Auto insurance is designed to protect you from financial losses if/when there's an accident or event that destroys the vehicle. Unfortunately, a lot of people don't understand how auto insurance works and expect everything to be covered each time they file a claim. Unfortunately, not all losses are covered if you have a limited protection policy. Here, you'll find a few tips to help maximize your protection so you won't find yourself hurting financially when you need the help most.
Full-Coverage doesn't Mean Fully Protected
You call your agent and tell them that you need full-coverage insurance for a car that you've financed. When you finance a car through an auto loan, you will be required to maintain a certain level of coverage — it is full-coverage in a sense, but there will still be situations in which you'll need to open your wallet if you don't know how your policy is set up.
Look at the deductibles — not just the premiums. Sure, you might fight a deal to get your monthly payments lowered, but that usually increases the deductibles on the policy. The higher the deductible, the lower the monthly premium. The downside is, if you're in an accident and your deductible is set at $1000, you'll have to pay that $1000 for repairs or to replace the vehicle — this can make it difficult to pay off the loan so that you can retrieve the title and recycle it if it's been totaled.
Keep your deductibles set at rates that you can afford to pay if there's an accident — working with your agent to find a good balance between an affordable deductible and affordable premiums is the best way to ensure that you're fully protected without paying more than you need for the policy.
Gap Insurance Coverage
Another type of insurance to consider looking into is gap insurance coverage. This is coverage that is typically offered by the lender, but some auto insurance companies do offer some protection, as well. This insurance covers the difference between the value of the car and how much you owe on it if it's totaled. This way, if the value of the car is more than what you owe, you won't be the one held accountable for the difference — the gap insurance will cover it. It could be paid out, or they could contribute a certain dollar amount towards the purchase of your next car.
Talk with your auto insurance agent to learn more about tweaking your policy to ensure that you're protected without overpaying.