Auto insurance is one of the most important ways to protect both your financial investment in your car and your means of carrying on daily life. But having the right insurance is dependent on understanding what is and isn't covered by your policy. Do you know what's really protected with your insurance coverage? Here are three common coverage questions and what you need to know about the answers.
Are Your Belongings Inside the Vehicle Covered?
Many people are surprised to know that the stuff inside their car may not be covered by their auto insurance. As a rule of thumb, vehicle insurance covers the body and parts of the vehicle itself. Belongings inside — ranging from your mobile devices to that custom stereo system — are usually covered by homeowners or renters insurance instead. If you don't carry these policies, you may need to add them.
Is Damage to Your Own Car Covered?
The answer depends on which type of policy you own. Generally, every car on the road must be covered by a minimum insurance policy known as liability insurance. Liability insurance pays for damage to the property of other people or their bodily injuries. However, this policy doesn't cover damage to your own vehicle. To cover your car as well, you need a different policy called 'collision coverage'. You can often bundle these as 'comprehensive coverage.'
Is the Replacement of Your Car Covered?
The question of the replacement value of a car is tricky. Most collision insurance policies pay repair bills but only provide for reimbursement of the cash value of the car you may have lost. Depending on its age and condition, that may be a lot less than what you need to get a new one. It may not even pay what's due on your loan.
Instead, you can purchase additional 'replacement value' coverage. This rider differs from cash value because it does not subtract deprecation for the age and condition of the vehicle. This adjustment is designed to more closely match the actual cost you would spend to buy a brand new version of the same vehicle. While it still may not be exactly the right amount, it's much more likely to help you avoid undue burden.
As you better understand what is really covered and what's not, you can adjust your insurance policies to provide the best protection possible. Have more questions about your own auto coverage? Start by making an appointment with an auto insurance agent like those at The Policy Center today.
You keep a copy of your insurance policy in your file drawer, but do you know how to read and understand the policy? Having an insurance policy will protect you from losses, but it won't protect you from all losses. To get a better understanding of what your policy will and will not cover, read through this blog. You will learn about all different types of insurance policies and learn the terminology used in the documents that you have read. Hopefully, by the time you have read through the content here, you will know exactly where your insurance policies are lacking so you can make changes.