What is Collision Coverage? - Insurance Navy. Collision coverage is a type of auto insurance offered by insurance companies to help pay for the cost of repair or replacement in the event of damage by another vehicle or object regardless of who is the at-fault driver. If your car is paid off, collision coverage is an add-on option; however, it’s typically required if financed or leased. Collison coverage is designed to cover situations where you are involved in an auto accident or when it flips over. Collision insurance also covers pothole damage or if you hit a stationary object like a heavy telephone pole, tree, tree branches, or guard rails. It is important to note that collision coverage comes with a deductible amount of out-of-pocket costs towards a collision claim before coverage from the insurance company kicks in. However, collision insurance does not cover vehicle damage caused by anything other than a collision.