Collision insurance pays to repair or replace your car if you hit another vehicle or object
Collision insurance is optional coverage that reimburses you for damage to your own vehicle when you collide with another car, a tree, a guardrail, a pothole, or any other object. It does not cover damage from weather, theft, or accidents caused by someone else's uninsured vehicle — those fall under different coverage types. Collision pays regardless of who caused the accident, though your insurer may pursue the other driver's insurance company afterward to recover costs.
Most states do not require collision insurance, but if you have a car loan or lease, your lender almost certainly does. The coverage comes with a deductible — typically $500 or $1,000 — meaning you pay that amount out of pocket before the insurer covers the rest. If your repair bill is $3,200 and your deductible is $500, collision pays $2,700.
Key Takeaways
- Collision insurance covers damage to your car from hitting another vehicle or object, but not from weather, theft, or uninsured drivers.
- You choose your deductible when you buy the policy, and you pay that amount before the insurer covers repairs.
- Lenders require collision on financed or leased vehicles; owners of paid-off cars can choose whether to carry it.
- The insurer may pay for repairs at a shop of your choice, or may offer a cash settlement if the car is totaled.
- Collision does not cover medical bills or liability for injuries you cause — that is a separate coverage called liability insurance.
How collision insurance pays for repairs
When you file a collision claim, the insurer assigns an adjuster who inspects the damage and estimates repair costs. The adjuster may use a damage assessment tool like Xactimate or may work with a repair shop to determine what needs fixing. Once the estimate is approved, you can usually take your car to any repair shop you choose — you are not locked into the insurer's preferred shop, though some insurers offer discounts if you use their network.
The insurer pays the repair shop directly in most cases, and you pay your deductible at the time of service. If repairs cost less than expected, the insurer pays only the actual cost plus your deductible. If the damage is so severe that repair costs exceed the car's current market value, the insurer declares the car a total loss and pays you the vehicle's actual cash value minus your deductible. You then own the salvage, which the insurer may sell or allow you to keep.
When collision insurance does not explore
Collision does not cover damage from weather events like hail, flooding, or high winds — that is comprehensive insurance. It does not cover accidents involving an uninsured or hit-and-run driver unless you carry uninsured motorist property damage coverage, which is separate. Collision also does not cover medical bills for you or your passengers, or liability for injuries you cause to others — those are covered by liability insurance and medical payments coverage.
If you cause an accident and the other driver sues you for damages, your liability insurance pays their claim, not collision. Collision only reimburses you for damage to your own vehicle. If you are hit by an uninsured driver and have no uninsured motorist coverage, you would need to sue the other driver directly to recover costs, or pay out of pocket.
Deductible choices and how they affect your premium
When you buy collision insurance, you select a deductible amount. Common options are $250, $500, $750, and $1,000, though some insurers offer lower or higher amounts. A higher deductible lowers your monthly premium because the insurer takes on less financial risk. A $1,000 deductible might cost $40 per month, while a $250 deductible for the same car might cost $65 per month.
The trade-off is straightforward: lower deductible means higher premium but less money out of pocket when you file a claim. Higher deductible means lower premium but more you pay when damage occurs. If you have an emergency fund and rarely file claims, a higher deductible can save money over time. If you cannot afford a large out-of-pocket expense, a lower deductible protects your budget.
Collision insurance for financed and leased vehicles
If you have a car loan, your lender holds a lienholder interest in the vehicle and requires you to carry collision insurance as a condition of the loan. The lender wants to may support the car can be repaired or replaced if damaged, protecting their investment. Your insurance policy names the lender as a loss payee, meaning if the car is totaled, the insurer pays the lender first to cover the remaining loan balance, then pays you any surplus.
Leased vehicles have the same requirement — the leasing company requires collision coverage to protect the car they own. If you total a leased car and have no collision insurance, you are liable for the full replacement cost, which can be substantial. Once you pay off a car loan or return a lease, collision becomes optional, and you can drop it if you choose.
Comparing collision to other damage coverage
Collision covers damage you cause by hitting something. Comprehensive insurance covers damage you do not cause — theft, weather, vandalism, animal strikes, and falling objects. Uninsured motorist property damage covers damage from a hit-and-run or uninsured driver. Liability insurance covers damage you cause to someone else's property or injuries you cause to others.
Most drivers who carry collision also carry comprehensive, since both are inexpensive relative to the protection they offer. If you have a newer car worth $20,000 or more, both make financial sense. If you have an older car worth $5,000 or less, the cost of collision and comprehensive premiums may exceed what you would recover in a claim, making them less cost-effective. Your lender's requirements override this calculation if you have a loan.
What happens if you do not have collision insurance
If you cause an accident and have no collision insurance, you pay for all repairs out of pocket. If the damage is severe, this can mean thousands of dollars in unexpected expense. If you cannot pay, the repair shop may place a lien on your vehicle, preventing you from selling or trading it until the bill is settled. The other driver's liability insurance does not cover your own car — it covers their claim against you.
If you are hit by another driver who has insurance, you can file a claim against their liability coverage to recover repair costs. This process is slower than using your own collision insurance and requires proving the other driver was at fault. If the other driver is uninsured or cannot be found, you have no recovery path unless you carry uninsured motorist property damage coverage.
Frequently Asked Questions
Does collision insurance cover accidents I cause?
Yes. Collision covers damage to your car regardless of fault. If you hit a parked car, a tree, or a guardrail, collision pays for repairs after you pay your deductible. Your liability insurance would cover the other vehicle's damage if you hit someone else's car.
What if I hit a pothole and damage my wheel?
Collision covers pothole damage in most states, though some insurers exclude it. Check your policy or call your insurer to confirm. If collision does not cover it, comprehensive sometimes does, depending on how the damage is classified.
Can I choose my own repair shop?
Yes. You can take your car to any repair shop you want. Some insurers offer discounts if you use their preferred network, but they cannot force you to use a specific shop. Get the repair estimate approved by your insurer before work begins.
What if my car is totaled — do I get the full value?
You get the actual cash value of the car at the time of the accident, minus your deductible. Actual cash value is what the car was worth on the used market, not what you paid for it or what you owe on a loan. If you owe more than the car is worth, you are responsible for the difference.
Does collision cover medical bills?
No. Medical bills are covered by medical payments coverage or personal injury protection, which are separate from collision. Collision only covers damage to your vehicle, not injuries to you or your passengers.