Collision and Comprehensive Coverage
Collision coverage pays for the repair of your automobile if you are involved in an accident. It is not fault-based. It will pay for the repair or total loss of your vehicle if you are involved in either an at-fault or a not at-fault accident.
Generally speaking, there are no coverage limits associated with collision coverage. If your insurance company insures your new Mercedes, and that vehicle is a total loss as a result of the accident, they will pay the actual cash value of your vehicle.
On collision coverage, most people believe an insurance company would pay you the Kelley Blue Book price on your vehicle. Insurance companies do not use retail value to determine the total loss value of the vehicle. They use something called “Actual Cash Value”. Actual Cash Value lies somewhere between the price that you would pay if you purchased the vehicle from a private owner and the retail value of your vehicle.
Obviously, if a vehicle is sold for retail value on a car lot, it will be more expensive than what you pay when you buy the same vehicle for from a private owner. Used car dealers usually invest at least $1,000.00 of repairs into vehicle before they place it on the lot to sell it for retail value. All insurance companies subscribe to computer services which determine the actual cash value of vehicles.
With collision coverage, one problem often arises. In the event you buy a new vehicle, and you drive it off the lot, the vehicle is worth less than what you paid for it. This is due to the depreciation in value between a new vehicle and a used vehicle. If you have a loan on your vehicle, the actual cash value of your vehicle can be less than your loan. We call this difference in value “a Gap”. If your vehicle is financed, you can purchase Gap insurance from your finance company. When a vehicle is leased, the residual payments on a lease can be greater than the actual cash value. If you are leasing a vehicle, once again, you should consider Gap insurance.
In the event you have a “classic” vehicle or a “collectors” vehicle, an insurance company will not pay you the value of that vehicle. For example, if you have a 1962 fuel-injected Corvette, which is in pristine condition, and it is worth $250,000.00, rest assured your insurance company will not pay you the value of that vehicle. If you own this type of vehicle, you should obtain “Stated Value” insurance for that vehicle. This insurance, in the event of a total loss or theft, will pay the stated value of that vehicle. There are companies that specialize in insuring classic vehicle such as Hagerty Insurance. My partner, Donald C. Kudler, Esq. had a good experience using them to insure his classic vehicles.
Comprehensive coverage will pay for the repair or replacement of your vehicle in the event your vehicle is damaged by anything other than an auto accident. For example, if a tree falls over on your vehicle, and your vehicle is damaged, this loss or total loss will be covered under your comprehensive coverage.
Collision and comprehensive coverages usually have deductibles associated with them. Your deductible can be zero, $250.00, $500.00, $1,000.00, or higher. Collision and comprehensive coverages with no deductible are more expensive than collision and comprehensive coverage with a $1,000.00 deductible. You should consider your financial status and the differences in premiums to determine which deductible is best for you
