A Guide to Auto Collision Insurance

Collision coverage can add hundreds of dollars per year to the cost of your auto insurance policy. Is it worth the price? You have to know what this type of insurance covers, what it doesn’t cover, and how it works after an accident to decide if it's right for you.

Collision coverage is often confused with comprehensive insurance, but each type covers different events.

What Is Collision Insurance?

Collision insurance is a type of auto coverage that helps pay for damage to your car, no matter who’s at fault, even when an accident is 100% your responsibility. It might pay to repair the damage or even give you a payout if your car is totaled.

Most states mandate that you carry liability insurance. Collision insurance is often optional. Your lender could require you to carry it if your car is leased or if you still owe money on a car loan.

Collision coverage doesn’t pay for damage to other drivers’ cars. It also doesn’t pay out if your car is damaged due to theft, vandalism, fire, or other natural events. Comprehensive insurance covers that type of event.

Collision coverage might help cover damage done by an uninsured or underinsured driver in some cases, even if you don’t carry uninsured/underinsured motorist coverage.

What Does Collision Insurance Cover?

Here are some common claim situations and when they're covered:

Your collision insurance may even extend to cars that you borrow or rent in the U.S. and Canada. But it might not extend to truck or moving van rentals. Ask your insurer in advance.

How Does Collision Insurance Work?

Filing a claim under your collision coverage works much the same as making other claims.

Contact Your Insurance Company

Contact your insurer about the incident. Provide photos and information about the accident. Turn over any police or accident reports you may have. Ask your insurer or review your coverage to see whether you can get a rental while your car is being repaired. Find out whether you'll have to pay a deductible.

Work With the Insurance Adjuster

Work with the adjuster, who looks into the facts of your claim and any damage to your car. Your collision insurance should step in to help repair the damage if you caused the accident.

Get Your Car Repaired or Accept a Check

Get your car repaired at a shop recommended by your insurer or at a shop of your choice. The insurance company may decide that repairing your car would cost more than its actual value. It would declare it a total loss in that case.

There are limits to your coverage for a totaled car. This is often the cash value of the auto. Cash value includes depreciation, or the decrease in value over time. It's not what you paid for the car or what it would cost you to buy a new auto. The amount your insurer sends you won’t be enough to buy a brand new 2021 Honda Accord if your 2015 Honda Accord is totaled.

The insurer can take your car (and title) for salvage value when and if it declares your car to be a loss.

Collision Insurance and Deductibles

You must choose a deductible when you add collision insurance to your auto policy. This is the amount of money you pay first before your insurer pays the rest of the costs. It applies to each accident, unlike with a health insurance deductible. It's more like a copay.

You can select from a variety of deductibles. Higher deductibles often lead to cheaper insurance premiums. You’re assuming more responsibility for any auto repair costs. Your deductible should be the most you could comfortably afford to pay out of your own pocket to repair your car after a mishap.

Raising your deductible from $500 to $1,000 could save you as much as 20% on your policy. But think about how that might impact you if there’s been $7,000 in damage:

The cost of your collision insurance depends on the type of car you drive. Makes and models of cars that tend to have a lot of claims or higher claim costs will often lead to higher annual coverage costs. Elite cars are expensive to repair or replace, while other cars may be associated with more severe bodily injury or death.

Do I Need Collision Insurance?

You will likely be required to include collision insurance on your auto policy if you’re leasing a car or borrowing money from a bank to buy one. The lender hopes to protect its collateral for the loan or financing. Your bank may add a higher premium to your loan until you get insurance again if you don’t buy insurance, or if you forget to renew your insurance or try to drop collision coverage.

Collision insurance is optional after the loan is paid off. You might want to add uninsured motorist coverage if you do drop collision coverage. This protects your car against damage from an uninsured driver, an underinsured driver, or a hit-and-run accident. 

Collision Insurance vs. Comprehensive Insurance

Collision insurance covers damage if it's caused by a collision between two objects, such as two cars, a car and a streetlight, or a car and a building. Comprehensive insurance covers your car damage from a non-collision incident, such as theft, vandalism, hail, or other weather-related circumstances. It covers incidents involving your window glass.

Most insurers sell comprehensive and collision insurance together as a package deal. You might not be able to pick and choose which you’d like to include.

When Should I Think About Dropping Collision Insurance?

There are some times when you might think about no longer carrying this type of insurance. Maybe you’ve just paid off your car’s loan. You can afford to pay costs out of pocket for any damage that should occur to the car, or even to replace it if you must.

You might be driving an older car and paying more for insurance each year than your car is worth. You may pay more in annual premiums than you’d receive if you had to make a claim if your car is worth less than $2,000.

Maybe your car is paid off, and you’re keeping it in a garage or off the road. You think it's at low risk of being damaged. You may be able to cancel collision insurance and keep comprehensive insurance in case the garage catches fire.

Your car could be so old or already so damaged that collision insurance might not be available to you. The insurer might not think it’s worth insuring.

Think about raising your deductible instead before dropping collision. You’ll pay less for your annual coverage. You would only use it in extreme cases.