What Is Collision Insurance and What Does It Cover?

By the Mercury Team

When it comes to protecting your valuable assets, auto insurance plays a crucial role in providing financial security and peace of mind. One type of insurance that's particularly important for you as a vehicle owner is collision insurance. Whether you're a seasoned driver or a new car owner, understanding collision insurance can save you from potential financial hardships in the event of an accident.

What Is Collision Insurance?

Collision insurance — or collision protection — helps cover the cost to repair or replace your vehicle if it’s damaged in an accident with another car (regardless of who’s at fault) or an object, such as a guardrail, tree, or light post.

Do I Need Collision Insurance?

Collision coverage is optional since no state legally requires it to drive. However, if you’re leasing or financing your vehicle, your lender may require it to protect their investment.

What if you paid off your vehicle but choose not to carry collision coverage? If you’re involved in a single-vehicle accident or responsible for causing an accident with another driver, you would have to pay out of pocket to repair or replace your vehicle. However, if the other driver is at fault, their liability coverage usually pays for your damages.

What Does Collision Insurance Cover?

Collision insurance can pay to repair or replace your car following collision-related accidents, including:

• A collision with an object, such as a light post or tree
• A collision with another vehicle
• A collision while your car is parked, including hit-and-runs
• A single-car accident involving rolling or falling over

What Is Not Covered by Collision Insurance?

Collision insurance doesn’t cover the following incidents:

• Damage to your vehicle not related to driving, such as hail, theft, or vandalism. Comprehensive coverage helps pay for these damages.
• Injuries to another person or damage to their vehicle. Liability protection helps cover these damages.
• Collisions involving animals. Comprehensive coverage helps pay for your damages.

Collision Coverage Deductibles and Limits

Collision coverage has an insurance deductible — the amount you pay before your insurer pays for the rest. You can choose your own deductible amount, typically from $250 to $2,000. If you pick a lower deductible, your premium — or the monthly amount you pay for insurance — may increase. However, if you select a higher deductible, your premium might decrease.

Before choosing a deductible, consider your budget. For example, if you choose a high deductible like $2,000, you have to pay that amount out of your pocket. So, if you need to file a claim and can’t afford to pay that deductible, you can’t repair or replace your vehicle. Ultimately, it’s best to choose a deductible that you can comfortably afford.

It’s also important to know that collision insurance has a limit — the maximum amount your insurer will pay towards your claim. The collision coverage limit is typically based on your vehicle’s actual cash value — how much your car is worth in the current marketplace — minus your deductible. For example, if you have a deductible of $500 and your car’s value is $4,000, your insurer could give you up to $3,500 to put toward repair or replacement costs.

Why Buy Collision Coverage?

There are a couple of reasons why you may want to consider adding collision coverage to your policy:

• Leasing or financing: Collision coverage typically isn’t optional if you’re making car payments or leasing your vehicle. Most lenders and lease holders require you to carry this coverage.
• Your vehicle’s value: If your car is new or has a significant value, collision coverage can give you peace of mind that your investment is protected following a covered loss.
• Paying out of pocket: Without collision coverage, you would have to pay out of pocket to repair or replace your vehicle following a collision. Carrying this coverage can help minimize financial stress and loss during these incidents.

Conclusion

Adding collision insurance to your auto insurance policy can be a valuable investment, especially if you want peace of mind whenever you’re behind the wheel. Understanding the terms, deductibles, and coverage limits is essential when deciding whether to invest in collision insurance. Evaluating your vehicle's value, budget, and driving habits will help you make an informed choice that aligns with your needs and financial situation. If you need help, Mercury can help customize an auto insurance policy that’s affordable and tailored to your needs.

Contact us today for a fast, free quote!