What is Collision Insurance?
Collision insurance — more commonly called collision coverage — is a type of optional coverage in auto insurance policies that helps drivers pay to repair or replace their cars after an accident. Though it is not part of standard policies, 75% of insured drivers choose to buy it. Some lenders require collision insurance for those leasing a vehicle or using an auto loan to buy their car, as it protects the lender’s investment.
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Consider Collision Coverage to Protect Your Car On the Road
Road accidents are common; in fact, an estimated 5.25 million car crashes were reported to police nationwide in 2020. Damage from collisions can cost thousands of dollars to repair. For example, replacing a typical car bumper can cost more than $1,000. If a car’s suspension is damaged in an accident, replacing it could cost around $1,000 to $5,000 more. If you don’t have savings to cover collision repairs, you may see value in a collision insurance policy.
While collision insurance is optional for those who own their cars outright, you may be required to buy an insurance policy that includes collision coverage when you lease or finance a car. Otherwise, you could choose to get collision insurance at the time of purchase or add it to your auto insurance policy later.
Once the policy is active, it covers damage from the specific collision-related events listed in the policy. When a covered event occurs, drivers can contact their insurer to file a claim. For each claim, drivers should have as much documentation on the collision as possible, including the time and date of the collision, and photos of the damage.
To better understand whether collision insurance is a good fit for you, learn more about what it covers, how it works, and when it might make sense to included it in a policy.
What Does Collision Insurance Cover?
As the name suggests, collision insurance covers damages to a car that result from a collision, typically up to your vehicle’s actual cash value, minus the deductible. Details may vary depending on the insurer and the policy, but collision insurance generally includes coverage for damages from:
- A collision with another vehicle. If you are involved in a collision with another vehicle, collision coverage can help cover the cost of repairing or replacing your car.
- A collision with an unidentified driver. Otherwise known as a hit and run incident, collision insurance protects you if the other driver flees the scene after a collision.
- A single-car collision. When you’re the sole driver involved in a crash, collision insurance may help pay for the damages. Some examples of single-car incidents include rolling or flipping your car after slipping on ice or water.
- A collision with an object. Dents, scrapes, and other more serious damages could occur when you hit potholes, guard rails, fences, or other objects. This coverage provides coverage for any necessary repairs.
This coverage applies no matter who is at fault. Typically, if you are in a collision and are found to be at fault, your standard property damage and liability coverage will not cover repairs to your own vehicle. Instead, that coverage pays for repairs to the other driver’s car.
However, collision coverage will pay for repairs no matter who is fault in a collision. This means you would have coverage for necessary repairs even if you are found to be at fault for the accident, or if the other driver fled the scene after a hit and run.
What Does Collision Insurance Not Cover?
Details of collision insurance exclusions may vary from one policy to another, but these things are generally not covered:
- Intentional collision damage. Collision coverage does not cover damages that are intentionally caused, such as vandalism or damage caused by an intentional collision.
- Collisions caused by wear and tear, or maintenance issues: Collision coverage does not cover damages that are caused by normal wear and tear, such as rust or mechanical failures.
- Damage to your own or someone else’s property after a collision. Collision insurance only covers damages to your vehicle. It does not cover damage to another driver’s car. It also does not cover damage to objects, such as fences and mailboxes. Instead, coverage for this damage falls under the property damage liability insurance portion of a car insurance policy.
- Medical bills from a collision. Treatment of injuries to you, your passengers, or the riders in another car are not covered by collision insurance. These costs may be covered by the personal injury protection or bodily injury liability portions of a car insurance policy, or by your own health insurance policy when it comes to addressing your own injuries.
- Collisions with an animal. Damage caused by hitting an animal, such as a deer, is not covered by collision insurance. Instead, this type of damage is covered by comprehensive coverage.
- Collisions with uninsured or underinsured drivers. If you are involved in an accident with a driver who does not have sufficient insurance, repairs would be covered by uninsured and underinsured motorist insurance.
Advantages and Drawbacks of Collision Coverage
While collision coverage can provide important protection in the event of an accident, it also comes with its own set of pros and cons. Here are some things to consider before deciding whether or not collision insurance is right for you.
Advantages of Collision Coverage
- Protection for your vehicle. Collision insurance can help you pay to repair or replace cars after an accident. While collision repair costs may vary depending on a car’s make and model and the extent of the damage, costs may add up quickly.
