Authored by Kumara Velu in Insurance
Published on 04-13-2009

Collision coverage for your car is optional in most cases. However, there are good reasons why you should consider including it in your car insurance policy. Collision coverage pays for damage to your car in case of an accident. It doesn’t cover the damage you cause to the other driver’s car though. You may say that you can always sue the other driver who causes damage to your vehicle. So, why buy collision damage insurance?

Here are some reasons:

You may be a safe driver. You don’t foresee yourself colliding with other vehicles. However, unavoidable things can happen while you’re on the road. You may end up causing an accident or be found responsible for one. This is when collision coverage comes in handy. It will cover damage to your car.

Sometimes there may be a situation where there’s a dispute as to who is in the wrong in an accident. It could lead to lengthy legal proceedings. With collision coverage, your insurance company will send your car for repairs while taking care of your claim against the other driver. This process is also known as subrogation.

Also you may meet with an accident situation in which the party at fault doesn’t have liability insurance to cover your damage. In this instance, you can rely on collision coverage to put right the damage done to your car.

Sometimes you may inadvertently crash your car into a lamp pole or a tree and damage your vehicle badly. You can’t sue anyone in this instance. If you have collision coverage, the damage to your car will be taken care of.

Cost

How much will collision coverage cost you? It depends on the make of your car and its value. If you own an expensive car or one that can be easily damaged in an accident, be prepared to pay a higher premium. Also vehicles that are easily stolen and hard to repair will have you fork out more dollars for coverage.

However, in the event of an accident, don’t expect the insurance company to pay you above the car’s cash value. This means you will only receive the market value of the car before the accident after the salvage value of the damaged car is deducted.

Disputes

If your car is worth $5000 before the accident, and the repairs are expected to exceed that amount, the company can pay you that amount and take your damaged car. If the company decides to have your car totaled, it may want to pay you anything from 75 to 80 per cent of the car’s retail value.

If you think your car is worth much more than that, you can challenge the adjuster’s assessment. You can talk to a senior adjuster to obtain a claim which reflects the true value of your car.

You can also seek advice from your state insurance commissioner or take your case to arbitration. Of course, as a last resort, you could file a suit against the insurance company.