Premium estimates in auto insurance, a good idea.
Too often we contract auto insurance like we are buying cereal at our local corner stone. “Yes, that one looks good, it says it is healthy, help you lose weight and is full of chocolate”. Just like it is a good idea to compare prices when you are shopping for a house, a car or an engagement ring, car insurance is an expensive and vital part of the life of any driver. Car insurance is not a tangible asset but can save all your other assets. Without good insurance you could lose everything you have if you are liable for an accident and you don’t have suitable protection. On the other hand, if your protection is great but you are paying a high premium, you might be spending more on insurance than your car is worth. As the Spanish proverb goes: “You don’t kill flies with cannon balls” you want to get the right tool for the right job. This article is all about how you can do that without losing too much money and time in the process.
As with any worthwhile endeavor, one must plan ahead for it to be successful. In the case of auto insurance this will mean deciding what your priorities and auto insurance needs are. If you are not sure what we mean by this I recommend you read our other articles on this blog that give more information on specific types of coverage. Here is a brief summary. There are three main kinds of auto insurance coverage.
1) The coverage you receive for damages to your car when it is your fault, what is called Collision Damages coverage. This coverage is rather expensive because it binds the auto insurance company to cover your damages even though it might be your own fault for bad driving and insurance companies always like to involve the policy holder in sharing the risk and making them responsible for their own actions as much as possible. It is a good idea to think how much your car is actually worth. If it is a new car it might be a good idea to place some importance on this coverage. If it is a second hand car that is not worth much more than 2000$ it might be cheaper to save money on this type of coverage.
2) The coverage of any liability for damages caused to others. This is the most important type of insurance as it can save you from bankruptcy. Any personal and material damages you cause with your vehicle are your responsibility and without this coverage you are in serious trouble. Make sure this insurance coverage is at least over the minimum set by the state or country you live in, and as high as you can reasonably afford.
3) Medical coverage will pay for any medical expenses that you incur in an accident even if you are at fault. This type of coverage is important as you or your passengers might not be able to afford treatment without it.
Plan ahead, ask for premium estimates with the options you decide you need and enjoy your ride with the peace of mind that good insurance brings.
Auto insurance and Gap protection, the insiders’ story.
It seems that nowadays there is an insurance for everything. When you ride a bus, a percentage of the ticket price is to fund your insurance. When you take a flight a large part of the cost of flying is spent on insurance. Going to school, buying at your local supermarket, riding a roller coaster, manufacturing and selling anything all require generous dosages of insurance.
Auto insurance is no exception, nearly every driving activity has its own special insurance. You need liability insurance to even own a car legally If you drive outside the country you are going to need extra insurance. If you own any accessories in the car or you can’t afford to buy another car if yours is stolen, you need insurance for theft.
There are so many kinds of insurance for so many eventualities that you might be surprised to find there is a gap protection insurance also. A gap between what? Can they fit any more insurances? The answer is yes. Although it is true that our “developed” world has no shortage of insurances it is also true that it has no shortage of caveats, clauses and lawyers. Auto insurances provide a service, a very useful service, nevertheless they are out there to make a profit. Profits aren’t made by paying for every claim that is made.
There are also ocassions when insurance although claimed and approved does not supply the funds necessary to cover the loss. This is the raison d’etre of Gap protections. This is better explained with an example. Imagine you have adequate insurance, you are a planner and you always plan for every eventuality. This is why you have a fully comprehensive insurance. Unfortunately you crash straight into a brick wall totaling your three year old car. The ice on the road was not your fault but you can’t blame anybody else either. Your insurance will pay for your damage but only up to a percentage (this varies between policies, typically around 80%). That is great. You paid 14,000 dollars for your car 3 years ago, you still half to pay for 8,000 dollars and the market value of the car is 6,000 dollars. The insurance company might pay 80% of the market value, 4,800 dollars. That leaves you with 8,000 dollars minus your super settlement of 4,800 dollars. In other words you are out of pocket by 3,200 dollars. That is assuming you don’t have a deductible on your damages insurance. If you do, add that to your out of pocket figure.
Gap protection would have avoided that. Gap protection will cover the gap between the amount you receive in settlement for your claim, the deficiency balance with a total loss, and will pay for the deductible on your insurance. Add to this any delinquent payments like taxes and past due charges which are also settled by the Gap insurance. Most Gap insurances also include theft insurance, making it a nice piece of insurance if you haven’t spent all your income on the other 20 insurances you have.