This week, we’ll wrap up our discussion on auto insurance.
Last week we discussed liability insurance, but what happens if your vehicle is damaged and the accident was your fault? What if the collision didn’t even involve another car? What if you hit a tree? What if the car damage wasn’t even caused by a collision?
This is where collision insurance and comprehensive automobile insurance come in. Collision insurance will reimburse you for losses resulting from a collision with another car or object, or even from a rollover. The policy will pay for the cost of repairing or replacing your car regardless of who’s at fault; however, if another driver is at fault, your insurance has the right to obtain reimbursement from that driver’s auto liability insurance.
Comprehensive auto insurance will provide protection against property damage caused by risks other than collision or rollover – such as fire, theft, vandalism, hail, and wind, among others. Both collision and comprehensive auto insurance typically include a deductible. As we’ve mentioned in previous posts, the higher the deductible, the lower the premium; however, you’ll then be responsible for covering more of the cost of repairs or replacement. For both collision and comprehensive, if the estimate for repairs exceeds the book value of the vehicle, the car is considered “totaled,” and the insurance company will pay the book value of the vehicle minus the deductible. For this reason, many drivers will drop their collision and/or comprehensive insurance for older car that no longer have much book value. While states do not require collision or collateral by law, if you have a car loan on the vehicle, your lender likely will.
The final two portions of auto insurance we’ll discuss are medical payment insurance and gap insurance. Automobile medical payment insurance covers bodily injuries suffered by the insured driver and their passengers regardless of who’s at fault. Medical payment coverage is generally a single policy limit, which is applied per person, per accident – for example, covering up to $5,000 of medical payments for each individual covered.
Gap insurance is an optional insurance that covers the difference between the balance of your loan and the book value of the car, if the balance is higher. For example, if you total your car and the vehicle is valued at $10,000, but you owe your lender $12,000 on your loan, gap insurance will cover the $2,000 difference.
That concludes our discussion on car insurance, next week we’ll return and discuss health insurance.