What Is Collision Insurance? (And Why You Might Not Need It)

Car insurance is one of those things we don’t necessarily want to pay for, but we’re happy we did when it comes time to use it. Whether you are getting car insurance as a new driver or you’ve been driving for a while and you’re wondering how much car insurance you actually need, it’s a good idea to understand the different components that make up an auto insurance policy.

In this article, we’ll look at what collision coverage is and whether it’s something you really need to be paying for. Every driver’s situation and needs are different, and this article will help you understand whether collision coverage makes sense for you.

What is collision insurance?

Collision is a type of insurance coverage that pays for damage to your own car that results from a collision with another car or object, such as a fence, tree, or telephone pole when you’re at fault.

Following a collision, your car insurance company will cut you a check for the costs of repairing your vehicle, minus the deductible. A car insurance deductible is the amount of money you pay out of pocket toward a covered loss, and it can range from $0 to several thousand per claim.

So let’s say you’re driving one day and not paying close attention to the road. You swerve at the last minute to avoid hitting another car, which causes you to drive through someone’s fence. The total cost to repair your vehicle is $2,000. If you have a $1,000 deductible, your car insurance company will cut you a check for $1,000. The remaining $1,000 is up to you to pay.

You choose the deductible you’re comfortable paying when you purchase your auto insurance coverage. Typically, you’ll pay a lower premium for your policy if you opt for a higher deductible.

Collision coverage is optional, which means there’s no state law that mandates drivers carry the coverage. However, if you finance or lease your car, your lender or leasing company will likely require it. Because the lender or leasing company technically owns the car, collision coverage helps protect their financial interest. In the event of an accident, they want to make sure there’s enough money available to repair your car.

You can add collision coverage to your policy at any time through your car insurance provider. If you’re purchasing a policy for the first time, you will have the option to add collision coverage as you’re setting up your policy.

What does collision insurance cover?

As the name suggests, collision insurance covers damage to your own car resulting from a collision. This includes collisions with other cars, as well as other objects such as a tree, guardrail, or fence. If you happen to flip your car while driving, collision coverage will help pay for the damage. Collision coverage pays if your car is damaged from driving over a pothole as well.

Collision does not pay for normal wear and tear to your car, nor does it pay for any type of mechanical failure. In general, if your car is damaged from anything other than a collision, collision insurance won’t cover it. For instance, collision insurance coverage won’t pay for damage caused by vandalism or hailstorms. These types of incidents would be covered by another optional coverage: comprehensive car insurance.

The difference between liability, comprehensive, and collision

A car insurance policy is made up of several components that are meant to work together to ensure you have as much protection as you need. Here’s a breakdown of what the major types of car insurance cover and do not cover:

	Liability insurance	Collision insurance	Comprehensive insurance
What it covers	Costs associated with bodily injury and property damage that you or another driver cause while driving your car	Damage to your vehicle resulting from a collision that’s your fault (not animals or other people)	Damage to your vehicle other than collision — theft, flooding, hailstorms, vandalism, animals, etc.
What it doesn’t cover	Costs associated with bodily injury or property damage to you or your passengers	Damage not caused by a collision (see comprehensive); mechanical failure; or normal wear and tear	Damage from colliding with another vehicle or object (see collision), except an animal

Collision vs. liability

Although collision and liability coverage can both pay out for the same car accident, the types of things they cover differ.

Collision is an optional coverage that helps pay for damage to your car from a collision. So if you hit another car and it’s your fault, collision will help pay the cost of repairs to your car. Although the coverage is optional, most people can benefit from having it. An exception is if the value of your vehicle is less than your collision deductible and what you would pay in premiums for your insurance — I’ll explain this more in a bit.

Liability insurance is broken down into two categories, bodily injury liability and property damage liability, and help pay the repair costs for the other person’s car, as well as medical costs if they’re injured in the accident.

Whereas collision is optional, all but two states require drivers to carry certain levels of liability insurance. However, all states require proof of financial responsibility. So in states where liability insurance isn’t required, you must still present proof that you have enough assets to pay damages, medical bills, and anything else that arises out of an accident you cause.

Collision vs. comprehensive

Comprehensive insurance covers damage to your car resulting from anything other than a collision. This includes theft of your vehicle, vandalism, fire, flood, fail, falling rocks, and damage caused by an animal (even hitting an animal while driving).

Like collision, you set a deductible amount for comprehensive. If your vehicle is damaged from a covered claim, your insurance company will cut you a check for the repair costs, minus your deductible.

Most people can benefit from having comprehensive coverage. However, it really depends on your specific situation. For instance, if you typically park your car in a covered garage where the risk of theft or vandalism is low, you may choose to forgo comprehensive coverage. But as with collision, it may be required if your car is financed or leased.

Is collision insurance required?

Although certain elements of a car insurance policy are optional — such as collision, comprehensive, roadside assistance, and rental car coverage — there are certain coverages required by state law. These required coverages vary by state, but in general, most states require drivers to carry certain levels of liability insurance.

Unlike liability insurance, no state requires drivers to carry collision insurance coverage. However, you may be required to purchase collision coverage if you don’t own your car. As mentioned earlier, if you finance or lease a car, the leasing company or lender will likely require that you have this coverage so long as they own the vehicle.

Although this coverage is optional, the Insurance Information Institute (III) tells us that four out of five drivers still choose to purchase collision insurance. With the average collision insurance claim costing $3,574 in 2018, it’s easy to see why. The costs to repair a vehicle can add up quickly, and collision coverage helps mitigate some of that risk for you.

How to save on car insurance

Although collision coverage offers financial protection in the event you collide with another car or object, purchasing this coverage doesn’t always make sense. If you’re wondering how to save money on car insurance, forgoing collision could be a smart option if you don’t need it.

If you’re driving an older car that you own outright, you’ll want to do the math to determine whether it makes sense to pay for collision coverage. Weigh the value of your vehicle against your collision deductible and annual insurance costs. If the deductible plus total in premium payments are greater than your car’s actual cash value, it might not make sense to purchase collision coverage. By opting out of purchasing collision, you’ll pay less on your insurance premiums.

If you’ve decided you do want collision coverage, make sure you set an appropriate amount for your deductible. This should be an amount you’re comfortable paying out of pocket in the event you have an accident. If you can afford it, choosing a higher deductible will typically reduce your premiums. That said, you should never skimp on coverage just to save on car insurance. In fact, you should purchase as much coverage as you can afford.

Another potential way to save on car insurance is to switch car insurance providers. Compare the best car insurance quotes from a number of different companies, making sure that you’re looking at the exact same type and amount of coverage. Two companies can charge totally different amounts for the same coverage, and shopping around is the only way to figure this out.

Bottom line

Collision is an optional car insurance coverage that helps pay repair costs for damage resulting from a collision. This isn’t just limited to collisions with other cars either. Collision will also help pay for damage if you collide with other objects, such as a tree, fence, or even an animal, as well as if your car is damaged from driving over a pothole.

Although optional, most people purchase collision coverage. Unless your vehicle is financed or leased, you may choose to forgo collision depending on the value of your car. You can compare the value of your car with your collision deductible and the total cost of paying for insurance to help determine whether collision makes sense for you.