How does collision coverage work?


Editorial team Published on

Collision insurance pays to repair or replace your own car if it is damaged in a crash with another vehicle or an object like a fence, tree, or guardrail, regardless of who is at fault.

What It Covers

  • Car-on-car crashes: Rear-ending another vehicle or getting hit by a driver.
  • Single-car accidents: Hitting a pole, guardrail, tree, or mailbox.
  • Road hazards: Pothole damage or a vehicle rollover.
  • Hit-and-runs: Accidents where the other driver flees and you cannot identify them.

How a Claim Works

  1. File the claim: You report the accident to your insurer.
  2. Pay your deductible: You pay your chosen deductible amount (the out-of-pocket cost you agreed to when buying the policy, such as $500).
  3. Insurance pays the rest: Your insurance company covers the remaining repair costs up to the Actual Cash Value (ACV) of your car. If the repair cost is higher than the car's total value, the car is considered totaled, and you get paid its market value minus your deductible.

Key Details

  • Fault does not matter: You can use collision coverage even if you caused the accident or if the other driver is uninsured.
  • Not legally required: States do not force you to carry collision coverage, but lenders require it if you finance or lease your car.
  • What it leaves out: It does not cover damage from weather, theft, vandalism, or hitting animals (which fall under comprehensive coverage), nor does it pay for injuries or damage to other people's cars. You can learn more about these rules through the Insurance Information Institute.