Man and woman assessing damage after a minor car collision

 

What Is Collision Insurance?

Collision insurance is a type of car insurance that covers the cost of repairing or replacing your vehicle if it’s damaged in an accident—even if it’s your fault. Unlike liability insurance, which pays for damage you cause to others, collision insurance focuses on protecting your financial investment in your car.

Types of Damage Covered

This coverage comes in handy during many common scenarios, including:

  • Collisions with other vehicles: Whether you hit another car, or they hit you, collision insurance covers the damage to your vehicle.
  • Single-car accidents: This includes your car hitting objects like trees, poles, or guardrails.
  • Hit-and-run accidents: If you’re the victim of a hit-and-run, collision insurance can help cover your repair costs.
  • Pothole or debris damage: Collision insurance can cover repairs if your car is damaged by hitting a pothole or road debris.

Collision coverage doesn’t cover damage to your vehicle that doesn’t come from driving, such as theft or weather, damage to someone else’s car, or any medical bills from an accident.

Woman on phone after car accident filing an insurance claim

How Collision Insurance Works

While having collision insurance provides peace of mind, it’s also important to understand how it functions if you get into an accident or damage your car.

Here’s an overview of the claim’s process:

1. Report the accident: The first step is to notify your insurance company as soon as possible. You’ll provide details about the incident, the parties involved including if police were called, and any witnesses.

2. Assessment: Your insurer will assess your vehicle’s damage, either by having you take it to an approved repair shop or by sending an adjuster to evaluate it. In some cases, insurers allow pictures as well.

3. Repair or replacement: If the car is repairable, the insurance company will typically cover the costs minus your deductible. If the insurer determines your car is a total loss, they’ll reimburse you for its actual cash value (minus the deductible).

4. Payment: After you’ve paid the deductible, the insurer will pay the repair shop directly or reimburse you for the expenses.

Person with clipboard reviewing car deductibles on their policy

Understanding Deductibles

A deductible is the amount you agree to pay out of pocket before your collision insurance coverage kicks in. For example, if you have a $500 deductible and your repair costs are $3,000, you pay $500, and your insurer covers the remaining $2,500.

The ideal deductible depends on your risk tolerance and budget:

  • Higher deductible: Opting for a higher deductible usually means lower monthly premiums, but you’ll have to pay more out of pocket if you have a claim.
  • Lower deductible: A lower deductible often results in higher premiums but can reduce your financial burden if you’re in an accident.

Understanding the claims process and how deductibles factor into it helps you better prepare to navigate the situation if there’s an accident.

When is Collision Insurance Required?

While collision insurance isn’t always mandatory, there are situations where it’s required or highly recommended.

  • Lender requirements: If you’re financing or leasing a vehicle, a lender may require collision insurance because they have a financial stake in the car.
  • State laws: States don’t require collision insurance. But in ‘no-fault’ states, your insurance may not cover vehicle damage, so you don’t want to pay for repairs or replacement out-of-pocket.
  • New or expensive vehicles: If your car is new or has a high value, the cost of repairs or replacement can be significant.
  • Limited savings: If you don’t have enough savings to cover repair costs, this coverage helps ensure you won’t face a major financial setback after an accident.
  • High-risk areas: Living in an area with high accident rates or highly populated areas resulting in higher rates of accidents may make collision coverage something to consider.

Purchasing collision coverage depends on your circumstances and risk tolerance. However, the peace of mind and financial protection it offers can outweigh additional costs.

Pros And Cons Of Full Coverage Car Insurance

 

Full coverage car insurance offers a comprehensive safety net for your vehicle and finances, but it comes at a cost. To help you weigh your options, here are the advantages and disadvantages:

The benefits of collision coverage:
 
  • Financial protection: If you’re in an accident, collision insurance covers the cost of repairs, potentially saving you thousands of dollars.
  • Meeting lender requirements: Collision coverage is often mandatory if you have a car loan or lease. Having it ensures you comply with the lender’s terms and avoid potential penalties.
  • Faster repairs: With collision insurance, you can get your vehicle repaired more quickly since you won’t have to wait to save up for or schedule the repairs yourself.
  • Potential for lower deductibles: Some insurers may offer lower deductibles on other coverage types if you bundle them with collision insurance.
Potential drawbacks of collision coverage:
 
  • Premium costs: Collision insurance premiums can be expensive, especially for young drivers, those with an accident history, or those with expensive vehicles. 
  • Claims can raise premiums: Even if an accident wasn’t your fault, filing a collision claim could increase your premiums. 
  • Not always necessary: If you own an older car with low value, the cost of coverage may outweigh the potential benefits.
Man in showroom looking at cars

Collision Insurance Costs

Cost is always a factor with insurance. So, while adding collision coverage to your policy can be invaluable if you get in an accident, there are costs involved to consider.

