All too often, motorists assume that their car insurance coverage will cover the full cost of an accident. Unfortunately, this is not always the case.
Understanding what isn’t covered in your auto insurance policy may be just as important as what is covered — or maybe more important in the event that an accident catches you off guard.
It is important to understand that the dollar amount the state requires for bodily and property damage liability coverage may not be enough to cover all of the damages in an automobile accident. If you have an accident that includes bodily injury to others, you may be sued for an amount that is greater than your policy, and you could lose all your assets as a result. The same result could occur with property-damage liability. If you have an accident and hit someone else’s vehicle, your insurer will take care of the costs, but will only do so up to the limits of your policy. You might not be covered for the complete expense if the other person owns an expensive vehicle. To combat this, you can buy liability insurance with a deductible that starts where your regular policy stops.
Motorists commonly believe that if their vehicle is totaled in an accident, the insurance company will cover the full cost of the car.
Your insurance company will pay you something, but the amount may not be what you expect. In fact, it might not even be enough to pay off what you still owe on the car. Most insurance companies will pay you based on the actual cash value of the car, a wholesale amount. This is particularly troublesome for those who have just purchased a new car, as they tend to depreciate in value very quickly. If this is a concern for you, you should consider purchasing gap insurance to cover the difference between what your insurer will pay for your totaled vehicle and what you still owe on it.
Another common myth is that if someone else hits your car, his or her insurance company will have to pay for the damages. While this is a reasonable assumption to make, it is not always the case. Not all motorists have insurance, and being involved in an accident with an uninsured motorist could cost you a lot. You may wish to consider securing uninsured motorist coverage in case another driver hits you and has no insurance. Adding this coverage to your policy is relatively inexpensive and can save you a lot of grief in the future.