What Collision Insurance is and What it Covers – Credible

Collision insurance covers damage to your car if you’re involved in an accident with another vehicle or object.
Janet Berry-Johnson

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Your auto insurance policy is made up of several different types of coverages that protect you financially from property damage or injuries to yourself or others in an accident.
One of those coverages is collision insurance, which covers damage from accidents that occur while your car is in motion or parked.
Here’s what you need to know about collision insurance:

Collision insurance covers damage to your vehicle if you get into an accident. This applies if your vehicle is damaged while in motion or even if it’s parked.
Here are a few common examples of events when collision insurance coverage kicks in:

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Collision insurance helps pay for the cost of repairing your vehicle, minus your deductible.
For example, say you back into a mailbox, causing $1,500 of damage to your vehicle. Your auto insurance policy includes collision coverage with a $250 deductible. In that case, your insurance policy will pay $1,250 ($1,500 minus the $250 deductible) to cover the cost of repairs.
If your vehicle is damaged beyond repair, collision coverage can kick in, too. When a car is “totaled,” this means the cost of repair is greater than the value of the vehicle.

Collision insurance doesn’t cover everything. Here are some types of losses collision insurance excludes:

While most states require vehicle owners to carry some form of auto insurance, collision insurance isn’t required by state law.
If you own your vehicle, you can choose whether you carry collision coverage. However, it’s a different story if your car is leased or financed. Most car loans and leases require you to have comprehensive and collision insurance coverage.
Check Out: Full Coverage Car Insurance: What Does It Mean?

While there’s generally no required minimum amount of collision insurance for drivers, collision insurance does have a limit. Your collision coverage limit is typically your vehicle’s actual cash value (ACV) just before the accident, minus your deductible.

You may want to consider dropping collision coverage in the following situations:
Learn More: What Happens if You Get Into an Accident Without Car Insurance?

If you’re trying to decide whether you should carry collision insurance, here are a few pros and cons to consider:

When shopping around for car insurance, you might hear the term “full coverage.” Full coverage isn’t a type of coverage you’ll find on your policy’s declaration page. Instead, it refers to a combination of coverages: liability, comprehensive, and collision. It can also include uninsured/underinsured motorist coverage, and medical payments coverage or personal injury protection (PIP).
While your actual coverage will vary from policy to policy, here’s a look at what these types of insurance policies typically cover:
Having all coverages will protect you if you get into a car accident and:
This form of coverage will protect you if:
Collision coverage will protect you if:

If you have a car loan or a lease, you must have collision insurance. If you own your car, you’re not required to carry collision insurance, but you may want to. No matter how old your vehicle is, you can benefit from collision insurance, since this coverage isn’t based on age but on the vehicle’s value.

If you’re worried about the cost, rather than dropping the coverage entirely, consider these ways to save money on collision insurance:

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Disclaimer: All insurance-related services are offered through Young Alfred.
Janet Berry-Johnson is an authority on income taxes and small business accounting. She was a CPA for over 12 years and has been a personal finance writer for more than five years. Janet has written for several well-known media outlets, including The New York Times, Forbes, Business Insider and Credit Karma. In 2021, Canopy named her one of the Top 10 Influential Women in Accounting and Tax.
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