Liability vs. Collision Car Insurance Explained: Costs, Coverage & Which Is Best for You

Collision vs Liability Auto Insurance: A Complete Comparison for 2025

When shopping for auto insurance, two of the most commonly discussed coverage types are collision insurance and liability insurance. Understanding the difference between these policies can save you thousands of dollars and ensure you’re fully protected in case of an accident.

In this article, we’ll break down collision vs. liability auto insurance, their coverage, costs, pros and cons, and help you determine which one is right for your situation in 2025.

What Is Collision Auto Insurance?

Collision insurance pays for the cost to repair or replace your vehicle if it’s damaged in an accident, regardless of who is at fault. It typically covers:

• Accidents involving another vehicle (even if you're at fault)
• Collisions with stationary objects (e.g., trees, poles)
• Single-car accidents like rollovers
• Damage from potholes

Example: If you rear-end another car and your bumper is damaged, collision insurance will cover your repair costs after your deductible.

What Is Liability Auto Insurance?

Liability insurance, on the other hand, covers damages or injuries you cause to others. It’s required by law in nearly all U.S. states, including Maine, Texas, Florida, and California. Liability coverage includes:

• Bodily Injury Liability (BIL): Covers medical expenses and legal fees if you injure someone.
• Property Damage Liability (PDL): Pays to repair or replace another person’s vehicle or property.

Example: If you cause an accident and the other driver’s car is damaged, liability insurance pays for their repairs — not yours.

 

Key Differences: Collision vs. Liability

Feature	Collision Insurance	Liability Insurance
Required by Law	❌ No	✅ Yes (in most states)
Covers Your Vehicle	✅ Yes	❌ No
Covers Other Vehicle	❌ No	✅ Yes
At-Fault Accidents	✅ Covered	✅ Covered (other party only)
Deductible Applies	✅ Yes	❌ No (for your car)
Premium Cost	Higher	Lower

Pros and Cons

✅ Collision Insurance Pros

Protects your car even when you're at fault

Helps cover expensive repair or replacement costs
Required if you lease or finance your vehicle

❌ Collision Insurance Cons

• Higher premiums
• Not always cost-effective for older cars

✅ Liability Insurance Pros

• Lower monthly premiums
• Meets state legal requirements
• Provides financial protection from lawsuits

❌ Liability Insurance Cons

• Doesn't pay for your own vehicle repairs
• You bear repair costs if you’re at fault

Do You Need Both Collision and Liability Insurance?

In most cases, yes — especially if your car is newer or financed. Liability insurance is legally required, while collision is optional. However, if your car is worth more than a few thousand dollars or still under a loan, collision coverage is often essential.

When to Drop Collision Coverage

You might consider dropping collision insurance if:

• Your car is more than 8-10 years old
• The cost of coverage exceeds the car’s value
• You can afford out-of-pocket repairs or replacement

Use the 10% rule: If collision insurance costs more than 10% of your car’s value annually, it may not be worth keeping.

Average Cost in 2025

• Collision Insurance: $290–$550 per year (varies by state and vehicle)
• Liability Insurance: $480–$800 per year (depending on coverage limits)

Bundling both with comprehensive coverage often gives better discounts.

Final Thoughts: Which Is Right for You?

Choosing between collision vs. liability auto insurance depends on your financial situation, car value, and risk tolerance.

• If your car is new or financed → Get both
• If you drive an older, paid-off car → Liability may be enough
• If you want peace of mind from any accident → Include collision