a blue car and a white car in a head on collision

Collision Coverage

This is the THIRD a series of blogs to explain automobile insurance coverage in a way that a consumer can make informed decisions for their needs.

Collision coverage pays to repair or replace a covered vehicle hitting or being hit by another vehicle or another object (tree, wall, etc.) or that covered vehicle overturning, less any deductible you may have. The deductible is an out-of-pocket amount you chose when applying for your policy.

The covered vehicle is usually the one described on the policy, a newly acquired care, or a temporary substitute. A newly acquired car is usually one that you purchase/take ownership within a period of days before a claim stated in the policy. A temporary substitute is a vehicle you do not own and replaces yours for a short time while yours is out of use due to breakdown, repair, servicing, or damage. It may be a rental vehicle or one you borrowed.

Under the collision coverage, your insurance policy language may allow your vehicle to be repaired using new, used, recycled and reconditioned parts. Some of these parts are made by manufactures other than the original equipment manufacturers (OEM), also known as after-market parts. The policy language may also allow the use of like kind and quality (LKQ) parts that have been harvested from salvage yards. Many object to the use of these parts. Unfortunately, the policy is a contract that you accepted the terms of when you paid your premium.

Collision coverage does not pay for any reduction in value of your vehicle. It also allows the insurance company to deduct any “betterment” you received as a result of your claim. While this is rare, it often occurs when items such a tires, batteries, etc. that have a measurable reduced life are replaced with a new one. Betterment may also apply to an all-over paint replacement when the original was faded or damaged. The principal of insurance is to restore your vehicle to pre-loss condition. If the repairs make you “better” than your vehicle was before, betterment is applied and you would have to pay the difference.

If your vehicle is deemed to be a total loss, the insurance company should conduct a market study in your geographic area to determine the fair market value (FMV) immediately before the crash. FMV is the amount the same year, make, model, options, conditions and mileage would have sold for. Factors such as sentimental value or routine repairs/maintenance do not increase the evaluation. Once a fair vehicle value is determined, sales tax and tag transfer fees will be added before the deductible is applied. If your vehicle is financed, the lien must be satisfied first. Any leftover equity will be paid to you.

If another party is at-fault for the crash that caused your vehicle to be damaged or rendered it a total loss, you can choose to use your collision coverage or pursue a claim on your own against the at-fault’s insurance carrier. If you decide to use your own collision coverage, your insurance company may take steps to collect what they have paid and your deductible from at-fault party or their insurance company in a process called subrogation.

Mark Myers, Investigator
Lilly, & Brown, LLP Lakeland, Florida