If you’re at fault in an accident, you need separate collision coverage on car insurance rather than liability to pay for your own vehicle’s damage. Despite the extra premium, many drivers can benefit from coverage — albeit with a few exceptions. That’s because the cost of coverage repays itself several times over if your car suffers extensive damage or needs total replacement.
What is collision coverage?
Collision insurance is a type of car insurance coverage that pays for physical damage to your own car, including repairs or replacing a totaled vehicle. It kicks in to pay for damage to your vehicle from a car accident you’ve caused. You’ll be covered up to the maximum payout limit you chose on your policy.
What does collision insurance cover?
If you have collision coverage, you’ll be covered for most of the applicable costs that come up. For example, you may need your car fixed or replaced after these types of accidents:
You’re involved in a collision with another vehicle
You’re involved in a collision with a stationary object
Your car is rolled or flipped
What does collision insurance exclude?
Collision coverage doesn’t cover costs for damage to other people’s property. You’ll need property damage liability insurance for that. It also doesn’t pay for others’ medical expenses — only bodily injury liability coverage will reimburse those expenses.
Also, any damage classified as acts of God or nature is excluded from collision insurance. This might include a tree hitting your car or an angry mob vandalizing your vehicle. You may need comprehensive coverage to pay those costs.
Is collision insurance required?
You’re generally not required to purchase collision insurance. However, it’s mandatory for residents of Manitoba to have it as part of their basic car insurance package.
If you’re still paying your car loan off or you’re leasing your ride, the lender will likely require you to have collision coverage. This is because it has a vested interest in the vehicle, and want to see it paid off or returned.
Should I get collision insurance?
When it is optional, many drivers still benefit from purchasing collision insurance — a few hundred dollars per year could save thousands if your car needs extensive repairs or a total replacement. But collision coverage can be an unnecessary cost in some situations, especially for accident-free drivers.
Weigh a few factors to determine whether you should buy collision coverage:
Consider your car’s value. You might be paying more than it’s worth if you’re protecting a low-value beater car. Instead, find out your car’s value, then see if the cost of coverage and your deductible totals a hefty portion of that value. If so, you might nix coverage to save more money for a different car or other financial goals.
Factor in your finances. Consider whether you can pay for car repairs, another car or get by without a second car if the worst happens. If you can’t shoulder the emergency cost of another car, you might need this coverage even on a low-value vehicle.
Keep your mileage in mind. You might consider forgoing coverage on a hobby car you ride on the weekend or any cars you don’t drive often. The lower mileage means you’re have less of a risk for getting in an accident.
Reassess after paying off your loan. If you’re financing your car, you probably need collision coverage. But set a reminder to figure out your coverage needs after zeroing out that loan.
How much does collision car insurance cost?
The average cost of full coverage car insurance runs around $264 per month, or $3,168 every year. In car insurance terms, full coverage means all provincially-mandated coverage as well as comprehensive and collision. However, keep in mind that your age, driving record, the type of car you drive, where you live, your gender and even your credit score can affect how much you pay. So the premium you end up paying can vary significantly depending on your personal circumstances.
To find the average car insurance rate, we looked at full coverage quotes with the following driver profile:
Single, 35 year old female
Living in the Etiobicoke area in Ontario
Perfect driving record
20,000 kilometres annually
Driving a 2020 Honda Civic DX 4DR
Equipped with winter tires
Does collision insurance have a deductible?
As with most insurance types, collision coverage comes with a deductible. You’ll choose your deductible when you’re buying this insurance. Then if an accident happens, you’ll pay this amount first before your insurance company kicks in to repair or replace your car.
To decide what your deductible should be, weigh how much car repairs might cost against how much you’d want to pay out of your own pocket. The higher you set your deductible, the less your insurance premiums should cost.
Stop sign setback
While cruising in his car, Isaac misses a stop sign and rams into another vehicle in the intersection.
Both Isaac’s car and the other vehicle are in rough shape, so repairs are definitely in order. Isaac’s liability insurance will cover the costs for the other party. Meanwhile, Isaac’s collision insurance will help him with his costs — luckily so, as his bill comes out to $4,500. After Isaac pays his $500 deductible, his insurance covers the remaining $4,000.
With collision coverage, you won’t have to worry about paying a massive car repair bill. After you pay your deductible, your collision coverage will absorb the rest of the cost.
You can soften the blow of a steep repair bill by adding collision to your existing car insurance coverage. But don’t be afraid to shop around for the best price. You can find coverage that works for you by comparing providers using our insurance comparison guide.
Frequently asked questions about collision insurance
Choosing a deductible comes down to figuring out how much you’re able to pay out of pocket. Your car’s value and how much it would cost to repair or replace it will likely be a big part of that decision too.
You’ll also want to balance the deductible with your coverage price. A higher deductible means a lower premium, but you’ll be stuck covering any repair costs that fall under the amount of the deductible.
How much coverage you can buy will ultimately depend on your insurance company, but you can typically insure your car up to its actual cash value with collision insurance. That means if your car is a total loss in a covered claim, you’ll receive the value of it, minus your deductible.
Whether or not you want collision coverage for an older car you own will depend on how much the car is worth, what state of repair it’s in and if the value balances out with the premium costs.
The best way is to check with your provincial or territorial ministry of transportation. All drivers will be required to carry some form of third-party liability coverage for bodily injury and property damage. You may also be required to buy personal injury protection or medical payments coverage.
Kevin Joey Chen is a credit cards, banking and investments writer whose work and analysis have appeared on CNN, U.S. News & World Report, Business.com, Lifehacker and CreditCards.com. He's passionate about helping you get your finances in order by expertly navigating cutting-edge financial tools — including credit cards, apps and budgeting software.
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