Collision Insurance: How Does It Work, and What’s Covered?

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Written by Mandy Sleight Edited by Lequita Westbrooks

Updated September 20, 2023

Collision insurance is a type of coverage in your auto insurance policy that pays to repair or replace your vehicle after an accident involving another car or object, such as a guardrail or telephone pole. A full-coverage insurance policy typically includes collision, liability insurance, and comprehensive coverage.

Although state laws don’t require you to have collision insurance coverage, lenders usually require it if you finance or lease your car. Below, we explain what collision car insurance covers, how it works, what it costs, and when you might need this optional coverage.

Key Takeaways:

• Collision insurance covers damage to your vehicle from a crash involving another car or object.
• Injuries or property damage to others, as well as broken glass, theft, vandalism, and damage from natural disasters or falling objects aren’t covered by collision insurance.
• You can probably benefit from collision coverage if you can’t afford to repair or replace your car or have a loan or lease.

What Does Collision Insurance Cover?

Collision insurance covers car repairs or vehicle replacement after certain incidents, including:

• Colliding with another car or someone hitting your vehicle while it’s parked
• Hitting an object, such as a mailbox or tree branch lying on the road
• A rollover car accident involving just your car

Although it’s most common for collision insurance to pay when you’re at fault, it still covers your vehicle even if you’re not.

What doesn’t collision insurance cover?

Collision insurance won’t cover damage you cause to someone else’s vehicle. If you cause the crash, your property damage liability pays for the other driver’s repair costs. If you injure the other driver (or their passengers), bodily injury liability coverage pays their medical bills.

Collision coverage also won’t cover damage from animals, natural disasters, theft, vandalism, or falling objects. Comprehensive insurance covers these types of situations.

You also won’t have coverage for your medical bills if you get injured in an auto accident unless you have personal injury protection (PIP) or medical payments coverage.

How Does Collision Insurance Work?

Collision insurance can pay for your vehicle’s damage in several scenarios. For instance:

• Someone hits and damages your car while it’s parked in your work parking lot..
• You swerve to avoid hitting a deer in the road and crash into a tree or someone’s mailbox.
• Someone in front of you stops quickly, and you rear-end them.
• You’re driving in a rainstorm and lose control of your vehicle, crashing into a telephone pole or another vehicle.

In all of these situations, your insurance company will pay your repair costs — or, if your vehicle is totaled, it’ll cover the value of your vehicle.

How Much Does Collision Insurance Cost?

Several factors affect the cost of collision insurance, like your:

• Age
• Driving record
• Car value
• ZIP code
• Deductible amount

The national average cost of collision coverage in 2019 — the most recent data available — was $290 per year, according to the National Association of Insurance Commissioners (NAIC).

When choosing a collision deductible, keep in mind that the lower the deductible, the higher your premium. So, if you get into a collision, you’ll pay your deductible before your insurer pays its portion of the claim.

Collision vs. Comprehensive Insurance

Although people lump them together, collision and comprehensive insurance are two separate coverages — and you can purchase one or both, depending on your coverage needs. But if you have a car loan or lease, most lenders require you to have both so that you can cover your loan balance if your vehicle gets totaled.

Collision coverage pays for your vehicle’s damage after an accident involving driving — whether you’re driving and hit an object or car or someone else is driving and hits your vehicle.

Comprehensive is often called “other-than-collision” coverage because it covers what collision insurance doesn’t: glass damage, hitting an animal, fires, theft, and other events.

Collision insurance usually costs more than comprehensive. The national average for comprehensive coverage was $123 annually in 2019.

What Is a Collision Deductible?

A collision insurance deductible is the amount of the claim you’re responsible for paying. For example: It costs $5,000 to repair your car, and you have a $500 deductible. You’ll pay $500, and the insurance company pays $4,500.

Suppose your car is totaled, and its actual cash value is $15,000, and you have a $1,000 deductible The insurance company will reimburse $14,000.

Some insurers offer what’s known as a vanishing deductible, which lowers your deductible by $50 or $100 every year you go without filing a claim. In the above example, if you had a $200 disappearing deductible credit, you’d only pay $300 for vehicle repairs or have $800 deducted from your totaled car amount.

In some states, you can add a collision deductible waiver to your auto insurance policy. This optional coverage waives your deductible entirely if you have a qualifying claim, like if someone without insurance hits your vehicle.

When You Need Collision Insurance

You might need collision insurance if you:

• Finance or lease your vehicle to meet lender requirements
• An inexperienced driver, like a teen, drives your vehicle
• Can’t afford to repair or replace your car on your own
• Own a high-value car

Insurance companies use valuation tools like Kelley Blue Book (KBB) or National Automobile Dealers Association (NADA) to determine your car’s value, which you can also use to see if adding this coverage is worth it. Check with your insurance company to verify insurance requirements and the cost of adding collision insurance.

Although collision insurance costs more than liability-only insurance and isn’t required by law, the added protection may be worth it.

When You Don’t Need Collision Insurance

It might not make sense to have collision insurance if:

• You have an older car that isn’t worth much, and you can afford the out-of-pocket cost to fix it.
• You paid off your loan or lease.
• The cost of collision coverage is close to or more than the vehicle is worth.

If your old car’s value is less than 10 times the cost of coverage, the coverage might not be worth it, according to the Insurance Information Institute (Triple-I).

Collision Insurance FAQs

Your auto insurance coverage needs are unique. Our frequently asked questions can help you determine if including collision insurance is right for you.

Does collision insurance cover other drivers?

No. Collision insurance covers your own vehicle if it gets wrecked, no matter who’s at fault for the damage. Your liability insurance covers other drivers if you’re at fault for an accident that causes them injuries or property damage.

When should I drop collision coverage?

You might consider dropping collision insurance if your car isn’t worth much or you can afford to repair or replace it after an accident. It might also make sense if you don’t drive your car. For example, if it’s in storage, it may be a good idea to go without collision coverage. However, you can’t drop collision coverage until your loan or lease is paid off.

Are collision and liability car insurance the same?

No. Collision and liability car insurance aren’t the same. Collision covers your vehicle if it’s damaged by another car or object. Liability insurance covers the other person’s injuries and property damage from an accident you caused.

Does collision insurance cover rental car accidents?

It’s possible. Your auto policy’s collision insurance may cover rental car accidents, but it depends on the policy and insurance company.

Before renting, you should verify if your collision coverage covers rental cars. If it doesn’t, consider purchasing the rental company’s collision damage waiver insurance, which covers damage to the rental.

What’s the difference between collision insurance and property damage?

Collision insurance covers physical damage to your vehicle, regardless of fault. Property damage liability covers property damage you cause to others in an accident. For instance, if you hit another car, fence, guardrail, mailbox, or telephone pole, property damage insurance will cover the damages.

Sources

1. Insurance Information Institute, “How to save money on car insurance,” Accessed September 4, 2023.
2. National Association of Insurance Commissioners, “2019/2020 Auto Insurance Database Report,” Accessed September 4, 2023.

Mandy Sleight Auto Insurance Writer

Mandy Sleight has over 15 years of insurance knowledge and expertise in auto, home, life, health, pet, supplemental benefits, and other insurance products. She is a sought-after insurance expert, appearing in Bankrate.com, Moneygeek.com, U.S. News & World Report, Reviews.com, CNET, and other publications. She uses her background and experience working for well-known insurance companies like State Farm and Nationwide Insurance to create engaging and easy-to-understand content to help readers make smarter insurance choices that have a positive effect on their budgets and finances.