What is collision insurance and what does it cover?

Two damaged vehicles following a collision
November 10, 2023

What is collision insurance?

Collision insurance can help pay for repairs to your vehicle if you hit an object, such as another car, a fence, or a snowbank. Unlike liability coverage, no matter who's at fault collision coverage can help pay for repairs to your vehicle.

Adding collision insurance to your car insurance policy can be a great supplement to liability insurance, but there are other factors to consider to know if collision coverage makes sense for your situation.

Let's take a closer look at collision insurance and what it covers.

What collision insurance covers

Collision insurance covers physical damage to your vehicle if it strikes something or something strikes it, regardless of who's at fault. This may include:

  • Damage to your car in an accident you cause

  • Damage to your car if you hit an object, such as a fence or pole

  • Damage to your car if someone else hits you (the other driver's liability insurance could also pay for this damage)

What collision insurance doesn't cover

Collision insurance doesn't cover any damages to other vehicles, property, or people involved in an accident, and it may not cover accessories or special equipment that you've added to your vehicle. It also doesn't cover damage to your vehicle that results from something other than hitting another car or object.

Here are some examples:

  • Hail or other types of storm damage

  • Hitting an animal, such as a deer

  • Damage to another vehicle

  • Damage to private property, such as a mailbox

  • Medical bills for anyone involved in the accident

Do I need collision insurance?

When determining whether you should purchase collision insurance, consider:

  • Vehicle value: Collision insurance doesn't pay out more than the value of your vehicle, so factor in the worth of your car when determining if collision insurance is right for you.

  • Accident costs: According to the Insurance Information Institute, collision claims are one of the most expensive types of claims, averaging $3,750—second only to bodily injury claims. The average collision claim costs nearly triple the amount of the average annual car insurance premium in some states, according to Bankrate.

  • Location: Depending on where you live, road conditions can vary throughout the year and you may drive in weather conditions that increase your likelihood of a collision. In fact, our data shows that collision accidents occur 6 percent more often during the winter months, on average.

Also consider that collision claims are one of the most commonly filed auto insurance claims, but don’t necessarily involve other drivers. Our data shows that more collision accidents involve a stationary object versus another moving vehicle.

While you should carefully review every coverage option when determining your auto insurance policy, collision insurance is important coverage to consider adding.

Is collision insurance required by law?

No states legally mandate collision insurance, but if you have a loan on your vehicle, the lender may require you to carry it along with comprehensive insurance to fulfill an insurance requirement.

Adding collision insurance can also provide peace of mind—versus having only the minimum legal requirements—by helping to reduce your out-of-pocket costs in case of an accident.

Get a Dairyland quote today. Find out if collision coverage is right for you.

How much collision insurance do I need?

Because collision insurance covers no more than the value of your vehicle at the time of the accident, the collision coverage limit is usually not adjustable. To calculate how much that would be:

Take the value of your vehicle and subtract your deductible—the amount of money you'll pay out of pocket for an accident before your insurance provider will cover the remaining collision costs. This should give you a good estimate of how much benefit collision coverage would provide.

Collision insurance deductible

Insurance companies typically have coverage options with different deductible amounts. If you choose a plan with a lower deductible, your premium—the amount you pay for your policy—will increase. The higher the deductible, the lower your premium.

Additionally, collision insurance has a limit. Since it solely covers damages to your vehicle from an accident, the maximum value of its coverage will be the value of your vehicle, factoring in depreciation. If your vehicle is totaled in an accident, your collision coverage would cover the value of your vehicle minus your deductible.

Let's say your vehicle is valued at $3,500 and is totaled in an accident. If your deductible is $500, your insurer would pay $3,000 for your collision claim.

What is the difference between collision and comprehensive?

Comprehensive and collision coverage are responsible for two different types of events. Collision insurance helps with damage from an accident with another vehicle or stationary object, whereas comprehensive coverage helps with damage caused by something like vandalism or hitting an animal.

Collision insurance vs. liability insurance

Collision insurance can help pay for damage to your vehicle, while liability insurance helps cover damage to another person's vehicle if you're at fault in an accident. Liability coverage can also help pay for the other person's medical expenses, legal fees, lost income, and pain and suffering.

Collision insurance is also optional, whereas liability insurance is a legal requirement in most states.

Rental car collision insurance

If you need to rent a car, it's important to make sure that the rental is covered by insurance. If your personal car insurance policy includes collision insurance, it may also cover your rental car.

However, it's important to get in touch with your insurance provider to make sure your rental car will be covered under your current policy. If not, you may need to purchase the rental company's insurance coverage.

Collision insurance FAQs

Do I need collision insurance on an older car?

Do I need collision insurance on an older car?

Collision insurance only pays up to the current value of your car, minus your deductible. So, if your car is older and not worth as much, collision insurance might not make sense.

If you do add collision coverage to your policy, it's a good idea to make sure your vehicle is worth more than the deductible, otherwise you could end up paying entirely out of pocket to repair or replace your car.

Does a no-fault auto collision claim raise your insurance premium?

Filing a claim can impact your premium, but that doesn't necessarily mean it will. Insurance rates are based on factors such as your age, location, your car, and your driving record. In general, avoiding accidents can help keep your car insurance rates lower.

Is collision insurance required when renting a car in Mexico?

Collision insurance is not legally required when renting a car in Mexico. However, liability insurance—sometimes called third-party insurance—is mandatory. Your U.S. insurance policy likely won't cover your rental car in Mexico, so be sure to contact your insurance provider before you rent.

Does Florida require collision insurance?

No, collision insurance is not legally required in Florida, or in most other states. However, if you lease your car or have a loan on it, the owner or lender may require you to have collision coverage.

Related link:

Have you made a lot of collision claims? We've still got you covered with high-risk auto insurance.

The general information in this blog is for informational or entertainment purposes only. View our blog disclaimer.

*Data accuracy is subject to this article's publication date.

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