Collision Insurance

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Updated August 9, 2020

What Is Collision Insurance?

Collision insurance is insurance coverage that helps to cover the costs to repair or replace an automobile after an accident.

A vehicle is typically covered if the insured driver is at fault and the damage occurred as a result of a collision with another automobile, an object such as a tree or traffic barrier, or an accident involving just the covered automobile such as a rollover.  

Collision insurance does not cover damage due to theft or vandalism, or if another driver is at fault.

How Does Collision Insurance Work?

Collision insurance has a deductible: an amount the insured must pay before the insurance coverage pays for repairs. The policy owner can choose the amount of the deductible.

Typically, a higher deductible will lower the premiums or the cost of the insurance, but will increase the cost that the insured is responsible for out of pocket. Lower deductibles result in higher premiums. The limit on the coverage is usually the depreciated value of the car.

If the cost of repairing the damage exceeds the depreciated value of the vehicle less the deductible, the vehicle is said to be “totaled.” In that case, the insurance company will pay out the policy limit amount (the depreciated value of the car) less the deductible. 

If your car is financed or leased, collision insurance is most likely required by the lender. Once the loan is paid off, collision coverage becomes optional.

What is the Difference Between Collision and Comprehensive Coverage?

The most defined difference between collision and comprehensive insurance comes down to what the driver could control in the course of the accident. 

Comprehensive coverage covers damage to a vehicle that is not the fault of a driver, either the insured or another driver. It covers damage due to things such as weather, animals, “acts of God,” theft, vandalism, and other disasters, that is, scenarios where the owner or driver has no control.

Collision insurance covers damages when you hit something with your car, that is, a situation caused by the driver.

Real Life Example

For example, a dangerous hurricane is forecast to come ashore near your home. You and your family evacuate in the family SUV; however, you leave your sedan in the garage. The storm causes massive flooding in your neighborhood which is not in a historic flood zone. Your garage is flooded and your car is damaged beyond repair.

Your comprehensive coverage should pay for the replacement of the sedan as you had no control over the events of the storm nor the historic flooding.

Returning home from your evacuation, an uninsured motorist rear ends your SUV in a traffic jam. The damage will require repairs. Your collision insurance will cover the repairs as the damage occurred during the operation of a motor vehicle.