What does collision insurance cover?

Collision insurance pays to repair or replace your vehicle when it is damaged in an accident with another vehicle or an object — such as a guardrail, tree, pole, or another car — regardless of who is at fault. It also covers single-car accidents like rollovers. Collision does not cover theft, weather damage, or hitting an animal — those are covered by comprehensive.

How much does collision insurance cost per year?

Collision insurance costs an average of $500–$900 per year with a $500 deductible, depending on your vehicle, driving record, location, and insurer. Newer, more expensive vehicles cost more to insure. Choosing a higher deductible ($1,000–$2,000) can reduce the annual premium by 20–40%.

Is collision insurance required?

Collision insurance is not required by law in any state. However, if you finance or lease your vehicle, your lender or lessor almost always requires both collision and comprehensive coverage. Once your loan is paid off, you can choose whether to keep or drop collision.

When should I drop collision insurance?

A common rule of thumb: drop collision when your annual premium plus deductible exceeds 10% of your car's market value. For example, if your car is worth $5,000, your collision premium is $600, and your deductible is $500, total exposure is $1,100 vs. max payout of $5,000 — borderline. Many financial advisors suggest dropping collision on cars worth less than $4,000–$6,000.

Does collision insurance cover a hit-and-run?

Yes. Collision coverage pays for damage from a hit-and-run accident where the at-fault driver cannot be identified. Your deductible applies. This is one reason to keep collision even if your car is older — hit-and-runs are unfortunately common. Some states also allow uninsured motorist property damage coverage as an alternative.

Collision Insurance: What It Covers, Costs, and When to Drop It (2026)

Collision insurance pays for damage to your own vehicle when you’re in an accident — whether it’s your fault, someone else’s, or a hit-and-run. It’s one of the two core coverages in a “full coverage” policy, alongside comprehensive insurance.

What Collision Insurance Covers

Covered	Not Covered
Your car hitting another vehicle	Damage to the other driver’s car (that’s liability)
Your car hitting a fixed object (pole, guardrail, tree)	Theft of your vehicle
Rollover accidents	Weather damage (hail, flood, wind)
Hit-and-run damage	Hitting an animal
Pothole damage	Vandalism
Parking lot accidents	Mechanical breakdown

How Collision Insurance Works

You’re in an accident covered by collision (regardless of fault)
File a claim with your insurer
Insurer pays the actual cash value (ACV) of repairs or replacement, minus your deductible
If repairs exceed the vehicle’s ACV, the car is declared a total loss and you receive the ACV minus the deductible

Actual cash value = replacement cost minus depreciation. A 3-year-old car is worth significantly less than a new one, which is why older cars receive less from collision claims.

Collision Insurance Cost by Deductible (2026 Averages)

Deductible	Average Annual Premium	Annual Premium + Deductible
$250	$750–$1,100	$1,000–$1,350
$500	$550–$850	$1,050–$1,350
$1,000	$400–$600	$1,400–$1,600
$1,500	$330–$500	$1,830–$2,000
$2,000	$270–$400	$2,270–$2,400

Tip: A $500 deductible is the most popular choice. Moving from $500 to $1,000 saves $150–$300/year on average — and you break even after about 1–2 years without a claim.

How Collision Costs Vary by Vehicle Type

Vehicle Type	Avg. Annual Collision Premium
Compact sedan (e.g., Honda Civic)	$450–$650
Midsize SUV (e.g., Toyota RAV4)	$550–$800
Full-size pickup truck	$600–$900
Luxury sedan (e.g., BMW 3 Series)	$900–$1,400
Sports car (e.g., Mustang GT)	$800–$1,300
Electric vehicle (e.g., Tesla Model 3)	$900–$1,500

When Is Collision Insurance Worth It?

The 10% Rule

Drop collision when: Annual premium + deductible ≥ 10% of car’s market value

Car Value	Annual Premium	Deductible	10% of Value	Keep or Drop?
$25,000	$700	$500	$2,500	Keep — $1,200 cost vs. $25,000 risk
$10,000	$600	$500	$1,000	Keep — borderline
$6,000	$550	$500	$600	Drop — $1,050 cost near maximum payout
$4,000	$500	$500	$400	Drop — paying more than the protection is worth

Other Factors to Consider

Emergency fund: If you can afford to replace a totaled car out of pocket, dropping collision makes sense
Driving risk: High-mileage commuters, frequent highway drivers, or those in high-accident areas benefit from keeping collision
Lender requirement: You cannot drop collision while you still have an auto loan

Collision vs. Liability: Key Difference

Coverage	What It Protects	Your Car	Other’s Car
Collision	Your vehicle	✓	✗
Liability	Others	✗	✓

You need both if you want full protection. Liability alone is legally required but leaves your own car unprotected.

How Collision Handles Total Loss

If repair costs exceed your car’s ACV (typically 75–80% of ACV in most states):

Insurer pays ACV minus your deductible
Insurer takes ownership of the vehicle
If you owe more on the loan than ACV — GAP insurance covers the difference

Example:

Car ACV: $18,000
Loan balance: $22,000
Collision pays: $18,000 − $500 deductible = $17,500
Remaining loan gap: $22,000 − $17,500 = $4,500 (GAP insurance covers this)

Collision insurance is typically paired with comprehensive coverage — see comprehensive and collision insurance for the combined coverage guide. For how collision coverage affects your total premium, see what affects car insurance rates. For the auto insurance hub, see auto insurance hub.

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy