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The short answer is of course not, everyone knows that car insurance, no matter how minimal or luxurious the coverage options, won't cover everything. The important thing is to understand what might be missing before you have a claim.
The Big Things: Insurance Coverage Limits and Selections
Often the largest cost component in most auto insurance premiums is the portion for liability insurance. The coverage, as the name suggest, pays out when you or a driver covered under your insurance policy injuries someone or damages another car or other property. Taking lower limits on this coverage can cut premiums by hundreds of dollars but does it make sense to do that? A difference of a few hundred dollars in premium is also the difference of a few hundred thousand dollars in insurance protection. That protection may be all that stands between you and continued homeownership, your savings, and keeping your future earnings from being garnished.
Another significant cost component are the insurance policy parts that cover your car. To over simplify, collision coverage pays out when your car is damaged while it's being driven, irrespective of fault. Comprehensive pays out when your car is parked and is damaged, as when a tree falls on it, for instance. There are exceptions to this; windshield repair or replacement is a comprehensive coverage, whether your car is underway or not. Damage caused when you hit a deer is als a comprehensive coverage.
You don't choose policy limits for comprehensive and collision, you either have these coverage or you don't. You do get to pick the deductible though. Higher deductibles reduce premiums, just be sure to pick an out-of-pocket option that you can afford to pay if your vehicle is damaged. Collision and comprehensive coverage are required by lenders and are policy options that can easily be thought of as required for new vehicles due to the dollars at risk if a new car is totalled. As vehicles age, collision coverage is often dropped after a point, and as a vehicle ages further, comprehensive coverage is typically dropped as well. The timing of these policy changes will vary from vehicle to vehicle since different cars depreciate in value at different rates.
The Little Stuff Can Be Big
Auto insurance can also include an often overlooked coverage component that pays for the medical costs of drivers and passengers injured when you or other covered drivers are at the wheel. Sometimes this coverage will also pay for lost wages. In some states this coverage is called Medical Payments, in others it is called Personal Injury Protection (PIP). Foregoing or reducing med pay and PIP can lower auto premiums quite a bit, but again, it may not be the best way to manage insurance costs. Consider, for instance, if you have health insurance with a high deductible or maximum out of pocket limit. Using PIP or med pay in the event of a car accident instead of your health policy can mean the difference between bearing the cost of $5,000 or $10,000 in medical care or having that taken care of.
Custom Or Off the Shelf?
Car insurance doesn't come with the dizzying array of options that accompanies homeowner insurance but there are some worth considering. Here are a few:
- Rental reimbursement:
If you car is laid up for repairs for an extended period, and you don't have an alternate ride, it might be nice to have the insurance company pay for a rental car for you. - GAP:
The moment you drive a new car off the dealer's lot it is no longer new and the value of your car may depreciate faster than you loan balance. GAP insurance will keep you from getting upside down. Nobody wants to make car loan payments for a car that has been totaled. - Roadside assistance:
Strictly speaking, this isn't insurance, but it will sure seem like it when a spouse or child is driving far from home. - Customized parts and equipment:
Insurance policies pay for repairs based on original manufacturer's equipment, so if you plan on pimping your ride, look into this coverage.
You Don't Pay for Service...Or Do You?
Service doesn't show up in auto insurance premiums but there is a benefit to good service and a cost to sub-par service. Consider these scenarios:
- Scenario #1:
You buy a new car, report it to your insurance company, but you never receive confirmation that your new care was added to your policy. A week later your car is totalled. You can imagine the fun and excitement involved untangling the ensuing mess. - Scenario #2:
Your car is damaged in an accident so now...you have to get repair estimates, have those approved, have the work done and then get that approved. With the wrong insurance company that can eat up a lot of your time and add unnecessary anxiety to your day-to-day schedule.
Sometimes It Just Pays to Ask an Agent
Getting a comparative quote is only part of the process of purchasing auto insurance. Picking the right coverage, the right limits, the right deductible, and the right insurance company are just as important as that premium comparison. There is no need to overlook those additional complexities, that's why we're here, to make the process easier and the outcome better for you. Just ask an agent.