Collision coverage
What is collision coverage?
Collision insurance coverage is a type of auto insurance that helps pay for repairs or replacement if your vehicle is damaged in a collision with another car or object, regardless of who is at fault. It’s an optional coverage, but often required by lenders or leasing companies. If your vehicle is financed or leased, your lienholder may require you to have collision insurance coverage.
How does collision coverage work?
If you’re involved in an accident where your car hits another vehicle or object, such as a pole, a guardrail or rolls over, collision coverage can step in to cover the cost of repairs. After you pay your deductible, your insurance company pays the remaining repair costs up to the actual cash value (ACV) of your car.
What are the benefits of collision coverage?
Collision coverage helps pay for repairs after a crash, even if you're at fault. Whether you're at fault or not, you’re covered for costly repairs. It’s especially beneficial for newer vehicles, leased cars or financed vehicles and helps cover repairs so you can get back to driving.
What does collision coverage include?
Collision coverage typically includes damage from:
- Hitting another vehicle
- Single-car accidents (e.g., hitting a tree or fence)
- Rollovers
- Damage from potholes or road hazards (collision coverage includes damage caused by potholes)
It pays for repairs or the replacement value of your car, minus your deductible.
What does collision coverage exclude?
Collision coverage does not cover:
- Medical expenses (covered by personal injury protection or medical payments)
- Damage to another person’s vehicle (covered by liability insurance)
- Theft, vandalism or weather damage (covered by comprehensive insurance)
- Mechanical breakdowns or wear and tear
How much does collision coverage cost?
The cost depends on several factors, including:
- Your vehicle’s value
- Your driving history
- Your location
- Your deductible amount
But on average, you will pay $743 per year.
What is a collision coverage deductible?
A collision deductible is the amount you pay out of pocket before your insurance kicks in. Common deductible amounts range from $250 to $1,000. For example, if repairs cost $2,000 and your deductible is $500, your insurance company pays $1,500.
Collision coverage limits
Collision coverage pays up to your car’s (ACV), which is its market value minus depreciation. If your car is totaled, your payout will reflect this depreciated amount, not the price you originally paid. This means that the payout may not cover the full cost of replacing your vehicle, especially if it has significantly depreciated.
How to file a collision coverage claim
If you’re in an accident:
- Document the damage with photos
- File a police report if needed
- Notify your insurance carrier
- Submit the necessary claim forms and documentation
- Work with an adjuster and repair shop
Your insurance carrier will subtract your deductible from the payout. A VIU by HUB Advisor can help guide you through the process.
Do I need collision coverage?
Collision coverage isn’t legally required, but it may be mandatory if your car is leased or financed. If you own your car outright, it’s your choice. Consider your car’s value, your risk tolerance and whether you could afford repairs or a replacement out of pocket.
Not sure if collision coverage makes sense for your situation? A VIU by HUB Advisor can help you weigh the costs and benefits, especially if your vehicle is leased or financed. Many lenders require collision coverage.
Who should consider collision coverage?
Vehicle owners should consider collision coverage if:
- You lease or finance your vehicle (it’s often required)
- You own a newer or high-value vehicle
- You can’t afford to pay for repairs or a replacement out of pocket
- You drive in high-traffic or accident-prone areas
Collision vs. comprehensive insurance: what’s the difference?
| Feature | Collision insurance | Comprehensive auto insurance |
| What is covers | Collisions with vehicles/objects | Theft, vandalism, weather, animal hits |
| Fault requirement | Regardless of fault | Not fault-based |
| Examples | Hitting a car, pole or curb | Hail damage, hitting a deer, fire |
Most drivers carry both to make sure they have full coverage.
Real-life examples of collision coverage in action
- You back into a pole in a parking lot—collision covers the rear bumper repair.
- You hit a patch of ice, lose control and crash into a guardrail—collision covers the damage.
- Another driver sideswipes you and they don’t have insurance—collision may cover your costs after your deductible.
Each of these examples represents a covered collision under the policy, where the insurance compensates for damages incurred during an accident involving the policyholder.
Common myths about collision coverage
Myth 1: Collision and comprehensive are the same. Truth: They cover different types of damage. Collision covers crashes. Comprehensive coverage covers things like weather, theft, or animal damage.
Myth 2: If the other driver is at fault, you don’t need collision coverage. Truth: Not all drivers have insurance. Collision insurance protects you regardless.
Myth 3: Collision covers everything that happens to your car. Truth: Collision coverage only pays for damage caused by crashes, not theft, weather or vandalism
FAQs:
Is it better to have a $500 deductible or $1000?
Choosing between a $500 deductible and a $1,000 deductible depends on your financial situation and risk tolerance. A $500 deductible means you'll pay less out of pocket after an accident, but your insurance premiums will be higher.
Conversely, a $1,000 deductible lowers your premium costs but increases your out-of-pocket expenses if you file a claim. If you prefer lower monthly payments and can afford a higher cost in case of an accident, a $1,000 deductible might be better. If you want to minimize expenses after a claim and don't mind paying more monthly, choose the $500 deductible. Collision coverage provides protection against the costs of repairing or replacing your vehicle.
Sources:
https://www.insurance.com/auto-insurance/coverage/comprehensive-and-collision-auto-insurance.html