The average annual cost for collision insurance in the U.S. is about $382. Cost can also vary by state—for example, on average $462 per year in Michigan and an average $244 per year for drivers in Iowa.

Generally, several key factors impact the cost of car insurance rates:
  • Driving history: Your driving record plays a role in your premium. A history of accidents or traffic violations can result in higher rates.
  • Vehicle type: The type of car you drive impacts your premium. Newer, more expensive vehicles generally cost more to insure.
  • Location: Where you live impacts your insurance rates. Areas with higher accident rates, theft, or vandalism typically have higher premiums.
  • Deductible amount: Higher deductibles often lead to lower premiums, but you may have to pay more out of pocket if you have a claim.
  • Provider: Different insurers have varying pricing structures and underwriting guidelines, so shopping for insurance quotes can help find the best rate.
  • Chosen coverage limits: The limits you select for coverage influence your premium—higher limits provide more protection but come with higher costs.
Car keys, calculator, and car insurance coverage statements

Tips For Finding Affordable Coverage

Budget matters, but the cheapest option isn’t always the best. You want to find coverage that provides the best value and the right coverage for your budget and needs.

Here are some tips to get the maximum discounts on car insurance:

  • Shop around: Get quotes from multiple insurance companies to compare rates and find the best deal.
  • Bundle policies: If you need additional protection, like homeowners insurance, bundling it with auto insurance coverage can lead to discounts.
  • Ask about discounts: Ask your insurer about discounts for good drivers, group memberships, and safety equipment.
  • Consider a higher deductible: If you’re comfortable with higher out-of-pocket expenses in case of an accident, choosing a higher deductible can lower your rates.
  • Maintain a good driving record: A clean driving record can lead to lower rates and help you qualify for more discounts.
  • AAA Triple Check®: Available in most states, AAA Triple Check® policy review runs a free check for you and highlights potential savings for you if you switch to AAA. 

Collision insurance vs. other coverage types

 

While collision insurance is crucial for protecting your vehicle in an accident, it’s not the only type of coverage. Understanding how each type of coverage compares can help you ensure you have comprehensive protection.

Tree on top of car, depicting comprehensive car insurance coverage incidents

Collision Insurance Vs. Comprehensive Insurance

Collision and comprehensive insurance both protect your vehicle, but in different scenarios. These are often bundled together but have different purposes:

  • Collision insurance: Covers damage to your car from a collision with another vehicle or object.
  • Comprehensive insurance: Covers damage to your vehicle from events other than collisions, such as theft, vandalism, weather-related damage, and falling objects.
Red car with front-end damage, reflecting collision or liability insurance coverage

Collision Insurance vs. Liability Insurance

Collision insurance isn’t always required, while liability coverage is mandatory in most states. Having both can protect you financially from accidents:

  • Collision Insurance: Covers damage to your vehicle, regardless of who was at fault in the accident.
  • Liability Insurance: Covers the bodily injury and property damage you cause to others in an accident, but it doesn’t cover damage to your car.

Understanding the Difference;

 

It’s important to remember that collision insurance doesn’t replace other types of car insurance coverage—it works with them to provide comprehensive protection for you and your vehicle.

A combination of collision, comprehensive, and liability insurance can help ensure you’re financially protected in many types of accidents.

Frequently Asked Questions

No Collision insurance does not, but comprehensive coverage typically covers damage caused by hitting an animal such as a deer or moose. However, It's important to check your specific policy for details 

If the other driver is at fault and underinsured, your collision insurance can cover the damage to your car minus your deductible. Then, you can seek reimbursement from the uninsured driver or their insurance company (if they have one).

Gap insurance is a separate type of coverage that pays the difference between what you owe on your car loan and what your insurance company will pay if the car is totaled. Consider whether gap insurance provides additional financial protection if you have a car loan or lease.

If your insurer deems your vehicle a total loss, it will typically reimburse you for the car’s actual cash value minus your deductible. The actual cash value is the car’s depreciated value at the time of the accident, not the original purchase price.

Don’t hesitate to contact your insurance agent or company if you have questions about collision insurance.

Get A Free Car Insurance Quote From AAA

 

AAA Car Insurance has earned a 94%* satisfaction rate from customers. Let us help you get the right car insurance coverage for your personal needs. Also be sure to try AAA Triple Check®. AAA agents Triple Check your policies to help ensure you are getting a great rate.

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