Preferred Financial Group

"We listen, we educate, then we perform like no one else in the industry."

 Frequently Asked Questions

"What Is Collision Coverage?"


Collision coverage can be a very important component of your auto insurance policy. It is an optional coverage and, if purchased, must also be purchased with comprehensive coverage. Collision coverage is not liability coverage, mandated by the states designed to protect others and their property.  Instead, it is designed to repair or replace your car in the event that you are involved in an accident. The accident can be with another vehicle or any other object, stationary or not, and coverage is granted irrespective of who is at fault.


Things to consider:

    • If you have an auto loan or lease, the lender or leasing company actually holds title to your auto. Because of this, they will normally require you to carry collision coverage to protect their interest…They require it, but you pay for it!
    • Since a car can have significant value, it can represent a good portion of your financial net worth. If it is damaged or totaled, repairing or replacing it without coverage could cost you tens of thousands of dollars and have a major impact on your financial net worth.
    • If your car is not worth much due to age and condition, it may not be worthwhile paying for collision coverage, since your insurance company will only pay you current market value in the event of a loss.



Jen was driving her husband Ben’s sports car while he was away on a business trip. She rarely drove the car and so was not too familiar with its handling ability. That posed a problem when she swerved quickly to avoid colliding with another car. She was able to avoid the collision with the car but unable to avoid hitting the tree adjacent to the road. The damage was substantial and Jen knew that Ben would be upset having to pay thousands of dollars for repairs. To her surprise, when she told Ben about the accident, he said not to worry since they had collision insurance. Jen learned that it made no difference whether she had collided with the tree or the other car. Their insurance company would cover the costs of repairs, minus their deductible, in either case.