- Coverage even if you are at fault. Standard auto insurance coverages do not pay for repairs to your own car if you are at fault in a collision. Collision coverage helps you pay even if you are at fault.
Drawbacks of Collision Coverage
- Cost: Collision coverage can be more expensive than other types of coverage, particularly if you have a newer or more expensive vehicle.
- Deductible: You will typically need to pay a deductible before your coverage kicks in, which can be costly if you have a high deductible.
- Limited coverage: Collision coverage only covers collisions with other vehicles or objects, and may not cover other types of damage or incidents.
- Not required: If you own your vehicle outright, collision coverage is not required by law, and you may choose to forgo it to save money on your insurance premiums.
The Difference Between Collision and Comprehensive Coverage
|Collision Coverage||Comprehensive Coverage|
|Collision with another vehicle||x|
|Collision with an unidentified driver||x|
|Collision with an object||x|
|Objects falling on car||x|
|Collision with an animal||x|
|Natural disaster damage||x|
Collision and comprehensive coverage are often confused as they are both optional coverages for most drivers. While collision coverage can help drivers pay for damages that result from an accident, comprehensive insurance covers non-collision events, such as:
- Objects falling on your car, such as if a tree falls onto your car
- Vandalism and theft of your car, including if all or only part of your car is damaged or stolen
- Hitting an animal, such as if you hit a deer
- Weather events, such as hail damage
- Natural disaster events, such as if your car is damaged during a tornado
Lenders generally require both collision and comprehensive insurance when drivers finance or lease a car, leading many policies to be bundled together. Drivers who own their vehicles outright may choose to buy one or both types of coverage, depending on their needs.
How Much Does Collision Coverage Cost?
Collision coverage costs $290 per year on average, though your exact premium will vary based on what you chose for your policy’s deductible and policy limit, as well as your’s replacement value. The last point ultimately determines how much coverage your collision insurance would provide.
A deductible is the amount of money an insured person is responsible for paying out of pocket before their insurance kicks in to begin sharing the cost of repairs. For example, if you select a $1,000 deductible, that means you agree to pay $1,000 toward repair costs in the event of a collision before your insurer will step in to cover the remaining amount.
A collision deductible waiver is an optional add-on for collision insurance. It waives the deductible if your car is damaged in a qualifying collision, such as if you were hit by an uninsured driver. Typically, you must choose between a collision deductible waiver or uninsured and underinsured motorist coverage. This option is not available in every state or from every insurance company. If you are interested in this feature, contact your insurer or a trusted insurance agent to find policies that offer it.
The policy limit for collision insurance — the maximum amount your insurer will pay for repairs — is generally the actual cash or fair market value of the vehicle. However, this is not always enough to purchase a replacement if the car is totaled.
To protect against that possibility, drivers may want to consider replacement cost insurance. This optional coverage could help drivers replace their totaled car with a new car of the same make and model. However, this is not always available in every state or from every insurance company. If you are interested in this insurance, contact your insurer or a trusted insurance agent to find policies that offer it.
How Your Coverage Amount Is Calculated
Your collision coverage amount is calculated based on your car’s value, which in turn informs your policy’s limit. It takes into account how much your insurer would pay if your entire car needed to be replaced, such as when it is totaled (a total loss), or otherwise damaged beyond repair — or if the cost of repairs exceeds the value of the car.
Most insurers use either cash value or fair market value to determine a car’s worth. Cash value takes into account the cost of the vehicle minus depreciation. Fair market value is the amount that someone might reasonably pay to buy the same vehicle in the same condition as the one that was totaled. Some factors that contribute to a car’s value include:
- Year. As cars age, the value depreciates. For example, a five-year-old vehicle is generally worth about 40% of its original purchase price.
- Make and model. The make and model of your car can be used to determine its base value. Generally, more expensive or higher-end vehicles will have a higher base value. The current market demand for your make and model can also impact its value. For example, if your car is in high demand, its value may be higher than if it is not in high demand.
- Type. SUVs and pickup trucks tend to depreciate more slowly than sedans and hatchbacks, though this may vary by brand.
- Condition. The condition of your car, including factors such as mileage and overall wear and tear, can also impact its value. Cars in good condition with low mileage are typically worth more than cars with high mileage or in poor condition.
- Options and upgrades. Any options or upgrades that you have added to your car, such as a premium sound system or leather seats, can also impact its value.
However, keep in mind that this amount may not be enough to purchase an identical new replacement for your car.
