Are There Gaps in Your Auto Insurance?
These three scenarios show the importance of having the right coverage should you ever need to file a claim.
1. You’re driving a new car.
According to industry experts, the value of a new vehicle normally decreases by about 22% by the end of the first year of ownership. If you owe more on your loan or lease than your car’s actual cash value, you’ll have to pay the difference if the car is damaged in a crash and declared a total loss.
What you can do: Add a Guaranteed Asset Protection (GAP) waiver to your insurance policy. In the event of a total loss, this covers the difference between the value of the vehicle and the balance left on your loan.
2. You get in a crash with an underinsured or uninsured motorist.
Poor insurance decisions by other drivers—including someone driving with inadequate coverage or with no coverage at all—put you at risk. If such a person causes property damage or injury to you and has insufficient liability limits to cover your bills, you could be stuck paying them yourself.
What you can do: Talk to your agent about uninsured and underinsured motorist coverage; it can protect you financially if you’re in a crash caused by an uninsured or underinsured driver.
3. You have personal assets you need to protect.
If you cause a crash, your automobile liability insurance covers others injured as well as damage to their car—but only up to your policy limits. With minimal policy coverage, you put at risk any personal assets that exceed your auto liability insurance limits.
What you can do: Consider adding an umbrella policy to your coverage. It provides additional liability coverage above the limits of your other policies, protecting your personal assets and future personal assets (like wages, savings or even an inheritance).