Understanding Collision Auto Insurance Coverage

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Understanding Collision Auto Insurance Coverage

Written by Brian Greenberg
CEO / Founder & Licensed Insurance Agent

Last updated: November 24th, 2022

Reviewed by Nick Fenske
Licensed Insurance Agent

What is Collision Insurance?

Collision insurance is one type of insurance you can buy for your vehicles. It kicks in to cover damages that you might incur if your vehicle is involved in an accident.

For example, if you run into another vehicle in traffic, collision coverage helps pay for any repairs to your vehicle. The same is typically true if your vehicle is damaged in a run-in with an object like a traffic pole or a mailbox.

What’s the Difference Between Collision and Comprehensive Car Insurance?

You may have heard people refer to comp and collision< before. Comp stands for comprehensive, which is another type of vehicle insurance. Understanding comprehensive vs. collision insurance is critical for knowing when your policy is likely to cover damages. Comprehensive auto insurance helps pay for damages caused by incidents that aren’t collisions. Say a windstorm knocks a tree over onto your car or a flash flood damages the vehicle. If you have comprehensive coverage in your policy, your insurance will pay for some or all of the damages.

Some auto insurance companies only offer comp and collision as a single product. Most don’t offer comprehensive coverage without collision coverage at all unless you won’t be driving the car. You might be able to buy comp coverage only for a collector’s car in storage, for example.

What Does Collision Insurance Cover and Not Cover?

Collision insurance policies cover damages that occur in the following types of incidents:

  • A collision with an unmoving object, such as a curb, building, fence, tree, pole, mailbox, or landform
  • A collision with another vehicle of any type
  • A single-car accident

Typically, your> collision policy only pays for damages if you were deemed at fault for the accident or another insured driver was not involved. It also only pays for damage to your car. Check out the table below to explore some examples. See when your collision policy would pay and when another payer might be expected to pay.

When Is Collision Insurance Beneficial?

Collision ScenarioYour Insurance PaysAnother Insurer Pays
You hit a tree in your car.X
You're involved in a fender bender and it's deemed your fault.X
You're involved in an accident, and it's deemed the other driver's fault, and they have InsuranceX
You're involved in an accident, that may have been another driver's fault, but they leave the scene before they can be identified.X
You're involved in an accident with a driver who is not insured, and it's deemed their fault.X

Understanding the Details of a Collision Car Insurance Policy

How much your auto insurer pays in the event of a collision depends on the details of your policy. The same is true for how much you might end up out of pocket. Every collision auto insurance policy has a deductible and a limit.

Car Insurance Collision Deductibles

Deductible refers to the amount you have to pay before insurance coverage starts paying for expenses. Commonly, car insurance deductibles range from $250 to $1,000. Some insurance companies offer deductibles as high as $2,000. In unique cases, such as with collector’s cars or luxury vehicles, deductibles of up to $10,000 are common.

Many people are familiar with the concept of deductibles associated with health insurance. With health insurance, the deductible amount is how much you pay each calendar year before your insurance kicks in to cover expenses.

With car insurance, the deductible amount is applied to every incident. If your deductible is $500 and you hit a tree in February of a year, you’ll pay for the first $500 of any repairs. If you have a fender bender in April of the same year, you’re on the hook again for up to $500 of repair costs before your collision coverage kicks in. .

Collision Auto Insurance Limits

Insurance companies put a limit on how much they will pay under collision policies. Typically, the limit is equivalent to the current value of your car.

Imagine this scenario. You hit a tree with your car. The car is currently worth $15,000. The estimate for repairs after the accident is $17,000.

That’s more than your car is worth, and most insurance companies won’t pay that. Instead, the insurance company considers the vehicle totaled. The insurance company typically offers you fair market value in damages paid out under the collision policy.

If you still owe a lender, the insurance company pays off the loan (assuming it’s less than the fair market value). If you owe less than the value of your car, you receive a check for the difference. If you owe more than the value of your car, the lender may hold you responsible.

In cases where you own a car outright, the insurance company offers you the entire fair market value. In all scenarios, the insurance company becomes the owner of the car.

What to Expect for Collision Auto Insurance Rates

As of 2020, the average cost of collision insurance in a full-coverage policy ranged from around $1,080 to almost $1,350 per year. But average costs can be misleading when you’re dealing with car insurance.

Factors That Influence Collision Premium Rates

The cost of your collision coverage premiums depends on a variety of factors that could include but aren’t limited to:

  • The value of your vehicle. The insurance company has more to lose with a more expensive vehicle. So, it charges slightly higher premiums to make up for that risk.
  • Your deductible. Typically, the smaller the deductible, the higher the premiums. Again, this is a tactic to help compensate for a higher level of risk.
  • Where you live. State laws about car insurance vary. Some require certain types of insurance that others don’t, and some states have laws that are expensive for insurers. Car insurance quotes can vary by a great deal depending on which state you live in.
  • Your age. Younger people and seniors typically pay more for car insurance coverage of any type than other adults. Usually, rates are best for those aged 25 to 65.
  • Type of vehicle. Collision coverage on a truck may be cheaper than the same policy on a sports car. Insurers look at the stability and safety of a vehicle, as well as the likelihood it might sustain significant damage in a collision.
  • How much you drive. If you drive more than average, you present a greater risk of getting in a collision. Your premiums may be higher because of this.
  • Your credit score. Some insurance companies check your credit and use your score to evaluate you as a risk factor. A low score could mean the insurer sees you as a greater risk.
  • Your driving history. If you’ve demonstrated risky driving behavior in the past and have accidents or traffic violations on your record, your premiums might go up.

Other factors that can impact how much you pay for collision insurance include your marital status, your gender, and what insurance provider you use.

Do I Need Collision Insurance?

If you’re driving on public roads you at least need to have liability insurance. The exceptions are is in  Florida and New Hampshire, which requires those without insurance or serious driving infractions to essentially self-insure to drive legally on public highways.

However, most states don’t require collision insurance. The law is more concerned with protecting other drivers., so you may be required to carry liability car insurance.

However, if you have a lien on your car, the lender probably requires you to carry collision coverage. This is to protect the bank’s investment. If you get into an accident and total the car, the insurance company will help pay it off.

Without insurance, you may have to scramble to buy a new car while still owing money on the old one. Banks realize the first debt obligation to get put on the back burner would be the one for the car that’s no longer worth anything or functional.

If you own your car outright, you don’t have to carry collision insurance. And many people save money by dropping this portion of their policy. But should you drop collision?

Should You Drop Collision Insurance?

It’s a personal decision. Look at how much your car is worth and whether you could afford to replace it if you had to. If your car is worth $20,000, the cost of your collision premiums may be worth it. If your car is worth $2,000, you may not want to pay hundreds or even thousands a year to insure it.

In many cases, a decent collision auto plan is worth it for the peace of mind and financial stability it brings. And if you want to save money on your policy, you can opt for a higher deductible instead of no collision coverage at all.

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