Car insurance is not a fun purchase, but it is an important purchase to avoid financial disaster. More than 6 million car accidents occur in the United States each year, and car theft is on the rise with more than one million vehicles stolen in 2022. Cars can also be damaged or destroyed for many other reasons, including falling trees or vandalism or hail.
Every driver should make sure that they are not forced to drain their bank account to pay for repairs or replacement of their vehicle when something happens. Unfortunately, many buy only the minimum coverage and are left without financial protection.
To make sure this doesn’t happen, drivers should check that they have these four types of coverage because without them, they could be facing a personal financial crisis.
1. Collision coverage
The average price of a new car is over $48,000, with prices driven up by the fact that automakers tend to focus on expensive SUVs and drop base cars from their models. Unfortunately, this means that if a car is involved in an accident and the driver has to buy a new one, they want to spend a lot of money. Repairs can also be expensive, so a driver could be out thousands even when the car is damaged but not destroyed.
If another driver caused the accident, their insurance must pay. But in single vehicle accidents or where the policy holder is at fault, their insurance will not offer any coverage unless they have collision insurance.
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Although some lenders require collision coverage for this very reason, it’s not required by law, so some people consider it optional – but unless the policyholder is wealthy enough to not care about paying cash, for to replace your car, collision coverage really should not be missed.
2. Comprehensive coverage
An accident isn’t the only thing that can lead to buying a new car or needing a major repair. Many other things can go wrong, such as hail, a tree falling on the car, vandalism or car theft. These issues will not be covered without a comprehensive policy.
Comprehensive policies cover non-accident costs and could save a policyholder thousands when a problem occurs. Again, they’re not required unless lenders require them, but those who pass them up will regret it if they have to pay out-of-pocket to replace their car that fell into a pothole or was damaged by a tornado.
3. Rental car coverage
When a car is destroyed beyond repair, it can take some time for the insurer to cut the check and for the policyholder to buy a new car. When replacing a vehicle, it can take days or even weeks to complete.
During this time, most people will need some kind of vehicle to get around – and it will probably need to be rented, as most people don’t just have a spare car sitting around. However, rental cars are expensive and usually cost more than $100 per day.
Car rental coverage is optional and usually not required by auto lenders. But it covers those costs so policyholders don’t go broke paying to get around while they wait for a covered loss to be repaired or a check to buy a new car.
4. Omissions Insurance
Finally, gap insurance can be critical for anyone with a car loan who may owe more than their vehicle is worth. That’s a lot of people, as the data shows that American consumers owe an average of $6,054 more on their loans than the market value of their cars.
Insurers usually only pay what a car is worth if it’s totaled. If that’s not enough to pay off the car loan balance, drivers are stuck paying out of pocket for a car they no longer own. Gap insurance can prevent this by picking up the difference.
Again, some lenders do require gap coverage, but it’s not required by law, so it can be tempting to skip it. Don’t do this, however, as paying off a large car loan can be a huge financial burden.
Skipping any of these four types of coverage is a bad idea for most people. Drivers should check their rules today to make sure they have all these covers – and they should let their car insurance company or agent know they want to buy them as soon as possible if they don’t.
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Skipping These 4 Types of Auto Insurance Coverage Could Be Facing Financial Disaster Originally Posted by The Motley Fool