The 5 Worst Insurance Mistakes We All Make
When Buying AUTO INSURANCE
California has a diverse demographic mixture of city, suburban, and rural areas. In some states the public has embraced affordable public transit. But, Californians tend to enjoy their freedom. Almost everyone has their own vehicle or means of transportation. Our vehicles range from low cost budget “get me to work” type; to luxury and sport “get me there in style” types. What ever your means of travel is, you probably make several of the 5 worst auto insurance mistakes when insuring your car.
#1 Auto Insurance Mistake:
Under-insuring to save a few dollars!
A current trend with some auto insurance carriers is the “choose what you want “ insurance plan. With the advent of online auto insurance platforms, many consumers can now dial in their own coverage amounts. This can be deceptive and when starring at the numbers it’s easy to be reluctant to place realistic coverage levels on your vehicle. You need to think about how much coverage you would need to feel comfortable that your assets are adequately protected. Be aware that it’s usually, only a few dollars difference between a poorly designed plan and a good or great one. So don’t make this auto insurance mistake!
The same goes for many agents you may speak with as when confronted by a consumer with a lower premium many may choose to match coverage’s offered somewhere else even though it may not be adequate coverage for your asset protection. You should assume that you might be sued for accidentally injuring another person.
#2 Mistake:
Not adding GAP on your vehicle after purchase or lease.
Today’s vehicle market has gone absolutely insane. We are being forced to pay crazy high prices for used and new vehicles. Like most things, auto prices are subject to availability, demand and supply chain interruptions. If you find yourself in need of a new vehicle, you may need to add Guaranteed Asset Protection (GAP) insurance. This is available through either your insurance company, lease or purchase agreement. Having full vehicle coverage plus adding GAP assures that your loan will be paid in full if your vehicle is declared a total loss. This is especially important in the first few years. That goes for all types of vehicles including new or used car, truck, motorcycle, motor home or recreational vehicle.
The need for GAP usually arises due to additional costs when purchasing a vehicle. These include taxes, registration, alarms and paint or upholstery sealants. These can easily lead you to be in an upside down position soon after purchase. Suddenly you are in the position of owing more money on your loan than your car is worth. You also have to remember that once the vehicle leaves the lot it is no longer a new vehicle. It is now a used vehicle and may be subject to a lower valuation for replacement cost. If you are paying in full or placing a sizeable down at time of purchase you may not need to purchase GAP as you should owe less than replacement cost value. But pay attention to any possible gap and avoid one of the most common auto insurance mistakes.
#3 Mistake:
Having to low or no – Uninsured/Underinsured Motorist Bodily Injury (UMBI).
On your own or possibly even your agent told you that if you have health insurance you don’t need this coverage. First let me clarify this is one of the few coverage’s that are specifically for you and your passengers. This coverage pays for injuries to you or your passengers if involved in an accident with an at-fault uninsured driver. A few thoughts to ponder:
- Will you face a high deductible from your health insurance?
- Do your passengers even have health insurance? If they don’t can you be held liable?
- Who will cover lost wages or extra medical expenses?
These concerns are real and without UMBI you may be responsible on your own. Don’t be mislead by the fact that UMBI coverage is not required in California. Due to a lot of misinformation, many auto owners carry little or no UMBI just to save a few bucks. This is not a great strategy to save money on auto insurance and one of the major auto insurance mistakes we all make.
#4 Mistake:
Don’t drive your vehicle across the boarder to Mexico without Mexican auto insurance.
Several U.S. states have borders with Mexico and crossing the border has great appeal to U.S. citizens due to prices, water and fun. Some companies will offer limited coverage a few to 50 miles across the border. However, U.S. auto insurers are not permitted to offer liability coverage in Mexico. They will typically only offer limited coverage to your auto’s physical damage assuming you have full coverage. Mexican auto insurance carriers are easy to find online or near the border. You could face jail time and or substantial fines if in an accident in Mexico without the proper coverage. Other considerations might be towing, legal and medical, liability and property damage. This can be one of the most problematic auto insurance mistakes you can make.
#5 Mistake:
Not understanding coverage and deductibles.
There are a variety of reasons that consumers end up with inadequate auto insurance. These include price, misinformation, lack of knowledge and misplaced trust to name a few. You will be held legally and financially responsible for inadequate coverage. This is one of the most costly auto insurance mistakes you could make. So let’s do a quick review of some of the basics of auto insurance coverages and deductibles:
Comprehensive Coverage
The purpose of comprehensive insurance is to cover a variety of issues including fire, theft, vandalism, hail, even hitting an animal may be covered. The best part about this coverage is it doesn’t count against you other than having to pay a deductible. This coverage is also one of the least expensive so having a low deductible usually makes good sense. $100 – $500 might make sense for most.
Collision Coverage
Collision coverage can pay for your vehicles repair, or replacement if totaled in an accident even if you are at fault. This coverage is pretty much the same across all carriers. Collision coverage is normally one of the most expensive. So a higher deductible will help bring the premium down and generally works to your advantage in the long run. The amount that works best for most is $500 – $1,000.
Bodily Injury (BI) Coverage
Covers liability concerns when found at fault, in California I would recommend no less than $100,000/$300,000 and if you have any real assets you should increase from there.
Property Damage (PD) Coverage
This covers the other parties’ property and or vehicle. Being that auto’s have significantly increased in price/repair and same for other physical property damage of signs, buildings, poles and guard rails I would suggest carrying $100,000 or greater for property damage.
Medical (MED) