Nearly all states require car owners to carry auto insurance. In these states, drivers must carry liability policies that compensate victims for medical expenses and property damage caused by the policyholder’s actions behind the wheel.
No states require collision coverage or comprehensive coverage. But that doesn’t mean they have no value. On the contrary, both types of coverage can significantly reduce out-of-pocket repair costs on newer, higher-value vehicles.
Neither collision nor comprehensive coverage is free, of course. Adding either (or both) will increase your auto policy’s premiums. That makes it all the more important to understand whether they’re worth carrying.
To determine whether collision insurance makes sense for you, you first need to understand what it is, what it covers and excludes, and the factors that may affect its premium costs.
Collision Coverage: What It Is and What It Covers
Collision auto insurance coverage pays for vehicle repair and replacement costs caused by rollovers or collisions with other vehicles or stationary objects. Incidents that may result in damage covered by a collision policy include:
- Collision With Another Vehicle. Your collision coverage should kick in after a crash involving another vehicle or vehicles. It doesn’t matter whether the other vehicle is stationary (for instance, parked or waiting at a light) or in motion. Collision coverage applies in either case.
- Collision With a Stationary Object. Collision insurance covers damage resulting from run-ins with stationary nonvehicle objects, such as fences, buildings, trees, and embankments. Generally, your vehicle needs to be in motion for collision coverage to apply. Collision insurance doesn’t cover damage caused by a tree falling on a parked, vacant car, for instance.
- Rollover or Fallover. Collision insurance covers damage resulting from single-vehicle crashes where the vehicle rolls or falls over. Collision coverage applies even if the vehicle comes to rest on its own, rather than as a result of hitting a stationary object.
What Collision Coverage Doesn’t Cover
Collision car insurance does not protect drivers against financial or legal liability for damage, injury, or liability resulting from:
- Collision With an Animal. Collision insurance doesn’t cover expenses resulting from vehicle-on-animal collisions. If you hit a deer on the open road and no other vehicles are involved in the crash, you probably won’t be eligible for compensation under your collision policy. Instead, you’ll need to file a comprehensive claim — if you have comprehensive coverage, that is.
- Other Animal-Related Damage. Collision insurance doesn’t cover animal damage to stationary vehicles either. That’s also the purview of comprehensive coverage.
- Noncollision Damage Caused by Objects. Damage caused by falling or flying objects isn’t covered by collision insurance, even when it occurs while the vehicle is in motion. Common examples include windshield damage from a high-speed pebble kicked up by the vehicle ahead and body damage caused by unsecured highway debris.
- Weather-Related Damage. Collision coverage does kick in after crashes in which weather plays a role, such as rollovers or multicar crashes on icy roads. But it doesn’t cover weather-related damage to stationary or moving vehicles — say, roof damage caused by wind-loosed tree branches or hail. Such damage is covered by comprehensive insurance.
- Damage Caused by Fire or Explosion. Vehicle fires or explosions not directly caused by a collision or rollover are not covered by collision insurance. This rule may apply even if the vehicle fire subsequently causes a covered crash. Your insurer might cover the damage caused by the impact but not the fire damage to the engine compartment.
- Theft and Vandalism. Collision coverage does not cover damage or injury resulting from theft or vandalism. This applies even if the damage is due to a collision, such as when a car thief crashes into an object or vehicle while fleeing.
- Damage Caused by Negligence. Your claim may be denied if your negligence or inattentiveness was to blame, even if the damage would typically be covered by collision insurance. For example, if you park on a steep incline with the parking brake disengaged and your vehicle rolls down the hill, striking a lamppost, your insurer might not cover the resulting damage to your vehicle.
- Damage Due to Your Own Participation in Criminal Activity. If you strike another vehicle or roll over while fleeing police, for example, the resulting damage won’t be covered by your collision policy.
Many drivers mistakenly assume collision coverage provides another layer of medical or liability coverage for incidents in which it also covers collision-related vehicle damage. Unfortunately, this is not true. Your collision policy won’t pay for a passenger’s medical bills after a car-on-tree crash, nor any civil damages you might incur if they subsequently sue you and win.
