What Collision Car Insurance Covers and When You Need It

Collision insurance pays to fix or replace your car if you hit another vehicle, a stationary object, or flip over — regardless of who caused the accident

Collision coverage is one part of your auto insurance policy that covers damage to your own car from a crash. It pays for repairs or the car's cash value (whichever is less) after you collide with another car, a telephone pole, a guardrail, a ditch, or any other object. The insurance company pays the repair bill minus your deductible — the amount you choose to pay out of pocket each time you file a claim.

Collision is different from liability insurance, which pays for damage you cause to someone else's car or property. Collision covers your own vehicle. It is also different from comprehensive insurance, which covers theft, weather, vandalism, and animal strikes — not crashes.

Most states do not require collision insurance by law. However, if you have a car loan or lease, your lender or leasing company will require you to carry it. If you own your car outright, you can choose whether to buy it.

Key Takeaways

• Collision insurance pays to repair or replace your car after you hit something, and you pay a deductible (usually $500 to $1,000) each time you file a claim.
• Your lender or leasing company will require collision coverage if you still owe money on the vehicle, but it is optional if you own the car outright.
• The insurance company pays the lesser of the repair cost or your car's current cash value, not what you paid for it originally.
• Choosing a higher deductible lowers your monthly premium, but you will pay more out of pocket when an accident happens.
• Collision does not cover damage from weather, theft, or hitting an animal — that is what comprehensive insurance covers.

How collision claims work after an accident

After a crash, you contact your insurance company and report the accident. You will need to describe what happened, provide the other driver's information if another vehicle was involved, and answer questions about injuries and property damage. The insurance company will assign an adjuster to inspect your car and estimate the repair cost.

The adjuster determines whether the car can be repaired or is a total loss (meaning the repair cost exceeds 70 to 80 percent of the car's current value — the threshold varies by state). If it can be repaired, the insurance company pays the repair shop minus your deductible. If it is a total loss, the company pays you the car's cash value minus your deductible, and you keep the vehicle title (or the insurance company keeps it, depending on your state and policy).

You are not required to use the repair shop the insurance company recommends. You can take your car to any licensed repair shop you choose, though some shops may charge more than the adjuster's estimate. If that happens, you may need to pay the difference yourself.

When collision insurance makes financial sense

Collision insurance costs money each month, so the decision to buy it depends on what your car is worth and what you can afford to lose. If your car is worth $3,000 and collision costs $40 a month, you would break even in about five years — meaning you would pay $2,400 in premiums to protect a $3,000 asset. If your car is worth $15,000, the same $40 monthly premium protects a much larger asset, making it a better financial choice.

Most insurance experts suggest dropping collision once your car's cash value falls below $5,000 to $7,000, depending on your financial situation. If you have savings to cover a total loss, you can afford to drop it sooner. If you live paycheck to paycheck and cannot replace your car quickly, keeping collision makes sense even on an older vehicle.

Your age and driving record also matter. Younger drivers and those with recent accidents or tickets pay higher collision premiums, so the cost-benefit calculation is different for each person. Getting quotes from multiple insurers will show you what collision costs in your specific situation.

Deductibles and how they affect your premium

Your deductible is the amount you pay toward repairs before insurance kicks in. Common deductible options are $250, $500, $750, and $1,000. Choosing a higher deductible lowers your monthly premium — sometimes by 15 to 30 percent — because the insurance company's risk is smaller. Choosing a lower deductible raises your premium but means you pay less out of pocket when you file a claim.

The deductible applies to each collision claim separately. If you have two accidents in one year, you pay the deductible twice. Some policies allow you to set different deductibles for collision and comprehensive, so you might choose a $500 deductible for collision (which you use more often) and a $250 deductible for comprehensive (which you use less often).

When deciding on a deductible, think about what you could actually pay if an accident happened tomorrow. If $1,000 would strain your budget, a $500 deductible is worth the higher premium. If you have an emergency fund, a higher deductible saves you money over time.

What collision insurance does not cover

Collision does not pay for damage from weather events like hail, flooding, or wind — that is comprehensive insurance. It does not cover hitting an animal (also comprehensive). It does not cover damage from vandalism, theft, or a fire. It does not cover medical bills or lost wages if you are injured in the crash — that is what personal injury protection or medical payments coverage handles.

Collision also does not cover damage to other people's property or injuries you cause to others. That is liability insurance. And it does not cover your rental car while yours is being repaired, unless you add rental reimbursement to your policy.

If you cause an accident but the other driver is uninsured or underinsured (meaning their liability limits are too low to cover the damage), uninsured or underinsured motorist coverage pays the difference — not collision. Collision only covers your own vehicle damage from the crash itself.

How your premium is calculated

Insurance companies set collision premiums based on several factors: your car's age, make, and model; your driving record; your age; where you live; and how much you drive. Newer cars with high repair costs have higher collision premiums. Drivers with accidents or tickets pay more. Younger drivers pay more. Urban areas with more traffic typically cost more than rural areas.

Your insurance company may also offer discounts that lower your collision premium: bundling home and auto insurance, maintaining a clean driving record for three to five years, completing a defensive driving course, or installing anti-theft devices. Some insurers offer usage-based programs that track your driving habits and reward safe driving with lower rates.

The best way to find out what collision costs for your situation is to get quotes from at least three insurers. Rates vary significantly, and shopping around can save you hundreds of dollars per year.

Collision insurance on financed or leased vehicles

If you have a car loan, your lender will require collision insurance as a condition of the loan. The lender wants to protect their investment in the vehicle. You must carry it for as long as you owe money on the car. Once you pay off the loan, you can drop collision if you choose.

If you lease a car, the leasing company requires collision insurance for the same reason. You are also responsible for any damage beyond normal wear and tear when you return the car, so collision protects you from large out-of-pocket costs at lease end. Some leases include gap insurance, which covers the difference between what you owe and what the car is worth if it is totaled — ask your leasing company whether you need to buy gap insurance separately.

When you finance or lease, the insurance company will list the lender or leasing company as a loss payee on your policy. This means if your car is totaled, the insurance company pays the lender or leasing company first to cover the loan or lease balance, and any remaining money goes to you.

Frequently Asked Questions

Does collision insurance cover hitting a deer or other animal?

No. Hitting an animal is covered under comprehensive insurance, not collision. Comprehensive covers damage from events outside your control, including wildlife strikes, weather, theft, and vandalism. If you only have collision and hit a deer, your own car damage would not be covered.

What happens if I cause an accident but do not have collision insurance?

You pay for all repairs to your own car out of pocket. The other driver's liability insurance will pay for damage you caused to their vehicle and property, but it will not pay for your own vehicle damage. This is why lenders require collision on financed cars — they do not want you to lose the vehicle to an accident you cannot afford to repair.

Can I file a collision claim if the accident was my fault?

Yes. Collision insurance covers accidents regardless of fault. You pay your deductible and the insurance company covers the rest. This is different from liability insurance, which only pays if you are found at fault for causing damage to someone else.

Will my collision premium go up after I file a claim?

Usually yes, but the increase depends on your insurance company's policies and your driving history. A first accident claim typically raises your rate for three to five years. Some insurers offer accident forgiveness programs that prevent a rate increase after your first accident if you have been a customer for a certain number of years. Ask your agent whether your policy includes this.

What is the difference between collision and comprehensive insurance?

Collision covers damage from crashes with other vehicles or objects. Comprehensive covers damage from events you cannot control: weather, theft, vandalism, animal strikes, and falling objects. You can buy one without the other, though lenders typically require both on financed vehicles.