San Diego Car Accident Lawyer Blog

Earlier today in the health care debate, President Barack Obama used this analogy about his prior experience with auto insurance to support his argument for health insurance reform:

OBAMA: ... You know, when I was -- when I was young, just got out of college, I had to buy auto insurance. I had a beat-up old car. And I won't name the name of the insurance company, but there was a company, let's call it Acme Insurance in -- in Illinois. And I was paying my premiums every month. After about six months I got rear-ended, and I called up Acme and said, "You know, I'd like to see if I can get my car repaired." And they laughed at me over the phone.

Because really, this was set up not to actually provide insurance, what it was set up was to meet the legal requirements. But it really wasn't serious insurance.

Now, it's one thing if you got an old beat-up car that you can't get fixed. It's another thing if your kid is sick or you've got breast cancer.

Now, I'm no fan of auto insurance companies. I think they try everything they can, fair or unfair, lawful or unlawful, to reduce the amount they pay out on claims to the detriment of injured people. But, I do not believe for one second that the President's story is accurate.

Here is why.

Obama was dealing with his own insurance company. That is what is known as a "first party" claim when he reported the damage to his insurance company. It is known as a first party claim because he had a direct contractual relationship with his insurance company. When you have a first part claim, insurance companies are not so brazen as to deny a claim and laugh at their customer. Sure, they might lowball his claim payment but typically they do not deny the claim outright.

Assuming that his insurance company actually denied his property damage claim, the reason most likely is that Obama had failed to purchase collision coverage for his insurance policy. Therefore, he did not have the right kind of coverage to pay for the damage to his car (this also assumes that the other driver, who sounds like he was actually at fault, did not have insurance--if he did have insurance, Obama should have filed a claim with the other driver's insurance company). Collision coverage is available to pay for damage to your property, such as your vehicle, when either you damage your own property due to your carelessness (backing into a tree, for example) or if your car is damaged by an uninsured motorist. In California, a driver is not required to purchase collision coverage. It is completely optional.

It is most likely that Obama, when he was young and not making very much money, decided that he would not increase his insurance costs by purchasing collision coverage. That may have seemed like a very prudent decision given that Obama was driving an old beater that was not worth much money.

Unfortunately, that decision is often short sighted. This is a decision made by many Californians each year. I have seen many clients who completely lost their car after an uninsured motorist destroyed their car. With no insurance for the at fault driver and no collision coverage to pay for the damages, the car is simply lost forever.

While it may seem a good cost saving measure not to pay for collision coverage for a car worth $3,000 or less, I can assure you that the cost of replacing your vehicle after a total loss will seem insurmountable unless you have collision coverage. Your decision to save $20-40 a month will seem poor when all of a sudden you must pay $3,000 for a new vehicle.

Don't be an Obama. Purchase collision coverage for your auto insurance policy.