What Is Collision Insurance?
Collision insurance is coverage that helps pay to repair or replace your car if it is damaged in an accident involving a collision with another car, tree, fence, or other objects. Collision insurance is not required by any state law, but if your car is under lease or loan, your lender may require it. Even though collision insurance is optional, drivers should still consider purchasing collision car insurance in order to protect their finances in the event of an accident.
What Collision Insurance Covers and Does Not Cover
|Collisions with other vehicles||Damage to your vehicle not related to driving, such as damage from hail or theft|
|Collisions with objects, such as fences or trees||Damage to another person’s vehicle|
|Single-car accidents that involve rolling or flipping over||Medical bills|
|Damage caused by hitting an obstruction in the road, such as a pothole||Animal damage|
Do I Need Collision Car Insurance?
You need collision insurance if your car is not fully paid off and your lender or lessor requires it. If you fail to purchase at least the minimum collision insurance required by your lender or lessor, they will purchase force-placed insurance for you, which costs significantly more and provides less coverage.
Although collision car insurance isn’t needed unless a lender or lessor requires it, you may still want to purchase it if:
- You cannot afford to replace your car in the event of an accident.
- You want to avoid wiping out your savings on a new car or repairs if an accident occurs.
- You drive often or in heavy-traffic areas where the likelihood of an accident is higher.
- You have a history of at-fault accidents (since the only way to have your vehicle repaired or replaced after an at-fault accident is through collision insurance).
Learn more about whether you need collision insurance.
How Much Does Collision Insurance Cost?
Collision insurance costs $382 per year, on average, and that is added on top of the cost of liability coverage. The three major factors affecting the price of collision insurance are your driving history, the value of your vehicle, and the size of your deductible.
Key Things to Know About Collision Insurance Costs
- Being a high-risk driver or having a history of accidents will lead to more expensive collision insurance premiums.
- A driver’s gender, location, education, profession, and marital status are all factors that affect collision insurance costs in most states.
- Expensive vehicles, like luxury vehicles, electric vehicles and sports cars, cause higher collision coverage costs.
Collision policies will typically pay for the actual cash value of your vehicle, minus your deductible.
Learn more about the cost of collision coverage.
Collision Insurance Deductibles
A collision insurance deductible is the amount of money you will pay for car repairs before your insurance coverage is applied, and it typically ranges from $100 to $1,000. If repairs cost more than the deductible, your insurance will pay the difference, up to the policy’s limit.
The lower the deductible, the less you will pay out of pocket to repair a damaged car. However, a smaller deductible will also mean that your monthly premiums will be larger, as will your insurance company’s maximum payout. The opposite would be true if you chose a higher deductible.
Collision Insurance Premium by Vehicle Value and Deductible
|Vehicle Value||$100 Collision Deductible||$1,000 Collision Deductible|
|$13,400||$51.80 per month||$31.40 per month|
|$23,700||$77.20 per month||$45.50 per month|
|$31,290||$124.40 per month||$72.20 per month|
* Premium figures assume comprehensive coverage with $1,000 deductible, bodily injury liability policy with a limit of $50,000 per injured person and a maximum payout of $100,000 per accident, as well as a property damage liability limit of $50,000.
Learn more about collision insurance deductibles.
Do I Need Comprehensive and Collision Coverage?
If a driver wishes to purchase collision coverage, many insurance companies will require the driver to purchase comprehensive coverage as well. But the opposite is not true: many insurance providers will allow a driver to purchase only comprehensive coverage and drop collision coverage. Remember, insurance packages vary across providers. An insurance agent can provide you with more specific details and cost information.
Learn more about the differences between comprehensive and collision coverage.
Unless you have had many accidents in the past, collision coverage may be a relatively inexpensive way to obtain broad protection of your car and finances. And, unless you are financing the purchase of, or leasing, a car, it is optional.
A general guideline to follow is that if three to five years’ worth of collision coverage premiums would exceed the value of your car, dropping collision coverage might be a smart move, as long as you have savings that you don’t mind using to repair or replace your vehicle. You can put this money toward more productive uses instead.
Take the time to compare collision car insurance quotes and evaluate how much it would cost to fix or replace your car in order to decide whether—and how much—collision insurance to buy.
Video: Collision Coverage Basics
Ask the Experts
To gain more insight about collision insurance, WalletHub posed the following questions to a panel of experts. Click on the experts below to view their bios and answers.
1. What drivers should purchase collision insurance?
2. How should drivers pick their collision insurance coverage levels?
3. How should drivers pick their collision insurance deductible?
4. When should drivers drop collision insurance?