What is Collision Insurance?
Collision insurance coverage helps pay to repair or replace your own car if it’s damaged in an accident with another vehicle, or a stationary object (like a fence, highway divider, and so on).
This coverage applies in a number of potential scenarios—like if you’re the victim of a hit-and-run, or your brake line goes out leading to a single-vehicle accident, collision coverage may pay for damages to your car.
Here’s what we’ll discuss:
- What does collision insurance cover?
- Do I need collision insurance?
- What is not covered by collision insurance?
- Collision coverage policy limits
- Collision deductibles
What does collision insurance cover?
Collision insurance is designed to protect you from yourself, essentially. It covers a number of scenarios, but it doesn’t cover everything. Collision coverage is “first party” coverage that protects your vehicle, and possibly any other vehicle you may be driving.
Collision insurance is offered by your insurance company to kick in after the following scenarios:
Single vehicle accidents
In all these cases, collision coverage has your back.
- You’re cruising down the road and your tire blows out; you lose control of your car, hitting a guardrail.
- Your brake lines go out, leading to a single vehicle accident
- You get distracted and wind up in a ditch
Crashes that involve another car
Let’s say that you hit another car and cause damage to both their car and to your own. Your liability insurance will cover the damage you cause to the other vehicle, but not to yours.
That’s what collision insurance is for: It covers and pays for the repairs needed to get your car back into pre-accident condition, or it pays you out the value of your vehicle (aka actual cash value) in the event of a total loss.
Car accidents that involve an uninsured or underinsured driver
Collision insurance also protects you if someone else hits you, but doesn’t have enough insurance to cover the full cost of repairs to your car.
In addition, if you get hit by someone who is uninsured, or leaves the scene of an accident (the dreaded hit and run), your collision insurance will also cover damages to your car.
Do I need collision insurance?
It depends. Unlike liability coverage, collision insurance is not required by law. That means that you can choose not to have the coverage, but you might end up regretting your decision later. If you get into an accident, and the accident is your fault, you would be responsible for the damage that you cause to your own car. That can run into the thousands of dollars, and may require you to fully replace your car.
While the state you live in won’t require you to get collision coverage, your lender will usually require it if you haven’t bought your car outright. If, like most people, you buy your car and take out a loan — financing it through a bank — the bank will require you to take out a full coverage policy, which includes collision coverage. This is also required when leasing a car, as well in the case of new financed purchases, and used financed purchases.
Why does your lender care if you have collision coverage? Lenders require auto insurance coverage because they hold your car as collateral for your loan. If you stop making payments, they can take your car to pay off your balance. If you get into an accident and your car is totaled or not drivable, your bank may end up on the hook for the loan.
What is not covered by collision insurance?
The following scenarios would not be covered by collision insurance (but might be covered by another type of coverage in a covered incident):
Damage to someone else’s vehicle
This could be covered by your policy’s property damage liability insurance if you’re at fault for the collision.
Damage to your vehicle that isn’t related to a collision with another car or object
Damages from these types of incidents could be covered by comprehensive insurance coverage (which is not a required coverage):
- Vandalism—like if a local graffiti artist decides to tag your car without your permission
- Theft—if your car is stolen and not recovered
- Falling objects—like a tree branch, or a rock that flies from the tire of a passing car
- Natural disasters—like if your sunroof gets pelted in a hailstorm
- Collision with an animal—like if Bambi decides to jump in front of your car on the freeway
Learn more about the differences between collision and comprehensive coverage here.
Someone else’s medical expenses from a crash
That could be covered by your policy’s bodily injury liability insurance if you’re at fault for the collision.
Your medical expenses from a crash
Depending on where you live, you will have the option to add either personal injury protection (PIP) or medical payments (MedPay) coverage to your car insurance policy. These coverages can help cover things like your medical bills—or funeral expenses, in a worst case scenario—and in some cases also for the passengers in your car, after a covered accident
Collision coverage policy limits
Every portion of your car policy comes with a limit to the various types of car insurance coverage. That limit is the most that your insurer will cover in the event that a claim is made. Collision coverage is usually an exception to this rule; the limit is usually the actual cash value of your car (minus your deductible, of course).
Here’s an example of how this works: Let’s say your car slides on black ice, sending you into the median.
It’s one expensive slip: The damage to your car is estimated to be around $10,000. The vehicle is assessed and the actual cash value of your car is determined by the adjuster to be $26,500.
Since the damage amount is less than the actual cash value of your car, this scenario wouldn’t be a total loss, and the insurance company would pay out the amount to repair your car, minus your deductible. In this case if your deductible was $1,000, the insurance company would pay out $9,000 ($10,000 of damage minus that $1,000 deductible) to pay for the repairs to your car.
Collision coverage deductibles
Another part of your collision insurance policy to keep in mind is your deductible. You decide on the deductible amount when you buy your insurance policy. The deductible is the portion of repairs that you pay, before your automobile insurance kicks in to cover the balance.
On a Lemonade Car policy you can choose your deductible, between $250 and $2,000. If you lease or finance your car, you may want to check if there’s a maximum deductible the lender will allow you to have on your car insurance policy. There are some other policies (usually commercial) with higher deductibles.
A Lemonade Car policy allows you to choose your collision deductible, and allows you to pick a different deductible for the other coverages on your policy too, like for your comprehensive insurance.
A few quick words, because we <3 our lawyers: This post is general in nature, and any statement in it doesn’t alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. You’re encouraged to discuss your specific circumstances with your own professional advisors. The purpose of this post is merely to provide you with info and insights you can use to make such discussions more productive! Naturally, all comments by, or references to, third parties represent their own views, and Lemonade assumes no responsibility for them. Coverage may not be available in all states.