Collision Coverage: What is Covered by Collision Coverage and When Should You Have It

Collision coverage is one component of “auto physical damage insurance”. It is purchased to cover damage to or destruction of an automobile. This coverage applies when there is damage to a vehicle caused by a crash with another vehicle, or object, or even with the road or roadbed.

When a shopping cart impacts your vehicle, your collision coverage applies. If you hit a wall in an effort to negotiate a turn, your collision coverage applies to the damage to your automobile. When you drive down a road and suddenly feel an impact to the underbody of your vehicle, because of a variation in the surface of the roadway, your collision coverage comes into play. Should you suddenly find yourself upside down in your vehicle, after trying to avoid another vehicle that is straying into your lane, collision coverage applies to the damage, caused to your automobile, by its overturn.

Striking an animal, such as a deer or dog, or having a flying bird or reptile impact your vehicle, does not involve collision damage. These events activate the other “auto physical damage coverage” on your policy, “comprehensive coverage”.

Collision coverage varies according to the value of your vehicle and the deductible you choose. The higher the deductible you select, the lower your premium will be. Keep in mind though that when there is a loss, you must be prepared to bear the amount of your deductible up front.

Some insurance carriers will waive the amount of your deductible, if both parties to an accident are insured with the same company. Depending on the laws of your state and the ultimate determination of fault, you may collect back a portion, or all, of your deductible through a process called “subrogation”. Subrogation involves negotiation and possibly “intercompany arbitration” between your insurance carrier and the insurance carrier of the other party in the crash.

If you have an older vehicle, it may not have enough value to be insured for collision damages. When you do not purchase coverage for this reason, you must bear the entire cost of damage if you are involved in a crash. Collision coverage does not pay for the other party’s vehicle.

The other party’s damages are covered by “auto liability coverage”, if you are responsible for the accident. If it is alleged that you are responsible, your insurance carrier investigates the facts of the crash through statements from all drivers, passengers and witnesses, an on-scene investigation of the accident location, inspection of the damages to all vehicles and any other unique elements of the event. When all the facts are in, your adjuster contacts the other party’s adjuster, and each of them presents the case, on behalf of their “insured”, to the other.

When your vehicle is completely destroyed in a crash, or has damage in excess of its value, it is deamed a “total loss” by the insurance company. In this instance, you will be reimbursed for the “actual cash value” of the vehicle, under your collision coverage. The settlement will take the depreciation of your vehicle into consideration. There are a few exceptions to this, such as in the case of a total loss to a newly purchased vehicle, or in the case of a “classic” car which was insured for a stated amount. The later involves paying a substantially higher premium, to cover a higher value vehicle against loss. Note that an older car is not necessarily a “classic car”.

Your damaged vehicle often still has some value, for the undamaged body parts, mechanical equipment and other intact vehicle components. This is the “salvage” value of your vehicle. Your vehicle’s salvage value is determined by obtaining salvage bids from people who are in the business of buying salvage. The high bid determines the value. If you enjoy doing vehicle repairs, or know someone who does, you have the option to purchase the salvage. One word of caution; if you do not do vehicle repairs regularly, buying salvage and trying to return it to serviceable use is not advisable for amateurs. This is a very quick way to get in way over your head. When fully repaired, you must apply to the Department of Motor Vehicles to have the “salvage certificate” converted to a “vehicle registration” in order to drive the vehicle on public roads.

When the total loss value of your vehicle has been determined and the insurance company adjuster extends you an offer, it is just that.  This is the time to pull out your receipts for any recent work done and new parts installed on the vehicle. You can be given credit, which will substantially raise the offer, depending on the nature of work and type of parts. In addition, be sure to check any vehicle warrranty, still in effect, for time remaining on the contract. The time remaining will also be given credit in your total loss settlement.

If you plan to remove any parts from your vehicle, do not expect to be paid for them. If you remove parts for which you have been paid as part of the settlement, you are stealing from your insurance company and can be asked for reimbursement. 

There is no harm in asking for the details of a total loss settlement in writing before agreement to an offer. It is possible that options that your vehicle had might have been missed. Be prepared to document anything that you feel was not taken into account. The original vehicle sticker, sales receipt, or even photographs can be valuable verification of value when negotiating a settlement agreement.

Remember that you are negotiating with your own insurance company, when discussing a total loss, under your collision coverage. Be prepared to accept the fact that you are not insured for the replacement cost of your vehicle. Also be realistic. Any unrepaired damage or wear does have to be accounted for in the settlement. Do not get into an adversarial relationship with your insurance adjuster. Negotiate but don’t attack. When personalities simply will not allow a reasonable conclusion, ask to speak to the supervisor. Realize that the supervisor knows the adjuster better than you, and be courteous at all times. Make an amicable settlement your end goal.

I hope that these tips will make you more aware of the intricacies of “auto collision coverage” and help you to understand, just what it is that you are paying for, when you purchase your insurance.