What Is Collision Insurance?

Collision insurance pays the cost of repairing or replacing your vehicle if it’s damaged by a collision with an object or another vehicle. Typically included in a standard auto insurance policy, collision insurance covers a range of risks. However, you may be able to opt out of collision coverage to lower your insurance premiums.

What Does Collision Insurance Cover?

Collision insurance covers damage to your vehicle caused by:

• Colliding with another vehicle
• Colliding with an object, such as a tree, building, guard rail, or mailbox
• Hitting a pothole
• Flipping your car

What Doesn’t Collision Insurance Cover?

There are several things collision insurance doesn’t cover, including:

• Liability claims
• Medical expenses
• Vehicle theft
• Damage to another driver’s car
• Damage to your car when you aren’t driving
• Wear and tear on the car
• Mechanical breakdowns
• Aftermarket vehicle modifications

Is Collision Insurance Required by Law?

States typically require drivers to carry a minimum amount of liability insurance, but they don’t require collision insurance. However, if you lease or finance a car, the leasing company or lender typically requires you to carry collision insurance until the lease ends or the loan is paid off.

How Much Collision Insurance Do I Need?

You can’t choose how much collision coverage to buy. The amount of coverage is determined by your car’s value. To cut the cost of car insurance premiums, you can choose a higher deductible. The higher your deductible, the lower your premiums.

How Much Does Collision Insurance Cost?

Nationwide, the average cost of collision insurance is $370.73 annually. However, costs can vary widely depending on several factors, including:

• Your location
• The kind of car you have
• The amount of coverage you have
• Your driving record
• Your annual mileage

Is Collision Insurance Worth It?

If your car isn’t leased and has no outstanding loan, you can choose to buy collision insurance or not. You may not need collision insurance if:

• Your car is older and not worth much
• You can afford to repair or replace the car without an insurance payout

On the other hand, collision insurance may be a good investment if:

• You’d struggle to pay for car repairs after a collision
• You don’t have the money for a new vehicle

The Bottom Line

Going without collision insurance can save you a few hundred dollars a year on car insurance. Is that savings worth the risk of footing the bill for car repairs or a new car yourself? Only you can decide. There are other ways to save on car insurance, such as comparing quotes from multiple insurance companies, shopping for insurance every year, looking for insurance discounts, and raising your deductible.

Maintaining good credit may also help you save on car insurance. In some states, car insurance companies can check your credit-based insurance score when setting premium rates. Before you shop for car insurance, check your credit report and credit score. Taking steps to improve your credit score could cut your car insurance costs.

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