The car in which Collins and his wife Alana Madill were travelling was hit by a bus near the southern French town of Beziers.
Local officials said the couple were also travelling with their three-month-old daughter Ayla, who survived the accident but is in a critical condition after being airlifted to a hospital in Montpellier.
The driver of the bus, which was carrying tourists, was reported to have sustained light injuries.
The 34-year-old Collins played 48 Tests for New Zealand between 2001 and 2007 and he captained the All Blacks on three occasions.
His international career ended at just 26 when the All Blacks lost to France in the quarter-finals of the 2007 World Cup in Cardiff.
The Apia-born Collins played domestically in New Zealand for Wellington and the Hurricanes and earned his first Test cap against Argentina aged 20.
He had to wait for two years to make his next All Blacks appearance before becoming a mainstay at number eight in the build-up to and including the 2003 World Cup.
Collins played for a series of European and Japanese clubs following his exit from the Test arena, including Toulon, Ospreys and Yamaha.
He returned to playing duties earlier this year with French lower division club Narbonne.
According to a statement from French police, Collins’ partner was driving the car and he was in the back seat. It’s not yet known why she lost control of the vehicle but the car first drifted to the left side of the road, then hit the security railing and shifted to the right side before stopping sideways on the highway when it got hit by a tourist bus.
Local paper Midi Libre said the bus driver freed Collins’ daughter from the wreckage by the time the emergency services arrived.
“The news has shocked us all and our thoughts are with Jerry and Alana’s families at this terribly sad time. We offer our deepest condolences to them and will support them as they come to terms with this devastating news,” New Zealand Rugby general manager rugby Neil Sorensen said.
Hurricanes chief executive James Te Puni said the franchise was shocked and saddened by the news.
“Jerry was a special part of both the Hurricanes and Wellington Lions over the years. He was an extraordinary leader and player, and our thoughts and prayers go out to his family at this time,” he said.
Former All Blacks and Samoan midfielder Alama Ieremia, a close friend of Collins, was also distraught.
“It’s very, very said. I’m saddened because I knew him when he was a young college kid that I picked for the Wellington Samoan sevens team. He was so young but had the heart of a Lion,” Ieremia said. “I knew he was going to be an All Black and he was only in fifth form. I’m going to miss my boy.”