The process of making a claim can become quite overwhelming if you lack the necessary coverage for your losses. Similarly, insufficient coverage might not fully compensate injuries and damages caused to third parties in cases where you are responsible for an accident. Car insurance serves as a safeguard against potential future losses, highlighting the need for thoughtful evaluation of the coverage you may need, particularly in the most unfavorable circumstances. This underscores the significance of understanding your specific auto insurance requirements and structuring a policy that adequately addresses them.
Lack of vehicle insurance coverage can leave you helpless, unsatisfied and financially in a bad shape after a claim. To avoid such a situation, let’s have a look at certain scenarios, what happens in such cases and what you need to do to ensure you are better protected by your policy:
Is Minimum Liability Auto Insurance Coverage Enough?
Many motorists might assume that adhering to the state’s minimum liability limits absolves them of any further obligations. However, this assumption is inaccurate. These regulations are in place to offer a minimal degree of financial protection to unsuspecting citizens in the event of car accidents. They do not represent the maximum level of responsibility a driver holds.
Drivers are legally responsible for the damages and injuries they cause and if their liability car insurance coverage is insufficient to meet all the third-party losses, they may have to pay the remaining losses out of pocket. Assuming it is financially viable, opting to increase the state-mandated vehicle insurance liability coverage limits to more comfortable levels would be a prudent choice. By carefully comparing policies and finding a competitive auto insurance provider, you can increase your coverage while keeping premiums affordable.
Are Your Expectations Realistic?
Some motorists opt for liability-only insurance, assuming it covers repairs or total loss of their vehicles. However, this belief leads to disappointment, as liability insurance only covers third-party losses. To receive compensation for your own vehicle, you must have Collision and Comprehensive coverage. Then, the insurer may pay for repairs or its actual cash value if it is totaled, subject to deductibles.
If you have a vehicle that is still valuable and you cannot cover the cost of repairs or its replacement out of pocket, you may need to consider arranging Comprehensive and Collision coverage to be protected in case it is damaged in an accident, gets stolen, vandalised, or suffers weather related damages.
You May Have to Pay Deductibles
You may be able to increase your deductibles and save some money on your car insurance. However, this strategy may backfire if you are not a good driver and have several claims in a policy term. You need to keep in mind that you pay a deductible for each and every claim on coverage with a deductible. For example, if you have two accidents and make two separate claims on your collision coverage, you will pay the deductible twice. So, when you are setting your deductibles, you should consider the possibility that this might happen and evaluate if you have enough savings to deal with such an occurrence.
You Need Gap Insurance If You Want Your Loan Paid Off
There exists confusion among drivers regarding the compensation they will receive when their vehicles are deemed totaled. Many mistakenly believe they will receive the amount they initially declared on the quote form, but this is not accurate. Insurance companies typically provide payment based on the actual cash value of the vehicle, which factors in depreciation. Insurance serves to reimburse losses, neither more nor less. For instance, if you’ve lost a 6-year-old mid-range family sedan, you will be compensated to purchase a similar car at its current market value.
This is why GAP insurance might be necessary when obtaining a loan to purchase a vehicle. It covers the disparity between the actual cash value of the car and the outstanding loan amount. As a result, you won’t find yourself still making loan payments even after losing the vehicle.
Are There Limits to Your Auto Insurance Policy?
Loss adjusters will only authorize vehicle repairs for damages directly related to the current insurance claim. If you and the garage decide on repairs unrelated to the claim, you will be responsible for covering those costs. For instance, if the vehicle was hit on the right side and there’s an unrelated old dent on the left, it’s unlikely that the insurance will cover the repair for the old dent. In such cases, it’s advisable to obtain a repair quote and negotiate for a more favorable price if you choose to have these additional repairs done. Otherwise, you may be in for a surprise.
Does your Policy Pay for Car Rentals while yours Is Repaired?
Many people are under the impression that they will get a courtesy car or a rental will be paid by the insurers when their own vehicles are down due to a covered damage. Many motorists do rent without checking this point. In some cases, they may have the rental car reimbursement coverage but not enough and they end up paying the difference. Not every policy includes Rental Reimbursement Coverage. Motorists are required to check if this is offered before going ahead with the plans.
Even if you have coverage, it is likely to be for a limited time and up to a certain amount. Normally, it is about $50 a day for 30 days. So, you are not free to spend as much as you like. If you do, you pay the difference. This coverage isn’t normally expensive and you should include it if you would need a rental arrangement in case of insured damages to your own vehicle.
From the examples above, it becomes evident that inadequate or insufficient vehicle insurance coverage can lead to challenges with your claims, potentially leaving you uncompensated for your losses. To address this issue, it is essential to thoroughly assess your requirements and acquire a policy that aligns with them. It is prudent to envision a worst-case scenario and determine your readiness to face it.
While many individuals might find it feasible to allocate a slightly higher monthly budget for an enhanced policy, they may find it challenging to manage substantial losses independently due to inadequate savings. Even if the cost of car insurance you need might seem prohibitive, it is important not to prematurely abandon the search for an affordable option.