Collision insurance helps pay to fix or replace your car if it’s damaged in an accident with another vehicle or object. However, collision coverage doesn’t apply to every type of damage, so you may need to combine it with other types of auto insurance to cover all your bases.
If you don’t know off the top of your head how collision insurance differs from liability insurance and comprehensive insurance, that’s OK — we’re here to help. Here’s a look at how collision coverage works and why you may need it.
What You Need To Know About Collision Insurance
Collision insurance is usually mandatory if you’re leasing a vehicle or paying off an auto loan. If your car is paid off, then collision insurance is optional. Even so, it can save you a lot of money in the event of an accident — depending on the car you drive.
What Is Collision Insurance?
Collision insurance helps you cover the costs of repairing or replacing your vehicle if it’s damaged in an accident with another car or an object, such as a lamppost, tree, guardrail, or mailbox. Collision coverage can also help pay for damage caused in a single-car accident, such as a vehicle rollover or driving over a pothole. It doesn’t cover normal wear and tear, mechanical failures, weather damage, or vandalism.
If your car is totaled in a crash, collision insurance would compensate you for your car’s actual cash value — which accounts for depreciation — minus your deductible. With the depreciated value of your car, your policy might not pay enough for you to purchase a comparable replacement vehicle. It’s important to remember that collision coverage has a limit, which is the maximum amount that your insurer will pay out in a claim.
What’s the basic difference between liability insurance and collision insurance?
Liability and collision are two different types of auto insurance:
- Liability insurance covers you for any injuries or damage that you cause to other people, vehicles, or property in an accident.
- Collision insurance covers the cost of repairing damage to your own car in an accident.
For example, if you’re at fault in an accident, your liability insurance will pay for the other driver’s repairs or medical bills. If your car is also damaged in the same accident, then your collision insurance will pay for your repairs.
Most states require drivers to carry a minimum amount of liability insurance, but none require drivers to have collision insurance.
What’s the basic difference between comprehensive and collision insurance?
Collision insurance covers vehicle damage from colliding with another car or object, while comprehensive insurance covers damage to your car from causes other than a collision. Comprehensive coverage handles incidents outside of your control: theft and damage from vandalism, fire, natural disasters, fallen objects or projectiles, and contact with animals.
So, when you hit a tree, your collision insurance covers the damage to your car. But if a tree falls on your car, then your comprehensive insurance will cover it. The two types of coverage work well together, so they’re commonly bundled.
What Does Collision Insurance Cover?
Collision insurance covers your car for the following:
- Damage from collisions with other cars or objects, such as trees and guardrails.
- Single-car accidents like hitting a pothole or a car rollover.
- Hit-and-run accidents and injuries to pets in your car (this coverage may depend on your insurer).
Collision insurance does not cover:
- Your medical bills.
- Damage to other vehicles or injuries that you caused.
- Theft of your entire car or parts of it.
- Damage from hitting an animal or events unrelated to a collision, such as bad weather or vandalism.
How Much Does Collision Insurance Cost?
The average cost of collision insurance is about $290 per year, according to the Insurance Information Institute. However, your payments could be more expensive depending on your insurer, driving record, and other factors. For example, Progressive’s collision insurance costs about $61 per month, on average, which comes out to $732 per year.
Collision repairs cost examples
The cost of auto body repairs can increase rapidly when there’s extensive damage to your car. Let’s say that you drive a Honda Accord and crash into another vehicle, causing your windshield to shatter. It will cost an average of $250 to $300 to replace the glass, according to AAA. However, if the accident isn’t as serious and you receive a single chip on your windshield, it may cost only $60 to $100 to repair.
Here’s another example: If you drive a 2020 Honda Civic and earn a small dent on your car door, it can cost $581 to $969 to repair in New York City, according to an estimate from Maaco, an auto paint and collision repair provider. A large dent, on the other hand, can cost $900 to $1,500 to fix.
When Should You Consider Dropping Your Collision Insurance?
When your car’s market value is still high, you’ll likely need collision insurance to avoid a big financial hit in the event of an accident. However, if your car has depreciated significantly and is worth only a few thousand dollars or less, then collision insurance may not be worth paying for — especially if you have a high deductible.
For example, if your deductible is $1,000 and your car is worth $3,000, then the maximum amount that you’ll get paid out on a claim is $2,000. At that point, you might be better off saving the money from your collision insurance premiums to buy another car, instead of paying to cover a vehicle that’s nearing the end of its life.
