(MONEY Magazine) – Like the sound of screeching tires and breaking glass, an Illinois state court decision is grabbing the attention of motorists nationwide, who are now wondering if their collision insurance is adequate. In October, a Marion, Ill. judge and jury awarded a whopping $1.19 billion in damages in a suit against State Farm, the nation's largest auto insurer, finding that it deceived its policyholders. Not only did State Farm stipulate that generic or after-market auto body parts be used for collision repairs instead of new parts made by a car's original manufacturer, the court determined, but it also failed to make that stipulation clear to policyholders. The suit dealt only with sheet-metal body parts, not mechanical parts like shock absorbers and engine components. State Farm, which is appealing, says its sales materials are clear about its stance on replacement parts.

If upheld, the verdict could increase insurance premiums nationwide--but you ought to have two more immediate concerns. First, you should find out whether your insurer will pay for manufacturer's parts to repair your car's body if you're in an accident. The only way to know for sure is to read your policy or ask your agent. Allstate, the second biggest insurer, pays for manufacturer's parts if you insist on them. But we found that most major insurers have the same policy as State Farm's: If you want manufacturer's parts instead of cheaper generic ones, you have to pay the difference. How much? Plenty. A new hood for a 1995 to 1999 Chevrolet Lumina, for example, costs $545 from General Motors and $279 from an independent supplier.

The second issue is whether it's worth paying extra--either for the manufacturer's parts themselves or for insurance to cover them. Unfortunately, however, opinion differs sharply on this point. The Consumer Federation of America, for example, says generic parts are just as good as the manufacturer's, while a Consumer Reports test shows generic parts don't fit as well and are more likely to rust. And evidence presented at trial apparently convinced the Illinois jury that generic parts hurt a car's resale value.

So what's the answer? Ultimately, we think you should pay extra only in two circumstances. No. 1: If you plan to trade in or sell your car within a year, you stand to lose a significant amount of money if the buyer or dealer isn't happy with the repairs--so spring for the manufacturer's parts. No. 2: If you like to have your car serviced by the dealer, it's worth getting a policy that will cover that choice.

How much more will such insurance cost? That depends on several factors, including your age and driving record. But when we checked with the Chubb Group, one of the few insurers heavily marketing this kind of coverage, we found that geography often makes a difference. A typical family in an upscale New York City suburb, for example, would pay close to $700 more a year for the Chubb coverage compared with the lowest-price policy from discount insurer Geico. The same family would pay just over $100 a year more if they lived in a comparable Atlanta suburb.

--Jerry Edgerton