subject: 4 Important Auto Insurance Issues That Are Often Ignored [print this page] Consumers have enough on their minds these days without worrying about car insurance. Most of us purchase coverage, hoping we will never need it. We drive our vehicles knowing that in the event of a collision, we will receive compensation for damages and injuries. Given this, it is understandable that few people invest their limited time to look closely at their policies, or consider their true coverage needs.
The problem is, a lot of consumers are underinsured, paying for unnecessary coverage, or headed for a costly headache. Few people are aware an issue even exists. With this in mind, we'll address four key issues below that will help you bridge coverage gaps, reduce your rates, and avoid problems down the road.
#1 - You May Be Paying For Excess Coverage
Most people renew their policies, year after year, without considering whether their coverage needs have changed. As a result, many are paying for insurance coverages they can do without. Two examples are collision and comprehensive auto insurance.
Both coverages are valuable, though optional. Collision insurance pays for damages related to accidents. Comprehensive coverage pays for damages and loss due to events unrelated to accidents (e.g. theft, flood, etc.). Here, the problem is cost; both are expensive. This means as your vehicle ages, and its value declines, it becomes more difficult to make a compelling case to carry both coverages. Eliminate them from your policy to reduce your rates.
#2 - What Type Of Replacement Parts Are Used?
This is an element of car insurance that very few people consider when they shop for a new policy. Suppose your vehicle is hit by another driver, creating a need for repairs - both externally and under the hood. The repair shop has two options: they can either install used replacement parts, or Original Equipment Manufacturer (OEM) parts. The mechanic will leave the decision up to you. But your instructions will be based on what your insurer is willing to pay.
Most insurance companies will opt for used parts. After all, they're cheaper. If you only need to replace a bumper, grill, or side mirror, this is unlikely to pose a problem. But what about alternators, catalytic converters, and radiators? If the replacements are in poor condition, your vehicle will break down sooner than it would otherwise. Some components, such as your radiator, play a key role in maintaining the health of major assemblies, like your engine. If your radiator fails, your engine can fail.
When you compare quotes from multiple auto insurance companies, ask how they address replacement parts.
#3 - The Need For Gap Insurance
Gap insurance is used to bridge a coverage gap. It makes up the difference between the outstanding balance on your auto loan, and the amount your insurer will pay in the event your vehicle is totaled. Here's an example:
Suppose you purchase a new Cadillac Escalade for $60,000. You finance the entire amount at 6 percent for a 60-month loan, resulting in monthly payments of $1,270. After three months of enjoying the vehicle, you're involved in an accident that totals it. So, you approach your insurance company to seek compensation.
Your insurer may only pay the market value of the Escalade. Keep in mind that new vehicles lose a substantial portion of their value during their first year off the lot. Consequently, suppose your insurer agrees to mail you a check for $52,000. It won't cover the entire amount owed on your auto loan, especially since the majority of your first few payments have been allocated toward interest.
Solving this problem is the purpose of gap insurance. Unfortunately, most consumers lack this type of coverage without realizing their exposure.
#4 - Your Personal Belongings Are Not Covered
If you keep your laptop, jewelry, clothes, or other belongings in your vehicle, realize they will not be covered if your vehicle is stolen. Car insurance policies do not include coverage for such items. If your car is stolen with your valuables inside, you'll be responsible for their replacement.
The solution is to buy property insurance coverage. Most policies are inexpensive, and will cover any of your personal items left in your vehicle.
Buying auto insurance is rarely enjoyable since it is a product you hope never to need. That said, be sure to consider the issues described above when you compare quotes from insurers. Doing so might save you money now, as well as down the road.
4 Important Auto Insurance Issues That Are Often Ignored
By: Kade Phillips
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