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 As you’ve no doubt surmised, insurance is a complex, detailed and responsive business. Each of us has unique service needs, and not all options are required on every policy. Some types of coverage may be much less common than others, and there may be others we’ve never heard of. Here are a few things you may be unaware of, that may be pertinent to your situation.
First, the simple ones: You may wish to include coverage for occasional vehicle repair on your policy. Like most options, it comes down to money and convenience. If you have a breakdown or your vehicle suffers damage of some kind, your policy may cover some parts and bodywork if you choose.
Comprehensive coverage, although commonly recognized, is not mandatory for vehicles owned outright. If you paid cash for your car or paid out the loan, comprehensive coverage isn’t for you. If your vehicle is financed, however, you will be required to purchase this fire, theft and collision coverage to protect the asset that is not yet paid for, and technically still belongs to the lender.
Bigger Safety Nets
Some drivers pay for an option called “gap” insurance. If you lease your vehicle you will probably want to add this coverage if it is not already written into the lease, or if you only had a small down payment when you purchased your car. If, however, you wrote your policy to specify that full replacement value of the new vehicle will be paid out, gap insurance is moot.
As you know, autos depreciate extremely quickly—20% after the first few months is common, according to some insurers. In the event your vehicle is totaled in some kind of accident (even a freak natural occurrence) or stolen and not recoverable, there would be no coverage for that depreciated amount on your standard policy. You would still owe more than the perceived value in the eyes of the insurer and the lender would demand their full loan amount back. The difference would then have to come out of your own pocket; not a desirable scenario.
Gap insurance to the rescue! If you choose this option for your policy, you would qualify for the difference between the loan amount and the depreciated value, or the “gap” between the two.
How does an insurer determine the actual value of a vehicle? They use several methods, including the Kelley “Blue Book”, the NADA (National Automobile Dealers Association) guides, as well as sourcing through the newspaper and online advertisements.
Miscellaneous Policy Options
Here’s another less commonly discussed practice in the business. In the event you are a multi-vehicle client, your insurance company may allow a procedure called “stacking” of your coverage. If you have two vehicles, for example, you can “stack” the liability coverage for personal injury so that the total of the two policies is applied to one vehicle that is involved in an accident.
So, for example, if you have a policy with coverage for bodily injury on uninsured/underinsured motorists of $250,000/$500,000 on one policy and the same on a second policy, you can have the total of those, or $500,000/$1,000,000 on both vehicles for one accident. This is a huge boon to you in the event of a serious accident with multiple injuries to you and other parties involved because standard policies are not always enough to cover all the medical expenses. It’s also a good way to ensure all your assets are protected and is a recommended option for as long as the insurance companies continue to make it affordable; but that could be short-lived.
There is another less commonly known aspect of insurance coverage called a “nonowner’s” policy. This is an alternative for you if you don’t personally own a vehicle, but occasionally or frequently drive someone else’s car, including a rental.
Of course the vehicle owner will have insurance on it no matter who is driving, but if you have a significant accident in a vehicle and are at fault, and the claims exceed that coverage, your nonowner’s policy will augment that so you are covered for personal injury and property damage, excepting repair of the borrowed vehicle.
The Dark Horse: No-Fault Liability
You may have heard of a term called “no-fault liability”. It’s not legal in all states, and not all insurance companies offer this, but many do. The name is misleading, because it in no way means that no one is at fault in an accident or liable. It was developed in part to expedite the claim payout process for the victim (the one not at fault), to cut down on litigation to prove fault, and to ethically increase the premiums of those at fault and recoup the payouts.
The original supporting belief for no-fault liability was that nearly every motorist has a very similar chance of being involved in an auto accident. Some would argue that there are drivers who exceed that average and are far more likely to cause an accident, as in the case of teenage boys, and that with the no-fault platform they are not sufficiently sanctioned; specifically speaking to the lack of court appearances. The statistics speak for themselves. Several states tried out the no-fault system and have since abandoned it, so the jury is still out on this rogue stand.
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