Collision coverage

What does collision coverage do?

Collision (COLL) covers your insured vehicle for physical damage that your car sustains when it hits, or is hit by, another vehicle, or another object.  Collision also covers the upset of your vehicle, such as the unintentionally rolling or flipping of your vehicle.

This is the coverage that gives you the ability to put in a claim with your auto insurer after your vehicle is damaged in an auto accident with other vehicles or property, or a single car accident.  Your property damage liability coverage does not cover your vehicle in any way, only those that you damage.

Collision coverage is what you need to have your insurer pay out, less your deductible amount, for damages in most auto accidents and best of all-- regardless of fault.  Collision will pay out, according to the terms and conditions of your policy, if the other driver is uninsured, underinsured, or unknown or even if you are at fault. 

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Collision doesn’t cover any and all damages that your vehicle may receive.  To have “full coverage” on your car you would also need to carry comprehensive coverage, which covers your car if it is stolen; or damaged by vandalism, flood, fire, or animals.   

Keep in mind, not every issue with your vehicle is covered by collision or comprehensive insurance.  For instance, damages caused by wear and tear, freezing or mechanical breakdown are not covered by either coverage -- or any other portion of an auto insurance policy.

When receiving a quote for collision coverage, you will need to choose a deductible amount. A deductible is the portion of a claim that you’re responsible for paying before your insurance coverage kicks in.

Typically, the range you can choose for your collision deductible is anywhere from $100 to $2,500 (deductible choices vary according to state laws and insurance company guidelines). Most car owners choose a deductible of between $250 and $1,000.

In general, the higher the deductible the less expensive your premium and the lower your deductible the higher your collision premium – since the insurer is taking on more risk.  So, a higher deductible can substantially lower the cost of insurance premiums, but you’ll have more to pay out-of-pocket before your collision benefits kick in. (See Will higher deductibles save you money?”)

When picking a deductible amount, find the right balance for your finances.  For example, if you set your deductible at $1,000 and your car sustains damages totaling $1,500, you will pay $1,000 and your insurance company will pay $500.  Deductibles are due per incident, so you will have your deductible amount due each time a collision claim is made.

Is collision coverage mandatory?

Collision insurance is not required by any state.  Most states require property damage liability so that your insurer will pay (up to your limits) if you damage other people’s vehicles or property, but states do not mandates that you carry coverage to pay for damages to your own car.

However, if you have a loan or lease on your vehicle, then your lienholder can (and usually will) require that you carry this coverage and may mandate the specific deductible amount you have to select. 

If want to lower your insurance premium by raising your deductible, while your car is still financed, be sure to check with your lienholder to see if they will allow a higher deductible than what you are currently carrying.

What happens if I don’t have collision coverage?

Without collision coverage, you may be left to pay out of your own pocket for your car’s repairs unless there is someone else found liable for the damages, such as an at-fault driver who has property damage liability coverage with which you can make a claim through. Or if you are hit by an uninsured motorist and have uninsured motorist property damage (UMPD) coverage under which you can make a claim.

With a newer, high valued car, you will normally want this added protection for your vehicle, whether you have financed it or not.  Without collision coverage, you could end up in a situation where you would not need to pay for repairs, but instead need to replace your car due to it being totaled out, and that’s a lot of money to be out for even a moderate valued vehicle. (See “Insure your car from the showroom to the junkyard”)

If you have an older car with a low value (without a lease or loan on it), you may not want to pay for collision coverage since if your car is damaged, or totaled, the low amount of compensation you’d receive from your auto insurance company may not be worth the premium paid out.  (See “Is it time to drop comp and collision”)

Knowing how much your vehicle is worth can certainly help you determine if collision coverage is worth the price.  Find out the current value of your car by using appraisal tools offered on sites such as Kelley Blue Book (KBB), NADAguides, and Edmunds.

Looking to buy your first new car?  Read “How to insure a new car” to learn the best way to go about shopping for an insurance policy.