What Is Collision Coverage?

Collision insurance pays for repairs or reimburses you for the cash value of your vehicle if it is totaled in an accident while driving.

When you have fully paid for your car, you no longer have a lender who requires you to have collision coverage, so it becomes an option. Learn what is covered and when having collision insurance makes sense.

What Is Collision Coverage?

Collision coverage only covers the costs of repairs to your vehicle, not other vehicles or drivers. It only applies in most states if you are at fault in an accident or if your car was damaged and you do not know who or what caused the accident.

Your car insurance policy must define a "collision" very clearly for the purpose of filing a claim. Your vehicle must collide with another vehicle or make contact with an inanimate object such as a fence, guard rail, pothole, or pole.

How Collision Coverage Works

Most states have laws requiring all drivers to have some level of insurance coverage if they intend to drive a vehicle in the state, typically to cover bodily harm and liability for property damage. However, collision coverage is not always included in these basic mandates. Whether or not your state requires it, you can choose to add collision coverage to your current car insurance policy. This could save you money in the long run because car repairs after a collision can be costly. If you rent or lease a car, a collision is even more expensive. Collision coverage will typically cost you an additional $290 per year. 

• If you're still making payments on your car, you may need to protect it regardless of where you live. If you took out a loan to buy your car, your lender may require you to purchase collision coverage so that their asset is protected if something happens to damage it.

What Types of Events Are Covered?

There are numerous instances that qualify as "collisions" under this policy:

Car Crashes

A collision occurs when your vehicle collides with another vehicle (whether you collide with another vehicle or the other driver collides with you). At least one of the vehicles involved will have collision coverage. If the at-fault driver did not choose collision coverage, they will be responsible for their own vehicle repairs.

Potholes

Although it may be easy to avoid running over a pothole, if this happens to you and your car is damaged, the odds are in your favor that repairs will be covered. Pothole damage is regarded by insurers as a collision. Again, this type of coverage must be selected in your primary auto insurance policy for vehicle repairs to be covered.

Trees

Surprisingly, it makes no difference whether you hit the tree or the tree hit you. A falling tree is part of a larger claim. A collision is reported when you hit a standing tree or a tree that has fallen before you hit it.

Guard Rails

Simply put, colliding with any static object is defined as a collision. Slamming into or lightly scraping a guard rail, stop sign, mailbox, or building would all be considered. It makes no difference whether the damage is minor or severe. The bottom line is that a collision occurs when your vehicle comes into contact with an object that is not alive or moving and causes damage to your vehicle.

Trenches and Ditches

If you've ever driven on icy roads and slid into a ditch, or swerved to avoid hitting a bump in the road and landed in a trench, you know how damaging a ditch or trench can be to your vehicle. Earth shoved up into your car's undercarriage can clog a variety of functions, necessitating a trip to the mechanic. Vehicles that have been rolled are even more vulnerable to damage. Physical damage to the entire vehicle (as long as it is not caused by a peril that is covered elsewhere) is always covered under the collision portion of your policy.

Types of Collision Coverage

Is it repairable or a total loss? If you have collision coverage, your insurer has two options for reimbursing you. In the event of a total loss, either your vehicle will be fully repaired or the cash value of your vehicle will be paid out. Here's what you can expect:

What to Expect If Your Car Can Be Repaired

Because they are less expensive, aftermarket or used parts are usually used to repair your vehicle. If you prefer original manufacturer parts for your make and model (OEM parts), you will have had to add an extra rider to your policy when you first signed up. Some insurers provide this option, while others do not, so if the source of the parts is important to you, make sure to inquire about OEM parts and terms when you sign up.

Your vehicle's repairs should restore it to its pre-accident condition, as if the damage never occurred. This establishes the baseline for what you should expect from insurance-covered repairs.

Any recent repairs or replacement parts can help to increase the cash value of your car. Find receipts for any recent car repairs to help ease the process and get a higher payout.

• A deductible is usually associated with collision coverage. You must pay this amount out of pocket before your insurance will cover the rest of the cost of repairs.

The deductible is set when you add your vehicle to your auto insurance policy and is detailed in your contract.

What to Expect If Your Car Is a Total Loss

If your vehicle is totaled, an insurance claim adjuster will work with you to determine the true cash value of your vehicle at the time of loss. This will not be the same amount you paid for the car because time has passed and wear and tear will be considered. The current market value of your car at the time the damage occurred may also be a consideration.

Does It Matter Which Driver Is at Fault?

In the event of a collision, it is not always clear who is to blame. It is possible that both parties involved will insist that they were not at fault. If this occurs, you can file a claim under your collision coverage and have your insurer work on subrogation on your behalf.

Subrogation is the process of attempting to be reimbursed for a claim after fault has been determined. It enables you to have your vehicle repaired immediately following the event. It also allows you to be reimbursed immediately following the repair, rather than having to wait for an agent to determine who was at fault. Then, if the claim is resolved in your favor and you are reimbursed, your at-fault claim status may be erased. There is no law requiring your insurance company to assist you in subrogating a claim. However, many codes of ethics require it. You should speak with your agent about how they handle pay-outs when fault is still in question.

If you are at fault in a crash (meaning you are the driver who caused it), you must have collision coverage selected on your car insurance policy to be paid for either vehicle repair or the full cash value of your car in the event of a total loss.