Collision insurance coverage pays for damage caused to your vehicle in an automobile accident, when you are "at fault". A standard collision automobile insurance policy will pay for any repairs up to the fair market value of your car.
It should be remembered that in the case where your car is a complete loss the insurance will only pay for the fair market value of your car. This can be considerably less than the price to replace your vehicle. For example if you drive an older model car that has a book value of $1500.00 or less, and the cost to repair the damage exceeds $1500.00 you will only receive the fair market value of your vehicle,not the repair cost. In effect you will either have to spend the extra money to repair your vehicle or to buy another car at a greater cost to you.
This is often why some drivers elect not to carry collision insurance on an older model vehicle. This is important coverage to have when renting a car. Collision coverage usually also comes with an insurance deductible. It's the amount of money you pay toward repairs before your collision insurance kicks in. The higher the deductible you're willing to pay, the less the collision policy will cost you. Collision insurance coverage is not required by law in any state. However, if you're driving a car purchased from a dealership or financed through a lender, you may be required by the dealership or lender to carry collision insurance.