Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager Chris Harrigan

UPDATED: Aug 11, 2021

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Here's what you need to know...

  • While it is beneficial in many circumstances, collision insurance can be expensive
  • One single automobile accident can cause hundreds or thousands of dollars in damage
  • If the damages are close to or higher than the value of the car, the car will be totaled

While not all accidents are predictable, the statistics say that every driver is likely to crash their car at least once every 17.9 years regardless of how talented or defensive they are behind the wheel.

Since a collision will almost always result in at least a minimal amount of cosmetic damage, being prepared by carrying the appropriate type and amount of car insurance coverage is key.

Collision coverage is an optional form of physical damage coverage that can be purchased on a personal auto insurance policy to ensure that repairs will be made.

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Are you required to carry collision insurance?


In states with mandatory car insurance laws, vehicle owners are required to carry specific types of coverage to protect their assets and wages while they limit their out-of-pocket expenses.

While the specific requirements vary from state to state.  Some states have more stringent requirements than others.

In most areas drivers must only carry coverage that will pay for third-party medical or property damage expenses.

This legally required coverage is called liability and is comprised of both Bodily Injury and Property Damage cover.

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State Requirements to Comply with Financial Responsibility Laws

Liability, Uninsured Motorist and Medical Payments coverage can be required by law, but in no state are you required to carry collision coverage that protects your car.

A civil and criminal code is designed to protect victims on the roadways, but there is no requirement for protection that pays for car repairs.

As long as the state minimum requirements are satisfied on your valid insurance policy, you will be in compliance and will not face any consequences or penalties.

Contractual Requirements with a Lender or Lessor


If you are currently making payments on your car, you are contractually obligated to protect the vehicle until you hold the title.

Since you will not hold the title until you pay the loan off, you must carry both comprehensive and collision insurance on the car to satisfy the terms and conditions of your loan agreement.

You may not be breaking the law if you do not have physical damage cover, but you are breaking your promise and could face some serious or expensive consequences.

Some of the consequences for failing to buy collision on a financed car include:

  • Repossession of the vehicle for violating terms of the contract
  • Uninsured loss where you must pay for repairs out-of-pocket
  • Assessment of forced-placed insurance that provides only the bank with cover
  • Extension of the term of the loan or increased payment
  • Addition of premium charges to the loan balance

How and when will collision insurance pay?

Now that you know when you are obligated to have collision coverage, you need to know how and when it pays to decide if you want to voluntarily keep it.

There are several different scenarios when collision insurance will be activated and your carrier will disburse a payment.

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Here is some basic information that will show you just how broad the coverage is:

Scenarios When Collision Insurance Will Pay

Collision insurance pays when you are both at fault and not at fault.

While the insurer will try to collect from a third-party driver, your collision is always a backup to limit your financial burden when it comes to repairing your car after a loss.

Here are four scenarios where collision pays:

  • You are primarily at-fault for collision with an object or another car
  • You are in an accident where the carriers cannot agree on fault determination
  • Your vehicle is hit by a driver who does not have property damage liability
  • You hit an object that fell off a truck and is in the middle of the road

How much will collision pay when your car is damaged?

Unlike liability coverage or uninsured motorist, there is not a fixed limit to how much your collision coverage will pay for an accident.

The value of a car is constantly changing and this means that claims valuations are constantly changing as well.

Your policy will pay up to the market value of your car to repair it or to issue a payment for replacement.

If you are at fault or the carrier is unable to collect from another carrier for a non-fault loss, you may be required to pay your deductible.

Is it time to remove collision from your policy?

There is no rule of thumb that says you should cut your collision insurance on a specific date or when your car reaches a certain age.

You need to consider the cost of the coverage based on your risk factors and what the value of your car is.

Downgrading could be a practical decision if you do not think your car is worth the cost of insuring it or if you could easily replace it with a similar model on your own.

You will need to consider how much a collision claim could raise your rates, how much you will be paying over the years with no losses, and if the payoff is worth the cost.

If you believe that you are paying too much for your car insurance, it is time to comparison shop.

You may not think that you need collision insurance only to discover that you can drop your premiums down without downgrading.

Before making any final decisions on your insurance company, it is important to learn as much as you can about your local insurance providers, and the coverages they offer. Call your local insurance agent to clear up any questions that you might have. Questions to consider asking include, “What is the best coverage plan for me/my family/my situation?” “What are the minimum coverage requirements in my state and what form of coverage do you recommend?” “Do you guys offer any bundle discounts if I take out both my auto insurance and home insurance with you?” and “What is the average rate of insurance quotes you guys offer?”

Before making any big insurance decisions, use our free tool to compare insurance quotes near you. It’s simple, just plug in your zip code and we’ll do the rest!

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