Collision insurance in the United States is an insurance policy for a vehicle which covers the owner for the loss or damage of their vehicle in the event of an accident. If the owner does not have collision insurance they are liable for the costs of repair or replacement of the vehicle and not the insurer.
Collision insurance is an optional part of auto insurance in the United States for most vehicles, but some companies may insist that you take collision insurance if your vehicle is bought under finance or hire-purchase agreements. This is to ensure that the owner of such vehicles has some coverage to meet their obligations under the agreement (in terms of monthly payments) in the event that a vehicle is written off.
When you rent a car in the United States the rental company will usually specify some form of collision insurance as a mandatory part of the rental agreement, this is often referred to as the collision damage waiver (CDW) or the loss damage waiver (LDW). If you have appropriate “any vehicle” insurance it may be possible for this to be used instead of the rental company’s provider as long as the level of insurance is high enough to mitigate most of the risk for the rental company.
Why would I want collision insurance?
For most vehicle owners the cost of replacing a vehicle can be prohibitive and many owners will rely on their car for the commute to their job and/or reasonable mobility. If this is the case you should ask yourself, “Can I afford to buy a new vehicle if mine was destroyed or can I afford to repair it if it is severely damaged in an accident?” (and almost as importantly “And would I want to?”) If the answer to these questions is “No”, then you should seriously consider talking to your insurer about adding collision insurance to your vehicle’s policy.
Is there any deductible for collision insurance?
In most cases, the answer to this question is “Yes”, so before your insurer will pay the benefits due to you under your level of collision cover you will need to pay a deductible. This deductible will be defined in your insurance cover and is normally a fixed sum and not a percentage of the insured amount or claim. If you want to know the deductible you will pay, you should review your insurance contract or contact your insurer for more information.
(To read more about collision insurance outside of our glossary, please read our more detailed article on the subject.)