If you drive, you probably have car insurance. At times you may be wondering why you need it. It’s expensive, and you may never even have to cash in, which can make it seem like a huge waste of money.
What’s The Point?
Let’s look at it this way. The very idea of insurance is that you want to be protected in case something happens. Unfortunately, while we don’t want bad things to happen, they sometimes do. That’s just a part of life. Insurance is basically a gamble, where you hope the outcome is not bad, but if it is, then you are protected. Plain and simple.
You may be thinking that the majority of the times when you must cash in on your 2012 insurance policy, it doesn’t nearly cover all of the money you have paid in, and this is true for most people.
What you may not realize however is that these aren’t the times you really need the insurance, and sometimes it may be best to not even bother in these situations. When you really need your insurance is if you have an accident and you can’t afford to pay for the damages.
2012 Auto Insurance Covers More Than Just Cars
If you have an accident and you damage someone else’s vehicle, they’ll file a claim and your insurance will cover it. In most cases, the damage may be minor, but if you have paid your insurance, you won’t have to pay a big lump sum out of pocket.
What if the other party is injured? This is where your insurance is helpful, and why you must have it. While repairing cars is expensive, medical bills can be astronomical, and depending on what the other party needs, can be more than what you can afford to pay. The insurance is there to make sure that it is paid. If we knew for a fact that we could avoid major accidents, well, we wouldn’t need insurance would we?
Types of Insurance Policies
Okay, so you now realize that you must have insurance for 2012, but when you go to purchase it, whether online or through an agent in person, you’re going to see that there are different types of policies that offer different types of coverage. How are you supposed to know what to get?
Liability
Liability insurance pays for injuries and car repairs of other parties in an accident for which you are held responsible. Every state requires a minimum liability coverage that you must have if you wish to drive. In some states, you may not have to have it, but you must be able to prove that you will be able to cover extensive damages should you cause an accident. Few people are able to do this.
Property Damage Liability
This covers you when you cause an accident and your car has damaged someone else’s property. There are different levels of this type of coverage. If you do not own your vehicle outright and it is financed, you will likely have a minimum amount of insurance to buy because the car that you are driving is technically someone else’s property. It’s a good idea anyway; do you really want to continue to pay for a car that is totaled in accident?
Bodily Injury Liability
This will cover medical bills and other related costs should you injure another party with your vehicle. It does not cover your own injuries. You do not want to be without this type of coverage, as medical expenses can cost way more than any other type of damage.
If you were to fatally injure someone in an accident, you would also have to worry about things such as lawsuits and pain and suffering. This is an important type of coverage, and in most cases is required in state minimums.
Comprehensive
This basically means that any type of loss that occurs that is not an auto accident is covered. Things like weather related damage or natural disasters are covered with this type of policy. If you hit an animal or your car is vandalized or stolen, state minimum coverage will not pay for the damage. You must have comprehensive added to your policy.
It’s important when buying a comprehensive policy that you know exactly what is covered. In some cases, such as if you live in an area that is prone to a certain natural disaster, such as earthquakes, you may need to buy additional coverage. It varies, so it is important to discuss the details with your agent.
Collision
This is the coverage that comes into play when your car comes into contact with anything: another car, a tree, a guardrail, or a building. Collision covers you when you hit something else.
Uninsured Driver Coverage
If you are in an accident and the other party does not have insurance, what do you do? You can sue them personally of course, but chances are if they don’t have insurance, they may not have much for you to take if you win a lawsuit.
If you have underinsured coverage, then your insurance company will pay any damages caused by another driver. This is not the same as underinsured, which would cover you if the other driver has the minimum coverage but it doesn’t cover the cost of your damages.
Talk to your insurance provider about whether or not this is a good idea for you.
Gap Insurance
You probably know that when you drive a car off the lot, it almost immediately loses value. You still have to pay the cost of the new vehicle, and it can take several months before it balances out. What happens if you are in an accident and your car is totaled, but you still owe more than the vehicle is technically worth? This is where gap insurance comes in. If you are in an accident and you owe more than the car is worth, gap insurance will cover you. Many lenders require this type of insurance so if you are buying a new car, be prepared to pay for this type of coverage.
Rental Car
If you travel frequently and drive rental cars on a regular basis, you should consider adding this to your insurance policy. There are varying levels of coverage, and in some cases your policy will cover your regardless, but it is important to double check before assuming anything.
How do you know what type of coverage you need? Well there are questions you should ask yourself to help you determine what to get.
What Type of Vehicle Do You Drive?
You need to think about the value of the car you are driving and what would happen if it were totaled in an accident. Would you be able to buy a new car? If not, you need to get coverage that will cover your vehicle, and most state minimums will not.
If you owe money on the car, you have to remember that the bank doesn’t care what happens to the car. If it is damaged or totaled, they still want to get paid, whether by you or an insurance company. If you don’t like the idea of having to continue to make your monthly payments even though you may not be able to drive your car, you need full coverage. Many lenders may in fact require it.
If on the other hand, you have a car that is not worth much money, it may not make sense to pay a lot for insurance that you may never use, in which case state minimum coverage may be okay.
What Does Your Financial Picture Look Like?
If you feel comfortable that you could pay out of pocket costs for small damages, you may not want to pay the high costs associated with multiple types of coverage. You need to discuss this thoroughly with your agent though, and you will still need state minimum coverage.
You have to remember that things such as medical expenses can change your financial picture entirely. It’s important to look at every aspect of the situation before making any kind of decisions such as this one.
How Often Do You Drive?
Obviously, the more you drive, the more likely you are to get in an accident. If you don’t drive very often, state minimum coverage may be okay, especially if you have an older car that isn’t worth a lot of money.
Do You Rely on Your Vehicle For Work?
What would you do if suddenly you did not have a vehicle? Would you be able to get to work? Would you be able to replace it if you had to? If not, you need to consider getting coverage that will protect you if you drive your car into a tree for example, or if it is stolen. Only you can decide the answer to this question.
What is Your Budget?
While you must meet state minimums, sometimes a person’s budget just won’t allow anything more than that. You need to think carefully however about the above questions. If your budget is already tight, what would you do if you suddenly did not have a car? While it may not make sense to spend money that you don’t know if you’ll get anything for, it may make sense to cut back somewhere else in order to plan for the worst. Again, this is only something you can decide.
There are ways to save on auto insurance. While you can’t change some things such as your age or gender, certain things, such as the type of car you drive, and how many tickets and accidents you have make a difference in your insurance costs. Many companies will also give you discounts based on things such as using the company for other types of insurance as well.
Talk to your insurance agent, who can give you more information about your personalized needs. If you drive a car, you need insurance; it’s against the law not to have it. You do not want or need to pay more than necessary however, so getting the right information answering the right questions beforehand can help you make an informed and educated decision.
