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At some point, every car on the road is going to hit something – a pothole, a tree, or another car. The damage from these collisions can be expensive, and that’s where collision car insurance comes in. It's a common type of auto insurance, but it doesn’t cover all types of damage to your vehicle, and it’s not something that every driver has to get. Here’s how to figure out if collision insurance is right for you.

Collision Car Insurance Definition

Collision car insurance is a type of auto insurance policy that covers damage to a car that results from a collision with another object. That means that if you drive your car into another car, a fence, a pole, or a tree, or if you roll or flip your car, collision insurance covers the damage. Collision insurance also covers damage to your car from a hit-and-run accident or if you’re in a collision in a no-fault state.

Note that collision insurance only covers damage to your car if it collides with another object. If you hit an animal or other living thing with your car, you’ll need comprehensive car insurance coverage to pay for the damages. Collision coverage also only provides coverage when it’s your car doing the colliding with an object. While collision coverage protects you if you hit a tree with your car, it won’t protect you if a tree falls and hits your car. It also doesn’t cover damage due to theft, weather, or natural disaster. For those types of damages, you again need comprehensive insurance and would make a comprehensive claim to your insurance company.

It’s important to stress that collision coverage only covers damage to YOUR car. If you hit another car, you’ll need liability insurance to cover damage to that car. By the same token, if you hit a fence, you’ll need collision insurance to cover the damage to your car and liability insurance to cover the damage to the fence. Collision insurance also doesn’t cover medical bills related to injuries you or another person suffers as a result of your car being in a collision. Collision insurance does not typically cover the cost of a rental car while your car is in the shop. It only covers damage to your car. If your car is damaged beyond repair, collision insurance pays you the cash value of your car.

Check out our guide on how car insurance works for a full rundown of types of car insurance and our guide on how much car insurance you need to figure out the coverage that’s right for you.

Comprehensive Car Insurance vs. Collision Car Insurance

You might think because you have comprehensive insurance coverage on your vehicle that you’re covered for everything. After all, that’s what comprehensive means. When it comes to car insurance, however, comprehensive has a more specific meaning.

While collision insurance covers damage to your car as a result of colliding with an object or another car, comprehensive insurance covers things that are outside your control. Think of it this way: Collision insurance covers you for the most common type of accident while you’re driving, and comprehensive coverage covers you for damage to your car not related to driving it. The addition of comprehensive coverage to other types of auto insurance policies is what makes your coverage truly comprehensive. Collision coverage protects you in case of a car accident, but tree branches, hail, theft, collisions with moose – you need comprehensive coverage to protect yourself there. You can learn more in our comprehensive car insurance guide.

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How to Use Collision Car Insurance

Using collision car insurance is the same as using most other car insurance policies. You purchase a policy from the insurer with a set deductible amount and set monthly premiums. The deductible amount is the amount of money you must pay before any insurance kicks in. Monthly premiums are the payments you make each month for the insurance coverage. 

Person photographing car accident with smartphone
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When your car is damaged in a collision, you file a claim with your insurance company, documenting the accident and the damage to your car. Depending on your policy, they may send an adjuster to estimate the cost of the damage. They may also require you to take your car to one of their contracted repair shops. They’ll pay for the repair, less your deductible. So, if your deductible is $500 and the damage is $2,000, you pay $500 and the insurance company pays $1,500. If that doesn’t seem like a great deal, consider this: If your car is damaged beyond repair, the insurance company will pay you the car's value (minus your deductible). That money will go a long way toward paying off the loan on your car or buying you a new one.

Who Needs Collision Insurance Coverage?

In most states, collision car insurance is optional coverage. Strictly speaking, you don’t have to buy it. However, if you lease or finance your car, your leasing company or lender will likely require that you have collision car insurance. That’s because while you're leasing or financing a car, you don’t technically own it (you never own a leased car, and when financing a car, you don’t own it until you pay off the loan). Leasing and car loan companies require collision insurance to protect their car while you drive it.

Collision insurance on a financed or leased car protects you as well. Let’s say you owe $20,000 on your car, and it’s damaged beyond repair in a collision. Without collision insurance, you’d have to pay the entire $20,000 you owe to the finance company. With collision insurance, you wouldn’t have to come up with the total amount.

