Understanding Collision Insurance: Bumper-to-Bumper Coverage

Collision coverage is a key pillar of car insurance and it pays to repair or replace your vehicle after a collision with another vehicle or object.

In this Car Insurance 101 article, we go into detail about how collision coverage works. You will also learn about deductibles, factors that can affect the price you pay to add collision to your policy, and ways to help you decide if you need this coverage or not.

We will also provide you with some interesting claim scenarios for situations that would be considered a valid claim, and also some that would not be covered.

What is collision insurance on an auto insurance policy?

Collision insurance is a type of auto insurance coverage that helps pay for the repair or replacement of your car if it’s damaged in an accident with another vehicle or an object, such as a fence or a tree.

It is designed to keep you from bearing the full cost of repairs to your vehicle after an accident, providing a level of financial protection and reassurance in your daily driving life.

This coverage is distinct from others (like liability and comprehensive or “other-than-collision” coverage) in that it is specifically designed to address damages from collisions, regardless of who is at fault.

Unlike liability insurance, which covers damage to other vehicles or property when you’re at fault, collision insurance is about protecting your own vehicle.

It can be particularly valuable if you’re involved in a single-car accident or if the other party in an accident is uninsured or underinsured.

How collision coverage works

Collision coverage is an essential part of your auto insurance policy designed to protect your vehicle and your finances in the event of a car accident.

First we’ll coverage the basics of this important coverage, then we’ll go into how deductibles and the claims process work.

Collision coverage basics

At its core, collision coverage is straightforward: if you’re involved in an accident, regardless of who is at fault, collision coverage steps in to cover the repair or replacement costs of your car.

This coverage applies whether you hit another vehicle, a stationary object like a lamp post, or if you’re involved in a single-car accident like a rollover.

Here is a more complete list of the types of incidents that would be covered under the collision coverage portion of your car insurance policy:

Collision with another vehicle
Collision with a stationary object (e.g., a tree or light pole)
Single-car accidents, such as rollovers or sliding off the road
Damage from hitting a pothole
Damage as a result of a hit-and-run incident (in many cases, though this can sometimes fall under uninsured motorist coverage depending on your policy)
Damage from backing into an object or another vehicle
Collision with debris or obstacles in the road
Accidents caused by losing control of the vehicle due to weather conditions (e.g., ice, snow)
Damage from a car being pushed into another vehicle or object due to the impact of a collision
Accidents involving a vehicle rolling down a slope due to improper parking or brake failure
Crashes occurring in parking lots or garages
Accidents involving collisions with barriers, such as guardrails or traffic signs
Damage from a vehicle being sideswiped by another car
Accidents caused by abrupt lane changes leading to a collision
Damage resulting from a collision while parallel parking or exiting a parking space

When you suffer a loss such as those listed above, you can begin the process of filing a claim with your insurance company to have the damage repaired.

How deductibles work with collision insurance

When you purchase your car insurance policy, one of the choices you have to make is the deductible amount you are willing to pay before coverage kicks in.

The deductible is the amount you agree to pay out of pocket before your insurance covers the rest. Deductibles typically range from $250 to $1,000, but some insurance companies offer choices of even larger deductibles.

The higher your deductible, the lower your premium (the regular payment you make to keep your insurance active), but it also means more out-of-pocket expenses after an accident.

Conversely, the lower the deductible amount you choose, the more you will pay to have the benefit of less out-of-pocket expense at claim time.

The deductible you choose is a decision that requires gauging the benefit of lower upfront costs if you have a claim versus the higher premium you’ll pay each month.

