Collision Coverage

Part II

Collision Coverage is design to put you back in the position you where right before the accident. But the way the policy is written, they will exclude repairs by dealerships and will give them the ability to give use parts. They will be using Reasonable and Necessary Clauses to get away with that.

The clause Reasonable and Necessary (I will nickel and dime you clause), will be used for the labor. For the labor? Yeah, if your beautiful Honda was hit, forget about going to the Honda dealership. These fortune 500 companies feel that this is too expensive for them. Therefore, you had better find yourself a second grade body shop that will do the work. The insurance carriers will average what the on going hourly rate in your market for the type of work your car needs and pay the average.

If the average rate is $40/per hour, then that is what the insurance carrier will pay and not a dime more. Often times the adjuster or the field representative will negotiate this rate with the body shop and they can get a discount on the labor rate, but if there is no agreement and the body shop charges $44 dollars/per hour, then you will be on the hook for the difference. Dealership rates are often times in the $75 to $80 per hour therefore forget about the dealership or prepare yourself to pay for the difference.

I think this is highly unfair yet it is legal. Several non-dealership shops are very reputable and do a great job, as much as there are many shady ones. Your insurance company by law cannot require you to go to a specific body shop or mechanic.

This is your vehicle and therefore you make the decisions, but they can tell you what rate they will pay (this is just leverage against you). They really take choice away from the consumer.

So what do I do?

Well, as mentioned above you can either pay for the difference for parts and for labor out of pocket (can get very costly), or you can become the biggest headache to your insurance company.

How? Under Collision Coverage and other sections of the policy gives you the right to review every estimate, every part, every bodyshop move (all very time consuming). You should ALWAYS ask for WARRANTIES (on writing that is).

You can also ask what body shop they recommend. Again, since they cannot tell you where to go, they will not give you just one choice (unless you live in a town where there is only one bodyshop). What they will do is give you a list of body shops and you pick one. It will be something like �Well sir, we do not recommend anyone, but we have a few body shops around town that we work with, we can tell you the closest to you and you can make a choice�.

If you do this, you will have more protection. Since these body shops work on the daily basis with your insurance company (trust me, they refer so much work that the insurance company virtually rules these businesses), the insurance company can tell the bodyshop how much the will pay and make sure that the job gets done.

This is good from the point of view that you can just let the two figure out the repairs and you can just pick up your car when it is done. The second good thing that some insurance companies (Safeco is one of them) have is what is called a letter of guarantee. The body shop will issue a warranty on the repairs, paint job, and parts, so if you ever have a problem you can come back (a good thing since you have OEM parts in your vehicle).

The next subject that is important to remember under Collision Coverage is the leverage the insurance company can use against you.

When you own your car, you have a title on your hand, the insurance company will issue a check to the owner of the car and the policyholder (could be the same person, couple, or different people). All the parties have to sign to get the funds. If this is the case, the insurance company will pay your damages minus your deductible.

However, when you have an auto loan things are different. If you have an auto loan, you will be required to have this coverage in your policy, and your bank will double check for this.

Be aware however, if you are getting a car loan, and your bank does not require proof of insurance, then the bank will probably open a policy on your behalf. They will take part of your car payment to pay for it. These policies are anywhere from five to seven times the premium you would pay on your own. Nevertheless, most (reputable) banks require Collision Coverage.

The reason why banks required Collision Coverage in the policy is because they know that there is protection for them (banks are not stupid, just like insurance companies).

Lien holder and financial clauses are not in the Collision Coverage section. They are however in your policy. These clauses will protect the lien holder interest on the vehicle. This means that if the insurance carrier just decides to pay for the damages because you cannot come to an agreement with them, then they can just issue payment to bank! And what do you think the bank will do with the funds? It will be applied to your loan balance!!!!! Forget about getting the car fixed! Even if you have Collision Coverage.

They can do this by simply giving you a check with your and the bank�s name on it for total damages minus deductible amount. You would have to have their signature to cash the check, in which case they will just retain the funds, or as mentioned above, they can just send a check to the bank. Again, they have a lot of leverage against the consumer.

So if there is a lien holder on the car, make sure they send payment to the body shop and not the bank!

Remember, you never have to pay your deductible directly to the insurance carrier. You either get a check for total amount of damages minus deductible, or the insurance company pays the bodyshop directly, and you have to pay to the bodyshop your deductible when you pick up your car.

Some insurance companies (like Travelers, Safeco, All State, and others) in their Collision Coverage have Deductible forgiveness clauses. They are often times in this part of the policy (they are hidden on the policy, so do not expect the insurance company to come out and call them that).

These clauses �forgive� your collision deductible all together if the collision that you had was with another auto insured by the same company. So a collision of Safeco v. Safeco will not have COLLISION deductible (could still have Uninsured property damage if you do not have collision). Be aware of this, I caught many claims where adjusters just forget (whatever) to tell you this. This could be a significant savings to you.

So if you back up and hit your wife or husband�s car, guess what? There is a big possibility that there is no deductible for the damage to any vehicle.

If you have a collision claim, the towing charges will be covered under Collision Coverage (no need for towing coverage, read more on towing coverage). However, rental coverages will be excluded. You need rental or loss of use coverage.

Collision Coverage will cover your car, but it will not cover rental or dealership repairs. Be sure to read this section carefully to identify what is covered and what is not.

To read the Collision Coverage Page 1, Click here.

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