What Is Collision Coverage?

Last Updated on

Collision coverage is pretty easy to understand. It’s coverage for damages to your car caused by an impact with another car or object. It covers damage to your vehicle in a number of situations. If you hit another vehicle, for example, this type of coverage would cover the damage to your car. If you skid out on a wet road and hit a tree, collision coverage would take care of repairing your car – minus the deductible of course.

Collision coverage is an optional coverage, but if you lease or finance your car, your bank may require you to carry it.
Collision and comprehensive coverage work together to cover a whole range of problems and help to fix (or replace) your car.

collision coverageQuick Facts

  • Comprehensive and collision coverage can repair or replace your car and offer people peace of mind
  • These are usually optional unless you’re leasing or financing your car
  • You can choose the deductible you pay, which will affect your premium
  • Your coverage limit is maxed out at the actual cash value of your vehicle

Collision coverage can help repair or replace your car you crash into another object or another vehicle, or if you roll it over. This type of coverage is meant to fix up or replace your car after a wreck.

Now, property damage liability coverage is the type of coverage that pays for damage to the other person’s car.

Do You Need Collision Coverage?

As noted before, if your car isn’t paid off, your lender or leaseholder will probably require you to get collision coverage. If you don’t buy at least the minimum amount of collision coverage mandated by your lender or lessor, they will buy it for you. This is referred to as “force-placed” insurance, and the price will be rolled into your loan or lease. The premiums on this type of insurance can cost a whole lot more than if you go through your own insurer. Furthermore, coverage is often more limited. For instance, a lot of force-placed plans come with liability insurance coverage. Since liability insurance is usually mandated by your state, you could have your license suspended if you only had this type of plan. So, it’s a good idea to purchase your collision insurance policy if you need to do so.

Buy Collision Coverage If You Could Never Afford To Replace Your Car

Purchase collision coverage if you couldn’t afford to replace your car. Imagine someone darts in front of your car. You freak out, swerve, and hit a telephone pole, wrecking your car. Could you afford to replace your car? If you couldn’t afford to replace it, think about purchasing collision coverage. Purchasing even a basic policy could end up safeguarding your car and money.

Collision coverage is really important if your car is either new or very costly to repair. Your lender might require it if you took out a loan to get the car.

For an older or cheaper car, though, it probably doesn’t make much sense to purchase coverage because the cost can quickly add up to more than the vehicle is worth. You’re not legally required to purchase collision coverage. It is up to you whether you think you need it.

Keep in mind that collision coverage only covers damage to your own vehicle; it won’t provide coverage if you damage someone else’s car. That type of insurance – called property damage insurance – is part of your liability coverage, which is mandated for licensed drivers in nearly all states.

It basically works like this: If you’re the at-fault driver in an auto accident and damage both your car and the other person’s car, your collision coverage will pay to repair your car, and your property damage coverage will pay to repair their car.

Debating Your Deductibledo you need collision coverage

Also, think about the size of the deductible you’re willing to go with. If your deductible is big (most insurance companies offer deductibles that range from $250 to $1,000), your premium won’t be as high. If you’re in a car crash, that deductible must be paid before you can get your car repaired.

So, go with a deductible you can afford and compare the premiums. Would you rather pay a little more each month to avoid paying a big deductible? If you have a great driving record and insurance claims history, the lower your deductible (and premiums) will be.

The cost will vary widely depending on many factors, including your car’s model, age, how much it’s worth currently, your age, and your gender.


Collision coverage is a good idea because almost every driver will get into a wreck at some point. Many people get into several collisions over the course of their lives. Younger drivers should certainly have collision coverage.

Back to Top