Collision Insurance Coverage

Investopedia defines collision insurance as:

A type of auto insurance coverage. Collision coverage will reimburse the insured for any damages sustained to their personal automobile that is due to the fault of the insured driver.

What does collision coverage cover?


In short, collision insurance coverage is an added feature to most car insurance policies that will pay for damage to your car in the result of an accident, but not the other driver’s vehicle. Kiplingera trusted finance advice website lists several important reasons why collision coverage is useful for all drivers.

Drivers who have perfect driving records may appear to be safer on paper, but the reality is the roads are dangerous and unpredictable. All it takes is not seeing a car in your rear view mirror before changing lanes, hitting an icy patch on the road that prevents you from being able to stop before hitting the car in front of you, or some other sort of freak accident that leaves you with a damaged vehicle and hefty auto repair bills.

In some states, if you are held responsible for a car accident then you may be unable to collect any damages for your vehicle from the other driver’s insurance company. Collision coverage is designed to reimburse you for the damages to your own vehicle. (Depending of your choice of coverage limits and deductibles)

Getting into an accident can cause a lot of problems. Often times there are some disputes over who was to blame for the accident. If you collide with another vehicle in an uncontrolled intersection and both you and the other driver swear that they had the right of way, then there is the problem of addressing who actually caused the accident. This not only can cause for a dangerous situation on the side of the street, but it also can result in some lengthy legal proceedings. (Even in states that have “No-Fault laws)  This is another advantage to collision coverage; with it your company can repair the car and take over the claim against the other driver. The insurance company is ethically, but not legally bound to fight for enough money to pay you back part of all of the deductible.


Is liability coverage enough?

If you are trying to save money on car insurance it is likely that you have discussed Liability Only Coverage with your local independent auto insurance agent. Liability Only coverage is the most basic form of auto insurance coverage and is required for most motorized vehicle in the United States. Liability insurance protects you against a lawsuit (subject policy limits) in the event that you get in an accident, but it also pays for the damages to another person’s vehicle or property (Again subject to policy limits) in the event that you are to blame for the accident.

Unfortunately not everyone follows the law. According to a USA Today article from 2011, one in seven drivers operate a vehicle without insurance. That equates to nearly 14 percent of drivers in the United States. The study showed some major variation from state to state, with Massachusetts having the lowest percentage of uninsured drivers, 4 percent, and Mississippi having the highest with 28 percent of its drivers being uninsured. Many auto insurance policies will offer protection against uninsured drivers, but what if that guy that rear ended you on Main Street was driving without proper insurance?

This is where liability insurance shows its limitation. In a perfect world everyone would follow the law, but because there are always the people who ruin it for other drivers, the importance of collision coverage increases. Collision coverage is designed as protection for your vehicle. (Subject to policy limits)


How much collision coverage do I need?

The Wall Street Journal provides the easiest explanation for how much collision coverage you should get. Collision coverage will include a deductible, which you will have to pay out of pocket before the insurance company is able to pay for the rest of the damages. Just like with many types of insurance, there are many deductible options that you can allow you enjoy a lower month-to-month premium. However, it is good to keep in mind whether or not you will have access to the amount of the deductible at the time of the accident. Collision coverage is meant to assist you in covering the cost of major damage; it is not designed to cover the entire cost of and accident. Even though you may be contractually obligated to report an accident to your insurance company, you may still want to avoid filing a claim for a simple repair, so that when a repair comes that costs thousands of dollars, you are able to file a claim without your premiums skyrocketing.


Kiplinger advises that the amount of collision coverage to consider depends on the car and its current value. If you are driving a $65,000 2014 Porche Boxter you are going to want more protection than if you are driving a $18,000 Toyota Yaris. Premiums are also higher for cars that are more accident-prone or are more frequently broken into or hard to repair. Coverage amounts are important to stated value or stated amount policies. Most policies are based on actual cash value, with some based on replacement cost.

Oddly enough, according to the National Insurance Crime Bureau the most stolen vehicle in the United States is the Honda Accord, which has nearly 60,000 total thefts, recorded.

Does collision insurance cover the cost for a totaled vehicle?

Drivers should be aware that the insurance company only obligated to pay the car’s cash value (depending on policy limitations and endorsements), which is the market value of the vehicle before the accident minus the salvage value of the damaged vehicle. With collision coverage, if you have a car that is worth $4,000 before the accident but only $500 after being totaled in an accident, the company does not have to pay more than $3,500 in repairs. Meaning if the repairs exceed that amount, the company can take the car and just give you the $4,000 it was worth. Insurance companies often declare a vehicle to be totaled between 75 to 80 percent of the car’s retail value.

Comprehensive v. Collision coverage

As mentioned before, collision coverage pays for damage caused to your vehicle in an automobile accident when you are at fault.  Comprehensive coverage also works to reimburse you in the case of an accident but is designed for repair of a vehicle that isn’t related to a collision. Common examples of a “Comp” claim would be vandalism damage, hitting a deer, natural disasters or falling objects. Both coverages are optional.

When to drop collision coverage

Collision coverage can save you thousands of dollars in the event that you get into a car accident that you are at fault of, but there is a point where the monthly premium costs are not worth it anymore and it is important to understand this so that you can save yourself money when the time comes.


MSN Money has an article that addresses the question of when it is safe to drop your collision coverage. Liability insurance is needed for the entire life of a vehicle. You always need to protect yourself from the risk of having to pay out of pocket for the legal fees that may result if you are at a fault for an accident when you do not have proper insurance. Collision coverage is not the same though.

The value of a vehicle drops over the course of time and eventually the benefits from the insurance may not be worth the premiums when you look at the actual risk. The MSN article looks at a 1997 Civic and a 2001 Odyssey. For the sake of the example, the Civic will do. The collision premium for the car costs $77 with a deductible of $1,000. The car is valued at $1,750 and the collision insurance benefit is $750. By this math it would take just under 10 years before the premium costs would equal the potential insurance benefit of $750.

Unless you think you are going to get into multiple accidents over a 10-year period, the risk is low. The conclusion is that when a vehicle’s worth becomes less than the deductible then it is ok to drop collision coverage because you will save money in the long run and not protect a vehicle that is not worth the cost.

How to purchase collision coverage?


Whether you are shopping for a new auto insurance policy all together or you are just considering adding collision coverage to your existing car insurance policy you should contact your local independent auto insurance agent to discuss the kind of coverage you should have for your specific vehicle.

Collision coverage is not required in most cases but it can be required when leasing or financing a vehicle. The age of the vehicle will affect the value of it and may make collision coverage less effective, but so can the level of use of the vehicle. The less you drive the less likely you are of getting in an accident, decreasing the amount of collision coverage you need for your vehicle.

These are just a few of the factors that your independent auto insurance agent will discuss with you when deciding whether or not you need to purchase collision coverage and then deciding just how much coverage you need. The insurance agent will have multiple policy options for you to chose from, assuring that you are able to find a affordable plan that first your needs and keeps you protected in case of an accident.

Other Enhanced Insurance articles related to Car Insurance Coverage:

What Is a Car Insurance Deductible

What Is Personal Injury Protection Coverage

What Is Medical Payments Coverage

What Is Underinsured Motorist Protection

What Is Uninsured Motorist Protection

What Is Rental Car Insurance Coverage

What Is GAP Coverage?

How Much Is GAP Insurance?

Property Damage Coverage

Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.

While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.

See car insurance infographic >