How to Estimate Your Car’s Value
If you are curious about your car’s value before getting collision coverage, you have options to get an estimate:
- Consult a reputable online resource. Kelley Blue Book and NADA are examples of trusted resources for determining the value of a car. They both offer tools that allow you to enter information about your car, such as the make and model, year, mileage, and condition, and receive an estimated value.
- Get an appraisal. You can have a third-party appraiser evaluate your car to determine its value. This may be necessary if your car is a unique or rare model, or if you have made significant modifications or upgrades to the car.
- Ask your insurance company. Your insurance company may have their own resources and calculation methods to determine the value of your car. Review your policy to understand how your insurance company determines the value of your car.
How to File a Claim After a Collision
In situations where the cost of repairs is not much more than the deductible, you may decide to fix the car without filing a claim. In other scenarios, though, filing a claim can help make otherwise costly repairs more manageable. If you want to file a collision insurance claim, you would typically follow these steps:
- Contact the insurer. As soon as possible after the collision, contact your insurance company to report the accident and initiate the claims process. Be prepared to provide details about the accident, such as the date, time, location, and any other drivers or vehicles involved.
- Get an estimate for repairs or replacement. Your insurance company may require you to get an estimate for the cost of repairs or replacement of your vehicle. You can get an estimate from a trusted mechanic or from a body shop recommended by your insurance company.
- Gather supporting information. Collect the documents you need to support your claim, such as photos of the accident scene, a copy of the police report, and estimates for repairs or replacement.
- Open a claim. Call the insurer to open a claim. Some insurers also accept claims through a mobile app or their website for added convenience.
- Work with the claims adjuster. Adjusters are responsible for assessing collision damage and estimating the cost of repairs.
- Pay your deductible. If your claim is approved, you will need to pay your deductible before your insurance company will cover the remaining cost of repairs or replacement.
- Make repairs. Choose an auto body shop and make repairs.
- Receive reimbursement. Your insurer may pay the repair shop directly or send you a check for the amount you paid minus your deductible.
How Long Do Claims Take to Process?
In straightforward claims, where it’s simple to assess the damages and determine what exactly happened, the claim could be settled in under two weeks. With more complicated claims, drivers could wait longer for reimbursement.
For example, if you are involved in a collision but it is unclear which driver is at fault, your collision coverage claim may not be approved until fault is determined. This is because if it is found that the other driver was at fault, their insurance would pay for repairs to your vehicle instead of your collision coverage.
Should You Add Collision Coverage to Your Auto Policy?
Determine whether collision coverage is something you need.
Get Collision Coverage If…
- Your lender requires this coverage
- You have a newer or more expensive vehicle
- You have a higher risk of being involved in a collision, such as if you drive often or live in a high-traffic city
- You cannot afford to repair or replace your car in the event of a collision
Skip Collision Coverage If…
- Your vehicle is older and low value, where collision insurance coverage would cost more than the cost to repair your car
- You have a very low risk of being involved in a collision, such as if you rarely drive and live in a rural area
- You can comfortably afford to repair or replace your car in the event of a collision
How You Can Save Money On Collision Insurance
The cost of your collision coverage is dependent on your policy details and your car itself. Learn more about what you can do to your policy and car to lower your collision insurance premium:
- Increase your deductible. Raising your collision coverage deductible can lower your premium, but be sure you can afford to pay the higher deductible if you need to file a claim.
- Compare quotes from multiple insurance companies. Shopping around for collision coverage can help you find the best rates and coverage options for your needs.
- Bundle your policies. Many insurance companies offer discounts if you bundle multiple policies, such as auto and home insurance.
Vehicle and Driver Changes
- Maintain a good driving record. Keeping a clean driving record can help you become eligible for lower rates on collision coverage.
- Drive a car with safety features. Some insurance companies offer discounts for cars with safety features such as anti-lock brakes, additional airbags, and electronic stability control.
- Consider dropping collision coverage on older cars. If your car is older and has a low market value, you may be able to save money by dropping collision coverage and using the money saved to buy a new car if necessary.
Putting It All Together
Collision coverage can help cover the cost of repairing or replacing your vehicle if it’s damaged in an accident, even if you are at fault. This coverage can be especially valuable if you own a newer or more expensive car that would be costly to repair or replace on your own. In fact, having collision insurance may be necessary if you have a car loan or lease. Overall, collision coverage can help drivers avoid a large repair bill or having to buy a new car unexpectedly.