What to know when considering collision insurance

When you’re out on the road, you want to feel confident that you — and your car — are protected from the unexpected. While no state requires you to carry collision insurance, many drivers choose to add this coverage for extra peace of mind.

Let’s look at the ins and outs of collision insurance and answer some questions you might have, so you’re informed when deciding if it’s right for you.

What is collision insurance?

Collision insurance is an optional coverage that helps pay for damage to your car if you hit another vehicle or object — like a tree or mailbox — whether you’re at fault or not. If you’re in a covered accident, your insurance will pay for your damage, less your deductible and up to your policy limits.

Let’s break it down:

What does collision insurance cover?

• Collisions with another vehicle, no matter who’s at fault
• Collisions with objects, such as trees, mailboxes, fences, poles, or potholes
• Single-car accidents, like rollovers, caused by icy roads

What isn’t covered by collision insurance?

• Damage to another person’s vehicle (That’s what liability insurance is for.)
• Damage to your vehicle from non-driving events, like hail or theft (That’s what comprehensive coverage is for.)
• Medical bills for you or others (That’s what medical expense coverage is for.)

Why is collision insurance important?

Imagine driving down a highway on a snowy winter day. Snowplows are clearing the roads ahead, and you think you’re in the clear. Suddenly, your car begins to slide, and despite your best efforts, you lose control and slam into the car in the next lane. Fortunately, everyone’s okay, but both cars are damaged.

Your property damage liability insurance will help take care of the other driver’s repairs, but what about your vehicle? If you have collision insurance, you just pay your deductible, and your insurance assists with the rest.

Now imagine you didn’t have collision insurance. You’d be responsible for the full cost to repair or completely replace your vehicle if it was totaled. If that’s a financial burden you’d rather avoid, collision insurance is a smart way to protect you and your bank account.

Do I need collision coverage?

While collision insurance isn’t mandated by law, there are times when it may be required by your lender or leasing company. Here are a few things to consider:

Do you lease or finance your vehicle? Most lenders require collision coverage when you lease or take out a loan on your vehicle.

What’s your car’s actual cash value (ACV)? Compare your car’s ACV to your collision premium — if your car isn’t worth much, you might decide the cost of collision coverage isn’t worth it.

What’s your deductible? If your deductible is close to your car’s value, it may not make sense to carry collision coverage. For example, if you have a $1,000 deductible and your car’s ACV is $1,500, is it worth it to fork out the collision premium each month?

Ultimately, it comes down to what you can afford to pay out of pocket if your car is damaged or totaled.

Do I need collision and comprehensive coverage?

Collision and comprehensive coverage often go hand in hand. While collision covers accidents involving other vehicles or objects, comprehensive coverage helps with things like theft, vandalism, hail, fire, or hitting an animal. Most insurers require you to have comprehensive if you want collision, but you can have comprehensive without carrying collision.

Ask yourself: “Can I afford to repair or replace my car if it’s damaged, totaled, or stolen?” If the answer is “no,” you might consider the extra protection of both coverages.

Should I get collision insurance on an older car?

Even if your car is older, check its actual cash value using a trusted resource like Kelley Blue Book Online (Opens in a new tab). If it isn’t worth much, the cost of collision coverage might outweigh the benefits. However, if your car is still worth a lot to you — or you’d struggle to replace it — collision insurance could bring you peace of mind.

Is collision insurance necessary for a rental car?

If you rent a car, you’re usually responsible for any damages that occur to the vehicle while it’s in your possession — so it’s a good idea to have some kind of collision coverage. Your own collision insurance often extends to rental cars, or you could purchase a loss damage waiver (LDW) through the rental company.

That being said, some rental companies don’t require you to have collision coverage as long as you sign on the line that you’re responsible for any damages. It’s always wise to check with your American Family agent before you travel to make sure you’re covered.

How much does collision coverage cost?

The cost of collision coverage varies depending on the person, the vehicle, and the insurance company, but there are three main factors that determine what you pay:

Driving history. If you’ve had several accidents, you’ll probably pay more for collision coverage than someone with a clean record.

Value of your vehicle. Is your car worth a lot? Your premium for collision coverage will likely be higher than it would be on a less expensive vehicle, since it’ll cost more to repair or replace your car.

Size of your deductible. Usually, the lower your deductible, the higher your premium, and vice versa — the higher your deductible, the lower your premium will be.

If you’re considering collision insurance but aren’t sure if it fits your budget, give your agent a quick call for an estimate.

How much collision insurance do I need?

Your collision coverage limit is typically based on how much your vehicle is worth. Your most important choice is your deductible — the amount you agree to pay out of pocket for a covered loss. Decide whether you’d rather pay higher premiums to get a lower deductible or save on premiums and pay more out of pocket if you have a claim.

Is collision insurance worth it?

If your car is paid off and still worth a chunk of change, or if you simply want peace of mind with an extra layer of protection — collision insurance can be a wise investment. It could help you avoid large out-of-pocket expenses and help keep your dreams on track.

Still deciding?

Choosing the right coverage is a personal decision. Take time to weigh your options and don’t hesitate to reach out to your American Family Insurance agent for help determining what the best coverage is to keep you driving forward.

This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.

This information represents only a brief description of coverages, is not part of your policy, and is not a promise or guarantee of coverage. If there is any conflict between this information and your policy, the provisions of the policy will prevail. Insurance policy terms and conditions may apply. Exclusions may apply to policies, endorsements, or riders. Coverage may vary by state and may be subject to change. Some products are not available in every state. Please read your policy and contact your agent for assistance.