How Much Collision Coverage Do I Need?

Last Updated on November 25, 2025

Collision coverage pays to repair or replace your vehicle if you hit another car, strike an object, or roll over. It’s optional in most states, but if you finance or lease your vehicle, your lender will almost always require it.

Since you don’t choose a specific “amount” of collision coverage, the real question is whether you need the coverage at all—and which deductible makes the most sense for your budget.

Key Takeaways:

• A deductible between $500 and $1,000 works for most drivers, balancing premium cost with out-of-pocket affordability.
• Collision coverage pays for repairs to your car after an at-fault crash, and insurers cover up to your vehicle’s actual cash value (ACV).
• Whether you need it depends mainly on your car’s value, your deductible, and how much financial risk you can comfortably take on.
• Collision is usually worth keeping for vehicles worth more than $6,000–$8,000; it’s often not cost-effective for cars worth under $3,500.

What Collision Coverage Pays For

Collision coverage includes:

• Damage from hitting another vehicle
• Damage from hitting objects (guardrails, curbs, poles, fences, etc.)
• Single-car accidents such as rollovers
• Repairs or a payout up to the vehicle’s actual cash value (ACV)

It does not cover theft, weather damage, fire, vandalism, or injuries. Those are covered by other insurance types.

How Much Collision Coverage Do You Need?

Collision doesn’t come in dollar amounts. Your insurer pays up to your car’s ACV, and you choose a deductible. Whether you need the coverage depends on your vehicle’s value, your risk level, and your financial ability to pay for repairs yourself.

1. Check How Much Your Car Is Worth

Your car’s value plays the biggest role in deciding whether collision is worthwhile.
Use tools like:

• Kelley Blue Book
• Edmunds
• NADA Guides

General guidelines:

• Car worth more than $6,000–$8,000: Collision is usually worth carrying.
• Car worth $4,000–$6,000: Collision may be worthwhile depending on premium cost.
• Car worth under $3,500: Collision is often not cost-effective.

2. Choose a Deductible That Matches Your Financial Comfort

Most insurers offer collision deductibles from $250 to $2,500, but the most common choices fall between $500 and $1,000.

• $500 deductible: Balanced option for most drivers.
• $1,000 deductible: Lower premiums but more out-of-pocket if you file a claim.
• $1,500–$2,500 deductible: Good for older cars where you want coverage but want the lowest premium possible.
• $250 deductible: Offers the least out-of-pocket per accident but comes with higher premiums.

The right deductible depends on how much you can comfortably afford to pay out of pocket.

3. If You Finance or Lease, You May Have Limited Options

Most lenders require:

• Collision coverage
• A deductible within a certain range (often $500–$1,000, but varies)
• Gap insurance for newer financed vehicles

If you lease or finance your vehicle, dropping collision is rarely allowed until the loan is paid off.

4. Consider Your Driving and Accident Risk

Keep stronger collision protection if:

• You drive in heavy traffic or accident-prone areas
• You have a long daily commute
• You frequently park in tight or high-traffic areas
• Your car has expensive parts (luxury models, hybrids, EVs)
• You don’t have enough savings to cover a major repair

Higher risk = more reason to keep collision.

5. Compare Your Collision Premium to Your Maximum Payout

A useful rule of thumb:

• If collision premiums cost more than about 8–10% of your car’s value per year, the coverage may not be worth it.

Example:

• Annual collision premium: $400
• Car value: $3,500
• After a deductible, your maximum payout might be under $3,000

If the yearly premium is high compared to the potential payout, consider dropping the coverage.

When It Makes Sense to Drop Collision Coverage

You may want to drop collision if:

• Your car is worth under $3,000–$3,500
• Your deductible is close to the car’s actual value
• Your premium is high relative to the car’s worth
• You could afford to replace your vehicle out of pocket
• You drive infrequently or mostly at low risk times/locations

Many drivers drop collision coverage once their car reaches an older age or lower value.

When You Should Keep Collision Coverage

You should keep collision if:

• Your car is worth $6,000 or more
• You recently purchased or financed your vehicle
• You depend heavily on your vehicle and can’t afford to be without it
• You live or drive in high-risk areas
• You couldn’t comfortably pay for major repairs or a vehicle replacement

Quick Collision Coverage Recommendation Chart

Bottom Line

You don’t choose a specific “amount” of collision coverage—your insurer pays up to your vehicle’s actual cash value after you pay your deductible. Your decision is whether the coverage is financially worthwhile based on your car’s value, your personal risk, and your ability to pay for repairs or replacement yourself.

Collision is most valuable for newer or mid-value vehicles, financed vehicles, and drivers who can’t afford a major unexpected repair bill. It becomes less useful as your car gets older, cheaper, and less expensive to replace.