, and neither is required by law. That said, if you are financing or leasing a vehicle, you will likely be required to carry coverage.
Do You Need Collision Car Insurance?
As mentioned above, collision insurance is not required by law. So you technically don’t need to have it as long as you own your vehicle outright. That said, you may still choose to purchase collision coverage. How do you decide if it’s right for you? Consider whether or not you can afford to repair your car or even replace it if it’s totaled in an accident. If you can’t, collision insurance may provide some peace of mind knowing that you’ll be able to secure transportation after a crash.
How Much Does Collision Insurance Cost?
On average, collision insurance costs about $290 a year. The exact cost you pay will depend on the value of your vehicle, the size of your deductible, and your driving history.
Individuals with clean driving histories tend to be offered the lowest insurance rates, while those with traffic violations or accidents on their record typically pay more.
The more valuable your vehicle is, the higher your collision insurance may be as repair and replacement costs tend to be higher.
Recommended: How Much Car Insurance Do I Really Need?
The Takeaway
Collision insurance helps protect one of your biggest everyday investments—your vehicle. While it isn’t legally required in most states, it can save you from paying significant repair or replacement costs after an accident. Whether collision coverage makes sense depends on factors such as your car’s value, your financial situation, and how much risk you’re comfortable taking on.
By understanding how collision insurance works alongside liability and comprehensive coverage, you can choose a policy that provides the right level of protection for your needs.
When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.
SoFi brings you real rates, with no bait and switch.
FAQ
Is collision insurance required by law?
Collision insurance is not required by law. However, you are likely required to have it if you financed or leased your vehicle. You may also choose to have it if you cannot afford to repair or replace your vehicle yourself after a collision.
What happens if the other driver is at fault?
If the other driver is at fault in a collision with your vehicle, then they are responsible for paying for your car repairs or to replace your vehicle. They’re also responsible for paying your medical bills and other losses.
Does collision insurance cover a rental car?
Yes, your collision insurance usually does cover rental cars. But be aware that your deductible will still apply.
How do I file a collision insurance claim?
If you’re in an accident with another driver, gather their personal information, including their name, phone number, license plate number, and insurance information. Document the damage with clear pictures and videos. And get a police report. At this point, you can notify your insurance agent.
If you’re in an accident with a stationary object, you’ll only need to document the collision. You don’t have to gather anyone else’s insurance information, and you may only need to call the police if you’ve hit and damaged public property.
Can I drop collision coverage on an older car?
If you own your car and are no longer paying off loans, you can drop your collision coverage at any time. This may make sense for older cars that are no longer valuable.
Photo credit: iStock/PongMoji
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