Collision Insurance FAQ
Do you have some lingering doubts about whether you should buy collision insurance? Here are the answers to some frequently asked questions.
Paying for collision insurance may not be worth it if you have an older car that has depreciated considerably. If you file a claim, the maximum payout you’ll receive is the current market value of the car, minus your deductible. So, if your car isn’t worth more than a few thousand dollars, collision insurance might not pay enough in an accident to justify your premium.
To decide if you should get collision insurance, you can check the value of your car through Kelley Blue Book.
Your personal auto insurance — including collision coverage — typically extends to a rental car. Keep in mind that your policy was priced specifically for your car, so when you’re renting a vehicle of significantly higher value, your existing coverage may be insufficient. If collision coverage isn’t included in your personal auto insurance policy, then you’d be responsible for covering any damage to your rental car.
Your credit card may offer some insurance benefits if you use it to book a rental car. However, these benefits are likely limited and secondary to your personal policy and the car rental company’s coverage. Before renting a car, be sure to contact your credit card issuer to clarify whether you have insurance protection and, if so, how much coverage you can expect.
Your deductible is the amount that you have to pay out of pocket before your insurance policy kicks in. So, if your deductible is $500 and it’s going to cost $2,000 to repair your car, then your insurance company will cover $1,500.
Typically, if you have a high deductible, you pay a lower premium and face higher out-of-pocket costs in case of an accident. If you choose a lower deductible, you generally pay a higher premium and have lower out-of-pocket costs after an accident.
A collision deductible waiver is additional coverage that eliminates your out-of-pocket costs in certain situations, like if an uninsured driver hits your car or it’s damaged in a hit-and-run accident.
Comprehensive and collision coverage aren’t required by law. However, if your car is financed or leased, then you’ll likely be required to carry both comprehensive and collision insurance.
When your car is paid off, comprehensive and collision coverage are optional. Together, these types of insurance can work together to cover your vehicle in a variety of scenarios, from natural disasters to hitting a pothole. If you’re worried about paying for potential car repairs, keep in mind that choosing just one type of coverage won’t protect you financially in every situation.
Auto insurance typically follows the vehicle, meaning that your policy will cover someone you’ve allowed to drive your car. However, this extension of coverage is only intended for short-term, occasional borrowing. If you expect that someone else will drive your car regularly, then you must list that person on your policy because it affects how insurers calculate your rate. Failure to do so could result in a loss of coverage.
If you don’t have collision coverage and you’re at fault in an accident, then you won’t receive any assistance or reimbursement to repair your car. For a car damaged past the point of repair, you would have to buy a replacement vehicle out of pocket.
If another driver is at fault for the accident, then their liability coverage will help pay to fix or replace your car. However, it’s important to remember that their coverage has limits too. So, if their policy only covers up to $10,000 in property damage, then that’s the maximum amount you’ll receive — regardless of the value of your car. If you don’t have collision coverage, then that means you may end up paying the remaining costs of repairing your car.
Tips for Buying Collision Insurance
Here are some helpful hints for purchasing collision insurance:
- Estimate your car’s current market value. This will help you decide whether to get collision insurance at all. If your car is worth more than you could comfortably pull from your savings to repair or replace, buying collision insurance may be the right call.
- Compare insurance providers. Start by asking your current auto insurance company how much it will cost to add collision coverage to your policy. But before you commit to the purchase, collect quotes from competing insurers to see if you can get a better deal. Consider switching providers if you find another company that bundles liability and collision insurance for less.
- Choose a higher deductible for lower premiums. According to Progressive, the most common deductible among its customers is $500. To lower the cost of your premium, you can choose a higher deductible. Just make sure that you can afford to pay it if you get into an accident. On the flip side, when you pay a little more for insurance each month, you won’t have to pay as much out of pocket if you need to file a claim.
The Bottom Line on Collision Insurance
We all make mistakes while driving, and even the quickest glance away from the road can result in expensive damage to your car. Even if you aren’t at fault in an accident, you can’t count on the other driver’s liability insurance to cover the full cost of repairing your vehicle, especially if you drive a valuable car. Collison insurance can help you pay for those repairs if your car is damaged in an accident with another vehicle or object.
Now, if your car is on its last legs, collision insurance may not be worth the cost. But for many drivers, it helps offer the peace of mind that any necessary repairs will be covered — and in extreme cases where your car is totaled, then you’ll have help buying a new one.