How do you choose the right collision deductible? Here are 10 considerations to think about:

Financial Comfort – The most important factor is how much you can afford to pay out of pocket if you need to file a claim. Choose a deductible that won’t strain your finances in the event of an accident.
Risk Assessment – Consider your driving habits and environment. If you drive frequently or in high-risk areas, a lower deductible might be preferable, given the higher likelihood of filing a claim.
Vehicle Value – The value of your vehicle can influence your deductible choice. If your car is older and has a lower value, a high deductible might make sense since the payout in the event of a claim would be less.
Savings and Emergency Funds – If you have a robust emergency fund or savings set aside, you might be more comfortable choosing a higher deductible, knowing you can cover it if necessary.
Insurance Premiums – Higher deductibles generally lead to lower monthly premiums and vice versa. Assess how the change in premium cost with different deductibles impacts your budget.
Claim Frequency – If you rarely file claims, you might opt for a higher deductible to save on premiums. However, if you’ve had to file claims in the past, a lower deductible might be more beneficial to reduce out-of-pocket costs for repairs.
Cost of Repairs – Consider the typical cost of repairs for your vehicle. Some cars, especially luxury or imported models, have higher repair costs, which might influence your deductible choice.
Lender Requirements – If your vehicle is financed or leased, the lender may have specific requirements for your deductible amount. Usually, this is to ensure that any damage to the vehicle can be adequately repaired.
Long-Term Financial Planning – Think about your long-term financial goals. Choosing a higher deductible can save money on premiums, which can be allocated towards other financial objectives.
Personal Risk Tolerance – Your comfort with risk plays a significant role. If you prefer the reassurance of lower out-of-pocket costs in the event of an accident, a lower deductible may be worth the higher premiums.

Choosing policy deductibles for both collision and comprehensive coverage really boils down to a personal preference and how comfortable the policyholder is to accepting the financial burden in the event of an accident.

How the collision coverage claim process works

Suppose you’re in an accident where you back into another car, or an incident like hitting a pothole or a guard railing. After ensuring everyone’s safety and fulfilling any legal obligations like reporting the incident, you’ll contact your insurance company to file a claim.

Your insurance company will assess the damage to determine if repairs are covered under your collision policy. This may involve an insurance adjuster inspecting your vehicle or requesting you to visit an approved auto repair shop.

Once the assessment is complete and the claim is approved, repairs can begin. If your car is totaled (the repair costs exceed the vehicle’s value), your insurance will reimburse you for your car’s actual cash value, minus your deductible.

Actual cash value is calculated by taking the replacement cost of the vehicle (what it would cost to buy a similar vehicle at current market prices) and subtracting depreciation (the loss in value over time due to wear and tear, age, and other factors).

If the repair costs are less than the vehicle’s value and you choose to repair it, you’ll pay the first $500, and your insurance will cover the remaining amount of the repair bill.

What may NOT covered by collision insurance

The Insurance Services Office (ISO) standard auto insurance policies typically define collision coverage as paying for damage to the insured vehicle resulting from a collision with another object or as a result of the vehicle overturning. This can include collisions with other vehicles, stationary objects, and potholes, among others.

It’s important to note that while this is a general description, the specific definition and the extent of coverage can vary by policy and insurance company, even if they start with ISO standard forms.

Insurers often modify or customize their policies with endorsements or riders that can alter the coverage. To understand the precise coverage of a specific policy, it’s crucial to read the actual insurance contract or speak directly with an insurance representative or agent.

Based on the standard ISO policy form, the following are examples of incidents or claims that would NOT be covered under collision coverage:

Theft of the Vehicle – Loss due to someone stealing your vehicle is not covered under collision; it falls under comprehensive coverage.
Vandalism – Damage from vandalism, such as spray painting or keying of the vehicle, is covered by comprehensive, not collision.
Natural Disasters – Damage from natural events like floods, earthquakes, or hurricanes is covered by comprehensive insurance.
Fire Damage – Damage from a vehicle fire not caused by a collision is handled by comprehensive coverage.
Hitting an Animal – Although some policies may cover hitting an animal under collision, many consider this a comprehensive claim.
Damage from Falling Objects – Damage to a vehicle from objects falling on it, like tree branches or debris, is covered under comprehensive.
Civil Disturbance – Damage from riots or civil commotion, such as a protest where a vehicle is damaged by participants, falls under comprehensive.
Glass Breakage – Windshield or window damage is often handled under comprehensive coverage, especially if not caused by a collision.
Damage While Parked (if not hit by another vehicle) – For instance, damage from a shopping cart hitting your car in a parking lot typically falls under comprehensive.
Wear and Tear – General wear and tear or mechanical failures are not covered by collision coverage.
Damage to Another Person’s Vehicle – Collision coverage is for your vehicle. Damage you cause to another vehicle is covered under liability insurance.
Medical Bills – Collision coverage does not cover medical expenses for you or passengers; medical payments coverage or personal injury protection would.
Damage from Rodents or Pests – Damage to a vehicle’s wiring or interior from rodents is covered under comprehensive, not collision.
Tire Damage – Unless the tire damage is directly related to a collision, it’s generally not covered by collision insurance.

