Collision coverage explained: what it pays for and when

The short version

• Collision coverage pays to repair or replace your own car after a crash.
• It applies whether or not the accident was your fault, minus your deductible.
• It is separate from comprehensive, which covers non-crash damage like theft or hail.
• Lenders and leasing companies usually require it.

Collision coverage is one of the core pieces of an auto policy, and it does one specific job: it pays to repair or replace your vehicle when it is damaged in a collision. That includes hitting another car, striking an object like a guardrail or a tree, and single-car accidents such as a rollover.

What sets it apart is that it covers your own car. Liability coverage pays for damage you cause to other people and their property, but it does nothing for your vehicle. Collision fills that gap.

In short: collision coverage pays to repair or replace your own car after a crash, which liability coverage does not.

Collision coverage follows a straightforward set of rules once you understand a few terms.

• It pays regardless of fault. Whether the crash was your fault or not, your collision coverage can pay for your car. If another driver was at fault, your insurer may later recover its costs from their insurer.
• You pay a deductible. You choose a deductible, and the coverage pays the covered repair cost above that amount.
• It is capped at your car value. If repairs cost more than the car is worth, the insurer treats it as a total loss and pays the actual cash value of the vehicle instead of repairing it.

Because collision pays up to the actual cash value of your car, its usefulness is tied to how much your vehicle is worth. That is an important factor when you decide whether to carry it.

In short: collision pays for your car above your deductible, up to its actual cash value, whether or not the crash was your fault.

Collision is easy to confuse with the other coverages on an auto policy, but each covers something different.

• Collision covers damage to your car from a crash, whether with another vehicle or an object.
• Comprehensive covers damage to your car from things other than a collision, such as theft, fire, vandalism, hail, or hitting an animal.
• Liability covers injuries and property damage you cause to others, not your own car.

Together, collision and comprehensive are often what people mean when they say full coverage, added on top of the liability coverage that states require. Each has its own deductible and its own role.

In short: collision covers crash damage to your car, comprehensive covers non-crash damage, and liability covers harm you cause to others.

Whether you need collision coverage comes down to your car and your finances.

• Lenders and lessors require it. If you lease or finance your car, the lender or leasing company almost always requires collision coverage until the loan is paid off.
• Newer and higher-value cars benefit most. The more your car is worth, the more collision can pay after a crash.
• Older cars are a judgment call. Once a car value drops low enough, the coverage may pay little after a deductible, and some owners choose to drop it.

The decision to keep or drop collision on an older car depends on what the vehicle is worth and whether you could afford to replace it out of pocket. Please contact us to discuss your options.

In short: collision is usually required on leased or financed cars and most valuable on newer vehicles, while owners of low-value cars sometimes choose to drop it.

Choosing collision coverage mostly comes down to the deductible.

1. Weigh the deductible. A higher deductible lowers your premium but means you pay more out of pocket after a crash. A lower deductible does the opposite.
2. Match it to your car value. If your car is worth relatively little, confirm the coverage would pay enough after the deductible to be worth carrying.
3. Consider how you would replace the car. If losing your car would be a financial hardship, collision coverage is easier to justify.

Because the right deductible depends on your budget and your car, please contact us to discuss your options.

In short: pick a deductible you could comfortably pay, match the coverage to your car value, and weigh how hard it would be to replace the car on your own.