Auto collisions are an unfortunate and often unforeseen part of driving. While you can take steps to minimize the risk of accidents, you can never completely eliminate the possibility of a collision. That’s where auto collision insurance comes into play. In this comprehensive guide, we will walk you through what auto collision insurance is, how it works, and why it’s essential for protecting your vehicle and finances in the event of an accident.

What Is Auto Collision Insurance?

Auto collision insurance is a type of coverage that helps pay for the repairs or replacement of your vehicle if it’s damaged in a collision with another vehicle, object, or if it overturns. This coverage is typically optional but is highly recommended for those who want to protect their investment in their car and avoid significant out-of-pocket expenses after an accident.

How Auto Collision Insurance Works

  1. Coverage: Auto collision insurance covers damage to your own vehicle resulting from a collision, regardless of who is at fault. It doesn’t cover injuries to you or others involved in the accident, nor does it cover damage to the other driver’s vehicle. For these types of expenses, you may need additional coverage, such as liability or personal injury protection.
  2. Deductible: When you purchase collision coverage, you will choose a deductible amount. This is the portion of the repair or replacement costs you’ll be responsible for in case of a collision. Common deductible amounts range from $250 to $1,000 or more. A higher deductible usually results in lower premium costs, but it also means you’ll pay more out of pocket when making a claim.
  3. Claim Process: If you’re in an accident, you’ll need to contact your insurance company to initiate the claims process. You’ll provide details about the accident, and they will guide you through the necessary steps. Once your claim is approved, the insurance company will pay for the repairs or replacement of your vehicle, minus your deductible.
  4. Coverage Limits: Auto collision insurance policies have coverage limits, which is the maximum amount the insurance company will pay for the damage. If the cost of repairing or replacing your vehicle exceeds this limit, you’ll be responsible for the remaining expenses. It’s important to review and understand your policy’s coverage limits before purchasing.

Why Auto Collision Insurance Is Essential

  1. Vehicle Protection: If your car is relatively new or holds significant value, auto collision insurance is vital for safeguarding your investment. It ensures that you won’t have to bear the full financial burden of repairs or replacement in the event of a collision.
  2. Peace of Mind: Knowing you have collision coverage provides peace of mind while driving. You can navigate the roads with confidence, knowing that you won’t face crippling expenses if an accident occurs.
  3. Legal Requirements: While collision coverage is optional in most states, it may be required if you’re financing or leasing your vehicle. Lenders often mandate collision insurance to protect their investment in your car.
  4. Flexible Deductible Options: Auto collision insurance offers flexibility in choosing your deductible amount. You can tailor the coverage to your budget and risk tolerance.

What Does Collision Insurance Cover?

Here are some common claim situations and when they’re covered:

EventDoes Collision Insurance Cover It?
Damage to your car if you collide with an auto or an object such as a tree, building, or guard rail Yes
Your injuries after an accidentNo
The other driver’s injuries or car damage after an accident No
Car damage from a hit-and-run driver Maybe
Damage from overturning Yes 
Your car’s damage when the other driver is at fault or doesn’t have enough insurance Maybe 
Your car’s damage when you’re at faultYes
Car damage if you’re using your car for business purposesNo

Your collision insurance may even extend to cars that you borrow or rent in the U.S. and Canada. But it might not extend to truck or moving van rentals. Ask your insurer in advance.

How Does Collision Insurance Work?

Filing a claim under your collision coverage works much the same as making other claims.

Contact Your Insurance Company

Contact your insurer about the incident. Provide photos and information about the accident. Turn over any police or accident reports you may have. Ask your insurer or review your coverage to see whether you can get a rental while your car is being repaired. Find out whether you’ll have to pay a deductible.

Work With the Insurance Adjuster

Work with the adjuster, who looks into the facts of your claim and any damage to your car. Your collision insurance should step in to help repair the damage if you caused the accident.

Get Your Car Repaired or Accept a Check

Get your car repaired at a shop recommended by your insurer or at a shop of your choice. The insurance company may decide that repairing your car would cost more than its actual value. It would declare it a total loss in that case.

There are limits to your coverage for a totaled car. This is often the cash value of the auto. Cash value includes depreciation, or the decrease in value over time. It’s not what you paid for the car or what it would cost you to buy a new auto. The amount your insurer sends you won’t be enough to buy a brand new 2021 Honda Accord if your 2015 Honda Accord is totaled.

Collision Insurance and Deductibles

You must choose a deductible when you add collision insurance to your auto policy. This is the amount of money you pay first before your insurer pays the rest of the costs. It applies to each accident, unlike with a health insurance deductible. It’s more like a copay.

You can select from a variety of deductibles. Higher deductibles often lead to cheaper insurance premiums. You’re assuming more responsibility for any auto repair costs. Your deductible should be the most you could comfortably afford to pay out of your own pocket to repair your car after a mishap.

Raising your deductible from $500 to $1,000 could save you as much as 20% on your policy. But think about how that might impact you if there’s been $7,000 in damage:

DeductibleYou PayInsurance Pays
$0 deductible $0$7,000
$500 deductible $500$6,500
$1,000 deductible $1,000$6,000

The cost of your collision insurance depends on the type of car you drive. Makes and models of cars that tend to have a lot of claims or higher claim costs will often lead to higher annual coverage costs. Elite cars are expensive to repair or replace, while other cars may be associated with more severe bodily injury or death.

Do I Need Collision Insurance?

You will likely be required to include collision insurance on your auto policy if you’re leasing a car or borrowing money from a bank to buy one. The lender hopes to protect its collateral for the loan or financing. Your bank may add a higher premium to your loan until you get insurance again if you don’t buy insurance, or if you forget to renew your insurance or try to drop collision coverage.

Collision insurance is optional after the loan is paid off. You might want to add uninsured motorist coverage if you do drop collision coverage. This protects your car against damage from an uninsured driver, an underinsured driver, or a hit-and-run accident.

Collision Insurance vs. Comprehensive Insurance

Collision insurance covers damage if it’s caused by a collision between two objects, such as two cars, a car and a streetlight, or a car and a building. Comprehensive insurance covers your car damage from a non-collision incident, such as theft, vandalism, hail, or other weather-related circumstances. It covers incidents involving your window glass.

Collision InsuranceComprehensive Insurance
Required by auto loan lender or leasing companyProbablyProbably
Required by state lawProbably notProbably not 
Covers car damage from accidents and collisions with objectsYesNo
Covers car damage from theft, vandalism, and weather such as hailNoYes
Covers car damage if you collide with an animalCheck your policyProbably
Deductible YesYes
Compensates you based on the actual cash value of the carYesYes

Most insurers sell comprehensive and collision insurance together as a package deal. You might not be able to pick and choose which you’d like to include.


Auto collision insurance is a valuable safety net that protects your vehicle and finances in the unfortunate event of an accident. While it’s not legally required in most states, it’s a smart investment, especially if you own a valuable car or are financing it. Understanding how auto collision insurance works, choosing an appropriate deductible, and reviewing coverage limits will help you make an informed decision and drive with peace of mind. Remember that insurance needs can vary, so it’s always a good idea to consult with an insurance agent to tailor your coverage to your specific needs and budget.