Considerations when purchasing collision insurance

Carrying full-coverage insurance that includes collision insurance provides peace of mind, but there are some considerations you should make when determining the level of coverage to buy, or even if collision insurance is needed.

Vehicle Value – The value of your vehicle plays a crucial role in deciding whether collision coverage is worth the investment. For newer, more expensive vehicles, collision insurance is almost a necessity to protect your investment. However, for older vehicles with lower value, the cost of coverage may not be justified, especially if the vehicle’s value is close to or less than the deductible.
Deductible Amount – Choosing the right deductible is a balancing act between monthly premium costs and out-of-pocket expenses in the event of a claim. A higher deductible generally lowers your premium but means more out-of-pocket costs when filing a claim. Consider what deductible amount you can comfortably afford to pay.
Premium Costs – Evaluate the cost of adding collision coverage to your policy. Premiums can vary significantly based on vehicle type, driving history, and even geographic location. Shop around and compare quotes from different insurers to find the best rate.
Risk Exposure – Consider your driving habits, the environments in which you drive, and how often you’re on the road. Drivers who commute long distances or navigate busy urban areas may have a higher risk of accidents, making collision coverage more critical.
Loan or Lease Requirements – If you’re financing or leasing your vehicle, your lender or leasing company will likely require you to carry collision insurance to protect their interest in your vehicle. In this case, collision coverage is not just an option but a requirement.
Financial Security – Reflect on your financial situation and ability to cover unexpected expenses. If paying out of pocket for significant car repairs would be financially challenging, collision insurance provides a safety net that can prevent financial strain.
Coverage Limits – Understand the limits of collision coverage. It typically pays up to the actual cash value (ACV) of your vehicle before the damage occurred. Ensure you know how your policy defines ACV and whether it aligns with your perception of your vehicle’s value.
State Regulations and Options – While collision coverage is not required by state laws, each state has its own regulations regarding auto insurance. Familiarize yourself with your state’s requirements and any alternative coverage options that may be available.
Policy Terms and Exclusions – Carefully review the terms of the collision insurance policy, including what is explicitly covered and what is excluded. Understanding these details can prevent surprises in the event of a claim.
Claims Process – Consider the insurer’s reputation for handling claims. Look for reviews or ask for referrals to gauge the insurer’s responsiveness, fairness, and ease of the claims process.
Discounts and Savings – Inquire about discounts for safe driving, multiple policies, security features on your vehicle, and more. These discounts can significantly reduce the cost of your premium.
Future Vehicle Plans – Think about how long you plan to keep your current vehicle. If you intend to upgrade to a new vehicle soon, the coverage decisions you make now might differ from those for a car you plan to keep for several years.

As mentioned earlier, decisions relating to collision insurance are different for every insured depending on their financial stability and also their comfort level of taking on the added burden of either higher premiums or more upfront cost at claim time.

Money-saving strategies to reduce collision insurance costs

As with other insurance coverages, there are always ways to reduce the price you pay.

The first and foremost way to reduce the cost of collision insurance is to shop around. Prices vary widely among insurers, so by taking a few minutes and comparing rates you may be able to find a cheaper price.

Another way to reduce the cost of collision insurance is to simply raise your deductible. This will increase the amount you have to pay at claim time, however, so make sure you have adequate savings to cover the extra cost.

If you own your home, consider bundling your home and auto insurance with the same company. This can trigger discounts on both policies, resulting in significant savings.

Additional ideas for reducing the amount you pay for collision insurance include maintaining a good driving record, make sure you’re getting all qualifying discounts, drive a vehicle with lower insurance rates, and try your best to remain claim-free.

