Auto Insurance mistakes that Many People make

 

Before we start, I want to let you know that I am not an expert, not even close.  I am certified and I do have experience in the field, but I am not an expert.  I am not using this to try to attract business; this is merely to help people understand their automobile insurance.  First we have to get rid of a few misconceptions.

1.        Auto insurance is not to protect your car.  There are portions of auto insurance that protects your car called comprehensive and collision, but that is not the main idea behind auto insurance.  The main idea behind auto insurance is to protect you and your family in case of an accident.  Bodily injury covers injuries sustained by people in your car and in the other car if you are in an accident that is your fault.  If the accident is not your fault, then you are covered by the car’s insurance.  If that other car has no insurance, you are covered by your uninsured/underinsured motorist insurance.

2.       You are only covered up to the bodily injury limits that you chose.  If you chose $25,000 in coverage and do $100,000 worth of damage, then your insurance is going to pay up to the limits of your coverage.  This puts you on the hook for the other $75,000.  If you, heaven forbid, cause an accident that kills someone, the insurance will still pay up to your bodily injury amount.  The rest of the judgement, which average $1.4 million, will be recovered from your assets and through garnishments.

3.       If you make a claim on your insurance and you do not have a plan for “accident forgiveness, then the price of your insurance will go up.  Notice that I said will and not might.  This is an absolute fact, if you remember I said earlier that insurance is not to protect your car.  When you make a claim, the insurance company is going to try to recoup the amount that they paid in as short a time as possible.

4.       Please check the value of your vehicle on a routine basis.  Insurance companies are going to pay you fair market value for your vehicle assuming that it is “totaled.”  What that means is that they are going to pay you trade in value for your car assuming that it is in fair condition.  It will benefit you to look at the fair market value of your car when you make an insurance decision.  If your car is worth $1500 and you have a $500 deductible.  Your check from the insurance company in the event of a total loss will be $1000.  You have to decide if the amount that you pay for collision insurance is worth the amount that you will be reimbursed.

 

It has been my experience that people usually pay too much for their auto insurance because they want lower deductibles, which is very expensive.  To balance out the cost, they take a lower bodily injury limit.  In essence, they are betting their home and other assets, to protect their car from damage.  That is not the best way to protect you or your loved ones.