Collision (Auto)

Collision coverage pays for damage to your own vehicle caused by a crash -- meaning your car makes physical contact with another vehicle, an object, or the road surface. Hitting another car at a stoplight, backing into a concrete pillar, sliding into a guardrail on wet pavement, rolling a vehicle, or going into a ditch are all collision claims. The other driver does not need to be involved. Collision is about the physical impact, regardless of fault.

Collision is optional on a personal auto policy unless your vehicle is financed or leased. If you have a loan or lease, the lender or lessor requires it because the vehicle serves as collateral for their financial interest. Once the vehicle is paid off, the choice is yours. Whether it makes sense to keep collision depends largely on the vehicle's current market value. On an older car worth $5,000 to $7,000, paying $500 to $700 annually for collision means you could spend one to two years of premiums and still net less than a total-loss payout after your deductible.

A higher collision deductible lowers your premium meaningfully -- sometimes 15 to 25 percent for moving from $500 to $1,000. The right deductible is the highest amount you could pay out of pocket without genuine financial hardship. If absorbing a $1,500 unexpected expense would be a serious problem, keep the deductible at $500 or $1,000. Insurance is most valuable for losses that would genuinely be difficult to absorb on your own, not for every minor scrape or dent that barely exceeds the deductible.