If you apply these strategies, there is a good chance that you can reduce the amount you pay for not only collision coverage, but your entire car insurance policy.

Is collision insurance required?

Collision insurance is not required or mandated by state law, but there are a few circumstances where you may be required to have it.

Financing or Leasing a Vehicle – If you finance or lease your vehicle, the lender or leasing company will typically require you to carry collision insurance. This requirement protects their financial interest in the vehicle, ensuring it can be repaired or replaced if damaged in an accident.
Rental Cars – When renting a car, you may be required to have collision insurance to cover any potential damage to the rental vehicle. If you don’t already have collision coverage through your personal auto insurance or a credit card benefit, the rental company will usually offer you the option to purchase their insurance at the time of rental.
Luxury or High-Value Vehicles – Owners of luxury or high-value vehicles, even if not financed or leased, often opt for collision insurance as a way to protect their investment. While not a requirement in this context, the potential high cost of repairs or replacement makes it a prudent choice.

Will a collision claim increase my car insurance rates?

Filing a collision claim can indeed influence your car insurance rates, but the impact varies depending on several factors, including your driving history, the details of the incident, and your insurer’s policies.

Generally, insurers view drivers who’ve recently filed a claim as higher risk, which can lead to increased premiums. However, this isn’t a hard and fast rule, and understanding the nuances is important.

Firstly, the nature of the claim plays a significant role. If you’re found at fault in an accident, you’re more likely to see an increase in your rates compared to a no-fault claim.

Insurers assess the risk associated with insuring you, and a history of at-fault accidents suggests a higher likelihood of future claims. However, if the collision was minor or you weren’t at fault, some insurers may not raise your premiums, especially if you have a history of safe driving or if your policy includes accident forgiveness.

The concept of accident forgiveness is another factor to consider. Many insurance companies offer this feature as part of their policies or as an add-on.

It essentially means that your first at-fault accident won’t impact your insurance rates. The specifics can vary by insurer, including whether this benefit is earned over time or available immediately, and how often it can be used.

It’s also worth noting the role of continuous coverage and loyalty. Some insurers may be more lenient with rate increases following a collision claim if you’ve been with them for a long time or if you have multiple policies. Additionally, the impact on your rates may diminish over time if you avoid further accidents or claims.

Ultimately, whether filing a collision claim will increase your insurance rates depends on many factors including company-specific rules and guidelines.

It’s always a good idea to speak with your insurance agent or representative to understand how a claim might affect your specific situation. They can provide personalized advice and help you navigate the decision-making process, ensuring you’re making the best choice for your needs and financial situation.

Conclusion and agent thoughts

Collision insurance is a vital component of auto insurance that offers protection for your vehicle in the event of an accident involving another vehicle or a collision with a stationary object.

It is designed to cover the cost of repairs or replacement of your car, minus the deductible, regardless of who is at fault. This type of coverage is particularly important for those who own newer or more expensive vehicles, as it helps safeguard against significant financial loss.

Choosing the right deductible for collision coverage is a crucial decision that balances monthly premium costs against potential out-of-pocket expenses in the event of a claim.

Factors influencing this choice include the driver’s financial situation, risk tolerance, driving habits, and the value of the vehicle. Higher deductibles generally result in lower premiums but mean greater out-of-pocket costs when filing a claim. Conversely, a lower deductible increases the premium but reduces the financial burden after an accident.

Drivers should also consider their vehicle’s repair costs, potential savings from lower premiums, and the requirements of any lender or leasing company when selecting a deductible.

Ultimately, whether to purchase collision insurance—and at what deductible level—depends on individual needs, the vehicle’s value, and personal financial considerations.

Drivers must weigh the cost of premiums against the benefits of coverage to make an informed decision that provides peace of mind and financial protection on the road.

During his career as an independent insurance agent, Ryan Grabenstein was appointed with Progressive, Allstate, Nationwide, Travelers, and many smaller regional and mutual companies. He has a Bachelor's degree in Finance from the University of Nebraska at Lincoln and Certified Insurance Counselor (CIC) personal and commercial lines training.