What Is Collision Coverage? Definition and How it Works

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What is Collision Coverage

If you own a car, you may have heard of collision coverage. But what is collision coverage, and why do you need it? In this article, we will explain what collision coverage is, how it works, what it covers, and how much it costs.

What Is Collision Coverage?

Collision coverage is a type of car insurance that pays for the repair or replacement of your car if it is damaged in an accident with another vehicle or an object, such as a fence, pole, or guardrail. It can also pay for damage caused by potholes and rolling cars. Collision coverage is non-compulsory in most states, meaning that you can choose whether to add it to your car insurance policy or not. However, if you have a car loan or lease, your lender or leasing company may require you to have collision coverage until you pay off your loan or end your lease.

How Does Collision Coverage Work?

Collision coverage works by reimbursing you for the cost of fixing or replacing your car after an accident, minus your deductible. Your deductible is the amount of money you have to pay out of your own pocket before your insurance company pays the rest of the claim. For example, if you have a $500 deductible and your car repair costs $2,000, you will pay $500 and your insurance company will pay $1,500. You can choose the amount of your deductible, usually between $0 and $2,000, depending on your preference and budget. The higher your deductible, the lower your premium, and vice versa.

Collision coverage only pays for the actual cash value of your car, which is the market value of your car in its current condition (pre-accident). This means that if your car is totaled, meaning the cost of repair is more than the actual cash value of your car, your insurance company will only pay you the actual cash value of your car, not the amount you paid for it or the amount you owe on it. For example, if you bought your car for $20,000 and you still owe $15,000 on your loan, but your car is only worth $10,000 at the time of the accident, your insurance company will only pay you $10,000, and you will have to pay the remaining $5,000 on your loan yourself. To avoid this situation, you may want to consider gap insurance, which pays the difference between the actual cash value of your car and the amount you owe on your loan or lease.

Collision coverage does not pay for the damage or injuries of the other driver or passengers, or the damage to the other driver’s car or property. To cover these expenses, you will need liability insurance, which is required by law in most states. Collision coverage also does not pay for the damage or injuries caused by events other than collisions, such as theft, fire, vandalism, or hitting an animal. To cover these expenses, you will need comprehensive insurance, which is usually sold together with collision insurance.

To use your collision coverage, you need to file a claim with your car insurance company, and provide them with the details of the accident and the proof of your damage, such as your repair estimates, photos, or invoices. Your car insurance company will then review your claim and pay for your damage, up to your policy limit and after your deductible, if any.

What Does Collision Coverage Cover?

Collision coverage covers the following situations:

  • You hit another car or another car hits you, regardless of who is at fault.
  • You hit an object, such as a fence, pole, or guardrail.
  • Your car is damaged by a pothole or a road hazard.
  • Your car rolls over or flips.
  • Your car is damaged by a hit-and-run driver, and you do not have uninsured/underinsured motorist property damage coverage.

Collision coverage does not cover the following situations:

  • Damage or injuries to the other driver or passengers, or the other driver’s car or property. You will need liability insurance to cover these expenses.
  • Damage or injuries caused by events other than collisions, such as theft, fire, vandalism, or hitting an animal. You will need comprehensive insurance to cover these expenses.
  • Damage or injuries caused by intentional or criminal acts, such as road rage, DUI, or fraud. You will not be covered by any insurance and may face legal consequences.
  • Damage or injuries caused by normal wear and tear, mechanical breakdown, or maintenance issues. You will have to pay for these expenses yourself or use your warranty or service contract, if applicable.

How Much Does Collision Coverage Cost?

The cost of collision coverage depends on several factors, such as your car’s value, your deductible, your driving record, and your location.

According to my research, the average annual cost of collision coverage in the United States is $381. However, this is just a national average and your own rate may vary significantly. For example, the average annual cost of collision coverage in Colorado is $377.62, while the average annual cost of collision coverage in Florida is $282.96.

One of the main factors that affects the cost of collision coverage is your deductible, which is the amount you pay out of pocket before your insurance covers the rest. The higher your deductible, the lower your premium, and vice versa. Like my i mentioned above, if you have a $500 deductible and your car repair bills after an accident are $3,000, you will get an insurance check for $2,500 ($3,000 – $500 = $2,500). However, if you have a $1,000 deductible, you will get an insurance check for $2,000 ($3,000 – $1,000 = $2,000).

Another factor that affects the cost of collision coverage is your car’s value. The more expensive your car is, the more it will cost to repair or replace it, and the more you will pay for collision coverage. For example, if you drive a 2024 Toyota Corolla, which has an average market value of $20,000, you will pay less for collision coverage than if you are driving a 2024 BMW 5 Series, which has an average market value of $55,000.

Other factors that affect the cost of collision coverage include your driving record, your credit score, your age, your gender, your marital status, and your location. Generally, the safer and more responsible you are as a driver, the lower your collision coverage rate will be. For example, if you have a clean driving record, a good credit score, and a low-risk profile, you will pay less for collision coverage than if you have a history of accidents, a poor credit score, and a high-risk profile.

The best way to find out how much collision coverage will cost you is to compare quotes from different insurance companies. You can use online tools such as Compare.com e.t.c or services to get personalized quotes from multiple insurers in your area. You can also adjust your deductible and coverage level to see how they affect your rate.



We hope you enjoyed this article and learned something new. If you have any questions or feedback, please let us know in the comments below, we are here to help you. Thank you for reading!


1 Comment

Will Insurance Pay for Rental Car During Repairs · May 17, 2024 at 8:26 am

[…] claim. A covered claim is an incident or event that is covered by your insurance policy, such as a collision, theft, vandalism, or fire. Rental reimbursement coverage is not automatically included in your […]

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