According to the Insurance Information Institute, collision claims are the most common type of car insurance claim, and some of the most expensive (liability and bodily injury claims are the only ones that cost more). In 2015, collision insurance claims cost $3,434 on average, according to III, and collision claims are increasing as people drive more and roads are more congested.

A patch of ice or a second of inattention could be all it takes to send both your car and your finances into a tailspin. Also, if another car hits your car and you’re in a no-fault state, your collision insurance, not the other driver’s policy, will cover the damage. Without collision car insurance, you’re on the hook for the entire repair bill that results from a crash. If you own your car outright and the damage is minor (and you don’t mind driving a dented car) that might not be big deal. You can simply skip the repair shop and keep on driving. In many cases, however, the damage is likely to be too severe for you to continue driving the car safely. The wheels might be out of alignment, the doors might not latch, or your air bags may have deployed. In those cases, you’ll have to make a repair to keep driving. Without collision insurance, you’ll end up paying for the entire bill.

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How Much Does Collision Car Insurance Cost?

Several factors drive the price of collision insurance, but the main two are how expensive your car is to repair and how likely the insurance company thinks you are to have an accident. If you have an inexpensive car that’s easy to repair, the insurance company will have to pay out less if you make a claim. That lowers their risk and thus your monthly costs. Also, if you’re someone who falls into a low-risk pool of drivers – no accidents, no tickets, not too inexperienced, and who drives few miles each year – there’s less risk associated with covering you, which means lower costs. 

Car covered in cash
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Progressive Insurance reports that 71 percent of their customers have collision coverage, with an average deductible of $500 and an average cost of $63 per month on top of their other insurance coverage. Using those numbers as a starting point, let’s do some math to figure out if collision insurance is right for you.

Let’s say you have a collision that causes $3,434 worth of damage to your car (the average amount of a collision claim). With a $500 deductible, you must pay $500 toward the repair, and the insurance company must pay $2,934. In this example, it's clear that collision insurance helps quite a bit. Though you’re also paying $63 per month for that coverage, you’d need to sock away that money for nearly 47 months (that’s just under four years) to have the cash on hand to make the repair.

Here’s another scenario: You have a car that’s worth $20,000, and you also owe $20,000 on it. You're in an accident that damages the car beyond repair. With your $500 deductible, you pay $500 to your loan company, and the insurance company pays $19,500. At $63 per month for your premiums, you would have to save for 309 months (nearly 26 years) to have the cash on hand to pay the loan company without insurance.

Collision insurance really shows its value when you total your car. Still, there are a few scenarios where you might want to skip it. If you have a very inexpensive car, own it outright, and have the cash on hand to buy a new one, you might be OK to skip collision insurance and pay for any damages out-of-pocket. Say you have a car worth $2,000, you don’t owe money on it, and you can afford a new car on your own. You might choose to skip collision insurance. Using Progressive’s numbers again, with a $500 deductible, you’d only walk away with $1,500 if you totaled your car in a wreck, and you’d be paying $765 per year in premiums. It might make more sense to put what you’d spend on premiums in a savings account for a new car in case yours gets wrecked – assuming you have the self-discipline to do that.

How to Save Money on Collision Car Insurance

If you decide you need collision insurance, or your car lease or loan requires it, there are things you can do to lower your collision insurance policy premiums. Your collision insurance costs are determined by how expensive your car is to fix or replace and how likely you are to have a collision.

The first and easiest way to save on collision insurance is to drive a car that’s inexpensive and cheap to repair. A car that’s not particularly valuable won’t have high replacement costs, and that will keep your insurance premiums down. A car that’s cheap and easy to fix can also lower your out-of-pocket costs. You might think that going for a car with the latest collision prevention tech would help you save on collision insurance, but high-tech equipment won’t get you big insurance discounts, Most insurance companies don't offer lower rates for advanced safety features because there’s not enough data to prove the technology’s effectiveness. Plus, all the cutting-edge sensors that active-safety features like automatic braking or collision warning require add significantly to a vehicle’s repair costs.

You can also lower your collision car insurance premiums by going for a collision policy with a higher deductible. That can save you money each month, but keep in mind that if you do need to make a claim, you’ll have to come up with more cash. Showing your car insurance company that you’re at lower risk of having a collision is another way to save. Driving fewer miles each year and keeping your driving record clean are two easy ways to do that. You might also get a discount for taking extra driver training, bundling insurance policies, or by having a membership in an affinity group. You can read more about these in our car insurance discounts guide.

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