Collision Coverage Costs: Factors Affecting Collision Premiums
How much should you expect to pay for collision auto insurance coverage? Your collision premium will vary based on factors such as:
- Your Vehicle’s Value. A more valuable vehicle can sustain more damage (in dollar terms) before being deemed a total loss. As a result, collision coverage is more expensive on higher-value vehicles, assuming all other factors remain constant. For the same reason, comprehensive coverage is also more expensive for high-value vehicles.
- Your Vehicle’s Make and Model. Your vehicle’s make weighs heavily on the cost to repair it. Although actual costs vary, the general rule is that premium vehicles of all makes (foreign and domestic) and higher-end foreign vehicles (such as Lexus and BMW) cost more to repair than value-oriented domestic and foreign makes (such as Chevrolet and Honda).
- How Much You Drive. The more you drive, the more likely you are to run into trouble on the road. Expect to pay more for collision coverage as a result.
- Your Vehicle’s Vulnerability to Potential Hazards. Safety features that reduce crash risk and severity can reduce collision premiums. Such features include lane departure warnings and automated emergency braking.
- Your Collision Policy’s Deductible. The surest way to reduce your collision policy’s premiums without trading down for a cheaper vehicle is to raise its deductible. That said, if you subsequently file a claim, you’ll pay higher out-of-pocket costs on your higher-deductible policy.
- Your Auto Insurance Claim History. Many insurers now allow one “free” claim before factoring claim history into underwriting decisions. If you’ve filed multiple claims during a five-year rolling period, your collision premium will almost certainly be higher than if you were claim-free.
When It Makes Sense to Add Collision Coverage
Should you add collision insurance to your auto coverage policy? Is it worth the added premium expense to ensure you won’t pay more than your collision deductible for covered repair work? In these scenarios, the answer may be yes.
- Your Auto Lender or Lessor Requires It. The most common reason to carry collision (and comprehensive) coverage is that the terms of your auto loan or lease require it. If you lease or finance the purchase of a new car, you’ll almost certainly be required to carry collision and comprehensive coverage until your loan or lease is paid in full, typically a span of five years. To make matters worse, you’ll probably need to keep your deductible low (no more than $500).
- The Vehicle Is Relatively Valuable. In purely financial terms, it makes more sense to add collision coverage on a relatively valuable vehicle, even if you own it outright. Without collision coverage, a severe crash could result in thousands of dollars of out-of-pocket expenses. Your vehicle might not warrant collision coverage as long as you’d think. Cars depreciate rapidly during the first three to five years on the road and lose value more slowly after that.
- Your Collision Risk Is Relatively High. If you drive 25,000 miles a year on treacherous roads, your risk of sustaining crash damage costly enough to warrant a collision claim is higher than your homebound neighbor’s. Your decision to carry collision coverage is more likely to pay off in the long run.
- You’d Rather Pay Upfront to Avoid a Major Out-of-Pocket Expense. Collision coverage makes sense for drivers who’d prefer to pay higher monthly or annual auto insurance premiums to preclude a hefty out-of-pocket expense should the worst occur. Of course, this bet might never pay off — most cars never get into crashes serious enough to warrant collision claims. And collision coverage isn’t the only option available to risk-averse drivers. A robust emergency fund can serve the same purpose.
Every budget-conscious driver wants to save money on car insurance. Adding collision coverage might not seem consistent with this goal. piling an optional type of auto insurance onto a policy that already passes legal muster is virtually sure to make that policy more expensive.
Then again, a bad crash early in a newer car’s life could cost more in repair or replacement costs than your total collision premium during the first part of its life. In this all-too-common scenario, your collision coverage will more than pay for itself. Also, if you borrowed money to buy the car, your lender might require collision coverage until the note is paid in full.
Bottom line: Don’t be so quick to write off collision coverage just because it’ll add to your total premium costs. Sometimes, paying more upfront pays off in the long run.