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Insurance: Collision Coverage

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Jeff Sevey

We’d all like to think that having an auto accident simply won’t happen, but even if you’re the most careful driver under the sun, you can’t control the actions or attention of other drivers around you. In fact, research shows that nearly 2.5 million people are injured or disabled and over 37,000 people are killed in car crashes every year in the United States.

They say the average driver in the U.S. will get into an accident on average about once every ten years - more than that in urban areas or while driving during high-risk times. And nearly every one of these accidents will result in some type of damage to your vehicle. That’s where collision insurance coverage becomes important.

When Does Collisions Coverage Protect You?

There are three instances where collision coverage can protect you in the event of an accident.

  1. If you’re at fault for an accident and you damage your own vehicle, collision coverage will pay the cost to repair or replace the vehicle. The value of a replacement will be the current market value of the damaged vehicle.
  2. If another driver is at fault for an accident, collision coverage will pay for the damages to your vehicle, and then your insurer will seek reimbursement from the other driver’s insurance company.
  3. Collision coverage will also pay for any damages to your vehicle in situations that are not covered by the other parts of your auto insurance policy. For instance, if you don’t carry comprehensive coverage, you can usually claim losses from theft, acts of nature, or vandalism under your collision coverage. If your car is damaged in a hit-and-run by another driver who has no insurance coverage, your collision coverage will pay to fix those damages.

Is Collision Coverage Mandatory?

In the state of California, collision coverage is an optional addition to your existing car insurance policy. If you choose to add collision coverage, your premium will increase, but this increase depends on several factors such as your personal driving record, credit score, level of education, and driving habits, just to name a few. Get quotes from multiple insurance providers before you make your decision, and make sure you’re comparing the same dollar amount of coverage and policy limits when you do.

Deciding If Collision Coverage is For You

Because collision coverage is optional, you may want to consider a few factors before purchasing the coverage, as the premium you pay may not be worth what you get from the insurance, should you have to use it.


  • What is your vehicle worth? If you own your vehicle outright and it’s worth a few thousand dollars or less, it might make more sense to pay out-of-pocket for accident damage rather than pay high deductibles or high premiums. If your vehicle is worth significantly more than that, collision coverage is most likely a smart idea.
  • Do you have a loan or lease on your vehicle? If you do, your lien- or lease-holder probably requires you to carry collision coverage on your car. Even if they don’t require it, it’s a very good idea to opt for the coverage. And here’s why: let’s say you purchase a $20,000 vehicle brand new, and one year after you purchase it, you’re in an accident and your vehicle is a complete loss. You now owe thousands of dollars on an auto loan, with no vehicle to show for it, in addition to having to purchase another vehicle. Collision coverage can help you recover at least the vehicle’s depreciated value.
  • Be aware of depreciation. If your car is newer, or you have a loan or lease, collision coverage is a great idea. When you reach the point where your collision coverage premiums exceed the value of your vehicle, you could safely drop your collision coverage, if you then own the vehicle outright.
  • How at-risk are you? If you drive in an urban area where accidents are more prevalent, or you simply drive a lot, go with collision coverage. If your vehicle doesn’t get driven much and you’re putting less than a few thousand miles on it a year, your accident risk may be very low, and you might not be able to justify the cost of collision coverage premiums.

Collision Policy Deductibles and Limits

When you purchase a collision policy, you'll be able to select your deductible amount. This is the amount you'll need to pay out-of-pocket for a claim before your insurance is activated. In general, the higher the deductible, the lower the premium payment. Alternatively, the lower you set your deductible, the higher your premium payment will be.

Here’s now a deductible works: Let's say you have chosen a $500 deductible. You've accidentally hit the car in front of you while driving, and the damage to your vehicle comes to $1500. If your claim is covered, you would pay the deductible of $500, and the insurance company would pay the balance of $1000 out of your policy. This may seem like the deductible is quite expensive. But consider a situation where, instead of hitting a car while driving, you cause an accident where your car flips and is deemed a total loss. In this scenario, you would only have to pay the $500 deductible, and your insurance company would issue you a check for the value of your car (up to the limit of your policy) with which to purchase another vehicle. Now that $500 doesn't seem so expensive at all.

Each insurance policy also has a limit of coverage. The limit is simply the maximum amount the policy will pay toward a covered claim. For a collision insurance policy, the limit is normally the cash value of the vehicle. And this makes sense. Due to the nature of a collision policy, it will only pay the cost to replace your vehicle at its current value, but no more than that.

There are several factors to consider when deciding whether collision coverage is an intelligent choice for your particular situation. If you have gotten into an accident that wasn't your fault and suffered significant injury or property damage, the attorneys at The Sevey Law Firm would like to invite you to come in for a free, confidential consultation. We can be reached at (916) 788-7100 or through our online contact page.

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