What Does Collision Auto Insurance Cover?

Do you want to buy a new car or are you an owner wondering what auto collision insurance covers? Collision auto insurance is one of those must-have policies for car owners. While it’s not required by law, it is often necessary if you have a lease or loan on your vehicle.

Even if it’s optional for some, it offers invaluable peace of mind by covering the repair or replacement of your vehicle if you’re involved in an accident. But what exactly does collision insurance cover, and is it worth adding to your policy?

In this guide, we’ll break down how collision insurance works, what it covers, and what factors you should consider before adding it to your coverage plan.

Understanding Collision Auto Insurance

Collision insurance is specifically designed to cover damage to your vehicle caused by a collision, whether it’s with another car, a stationary object like a fence or pole, or even a road hazard.

In the event of an accident, your insurance company will cover the cost of repairing or replacing your car up to the car’s actual cash value, minus your deductible.

Key takeaway: If you hit something or someone hits you, collision insurance helps cover the cost of getting your car back in shape.

What Does Collision Insurance Cover?

Let’s break down the specific situations where collision insurance steps in to help:

1. Accidents with Another Vehicle If you’re in a crash with another vehicle and you’re at fault, collision insurance will cover the cost of repairing your car. It doesn’t matter whether you hit another car on the highway or someone bumps into you in a parking lot—if a collision occurs, your policy will kick in.
2. Single-Car Accidents Have you ever had the unfortunate experience of hitting a guardrail, mailbox, or tree? In a single-car accident like this, collision insurance will cover the cost of repairs. Even if no other vehicle is involved, your policy helps get your car back on the road.
3. Accidents Involving Stationary Objects Accidents aren’t always about colliding with another vehicle. If you accidentally drive into a wall or pole, or even something more unusual like a fence or a garage door, your collision insurance has your back.
4. Rollovers If your car rolls over in an accident, which can happen more often with taller vehicles like SUVs or trucks, collision insurance will cover the damages to your vehicle. Rollovers can cause extensive damage, and without insurance, those repair costs could be astronomical.
5. Damage from Potholes Hitting a pothole can sometimes feel like you’ve collided with a small crater. These road hazards can do serious damage to your suspension or tires, and in some cases, even lead to more severe issues. Collision insurance will cover these repairs as well.

Note: It’s important to remember that collision insurance doesn’t cover damages to other people’s vehicles or property, nor does it cover injuries to anyone in the accident (you or others). For that, you’ll need other forms of coverage, such as liability insurance and personal injury protection.

What Collision Insurance Doesn’t Cover

Collision insurance is highly focused on covering your car’s damage in specific collision-related incidents, but it doesn’t cover everything. Here’s what it doesn’t protect against:

1. Damage From Natural Disasters If your car is damaged by a flood, hurricane, hail, or other natural disaster, collision insurance won’t cover the repairs. For these types of events, you’ll need comprehensive insurance.
2. Theft or Vandalism If your car is stolen or vandalized, you’re out of luck with collision insurance. Comprehensive coverage is what you’ll need to handle these unfortunate events.
3. Mechanical Failures Routine wear and tear, mechanical breakdowns, or tire damage not related to an accident are not covered by collision insurance. Extended warranties or a mechanical breakdown insurance policy may cover these.
4. Medical Bills Collision insurance doesn’t cover medical costs for you, your passengers, or anyone else involved in the accident. You would need personal injury protection or medical payments coverage for that.
5. Damage to Another Vehicle While collision insurance covers your car, it won’t help pay for damages to someone else’s vehicle or property. This is where liability insurance comes into play.

Key takeaway: While collision insurance is great for your vehicle’s damage in a crash, you’ll need other coverage like comprehensive, liability, and personal injury protection for a well-rounded policy.

The Role of Deductibles

Your deductible is the amount you have to pay out of pocket before your insurance company steps in to cover the remaining costs of the repair. Common deductibles range from $250 to $1,000, and the choice is usually yours when setting up your policy.

If you have a lower deductible, you’ll pay less when an accident happens, but your monthly premium will be higher. If you opt for a higher deductible, your premium goes down, but you’ll pay more out of pocket after an accident.

Example: Let’s say you’re in an accident that causes $5,000 worth of damage, and your deductible is $500. You’ll pay $500, and your insurance company will cover the remaining $4,500.

Should You Get Collision Insurance?

Now that you understand what collision insurance covers and what it doesn’t, the big question is: should you get it? Here are a few factors to consider:

1. The Age and Value of Your Car If your car is newer and worth a lot of money, collision insurance can be a wise investment. However, if you drive an older car that isn’t worth much, the cost of coverage might exceed the value of the car. In these cases, it may be more cost-effective to set aside savings for repairs rather than paying for collision insurance.
2. Your Driving Habits If you do a lot of city driving, where accidents are more likely due to congestion and stop-and-go traffic, collision insurance could save you from a financial headache. On the other hand, if you live in a rural area with less risk of collisions, you may not need it as much.
3. Your Financial Situation If you can’t afford to pay for costly repairs or replace your car out of pocket, having collision insurance could provide valuable peace of mind. However, if you have enough savings to handle repairs without insurance, you may not need it.

Final Thoughts

Auto collision insurance is designed to protect your car from damages related to accidents, whether you hit another vehicle, a stationary object, or experience a rollover. While it’s not required by law, having it can save you thousands of dollars in repair costs if you’re involved in an accident. Before you decide whether to add collision insurance to your policy, consider the value of your vehicle, your driving habits, and your financial situation.

For many, it’s a smart choice that offers peace of mind and valuable protection on the road. But for others, especially with older vehicles, it may not be worth the added expense.

In the end, the decision to get collision coverage comes down to weighing the risks and costs. If you think you’d be hard-pressed to pay for repairs out of pocket after an accident, it’s worth considering collision insurance as a financial safeguard.