What Is Collision Insurance Coverage, and Do I Really Need It?

Article summary

• Collision coverage protects your wallet by paying to repair or replace your vehicle if you are at fault in a crash or hit a stationary object like a guard rail.
• This optional coverage differs from liability and comprehensive insurance because it strictly covers damage to your own car rather than damage to other vehicles, vandalism or weather-related issues.
• Lenders typically require collision coverage if you lease or finance your car, but it is also a wise choice if you drive a newer vehicle or want to avoid expensive repair bills.

We take certain risks when we get behind the wheel of a vehicle, and even the most careful drivers can sometimes find themselves in a situation where they’ve caused property damage or injury. That’s where auto insurance comes in—it offers vehicle owners valuable financial protection when the unexpected happens.

Since no two drivers will have the exact same auto insurance needs, insurance companies offer a variety of coverages that can be part of your auto insurance policy. Liability insurance is a type of coverage that’s mandatory (in all states except New Hampshire), but there are other types that are optional. This story explains the importance of one type of optional coverage, called auto insurance collision coverage, so you can make an informed choice when it comes to including it in your policy.

What is collision coverage?

Collision coverage is a type of auto insurance that helps protect you financially from damage to your own vehicle, often in events that happen when you are behind the wheel and found to be at fault for a crash. It helps pay to repair (or replace) your car after it’s damaged in a covered event. Note that you typically don’t choose a limit for collision coverage; the maximum amount your insurance company will pay for a collision is the actual cash value of your vehicle.

What does collision insurance cover?

Collision insurance can cover crashes for which you are at fault, either with another vehicle or with stationary objects. Here are a few examples of situations where damage to your car may be reimbursed by your auto insurance collision coverage (after you’ve paid any deductible):

• You rear-end another vehicle.
• You hit a guard rail.
• You run over a pothole.
• Your car runs off the road and flips over.
• Your car is damaged by another car.

What is excluded from collision insurance coverage?

Here are some things your car insurance collision coverage would not pay for:

• Damage to your vehicle from vandalism, hail, a fallen tree or an animal you hit. (Those situations would be covered by your comprehensive insurance.)
• Damage you cause to another person’s vehicle, or injury you cause to another driver or their passengers. (Your liability insurance, medical payments coverage or personal injury protection coverage would address injury-related costs, and the other driver’s insurance would cover the damage to their vehicle.)

Who needs collision car insurance?

According to the Insurance Information Institute, nearly four out of five drivers choose to purchase optional comprehensive and collision coverage.

• If you still owe on your vehicle, your lender or leasing company probably requires you to get full coverage (which includes both comprehensive and collision coverage). If you own your vehicle outright, comprehensive and collision coverage will be optional instead of mandatory.
• If you own a newer car, collision insurance can be a smart choice because of your car’s higher repair costs and replacement value.
• If you own a car that you know you’d want repaired after a crash, collision insurance makes sense.
• If you live or drive in an area with high rates of accidents, collision coverage might be appropriate. 
• If you can’t afford to pay out of pocket, should you need to repair or replace your vehicle, car insurance collision coverage could be money well spent.

Are there situations where collision car insurance isn’t needed?

If you own a car that’s worth very little, the coverage may not be worth the cost.

Whether it’s kept in a garage or in storage, a car that is not being driven will probably not be involved in a crash and, therefore, may not require collision insurance.

Get the coverage that’s right for you.

Work with your AAA Insurance Agent to avoid unnecessary coverage and unreasonable rates. Collision insurance doesn’t take the place of other types of insurance; it works with them to cover you for a variety of mishaps.

Understand how deductibles affect your auto insurance rates (or have an agent explain them to you), and you will be able to make an informed decision that will protect your financial investment in your vehicle.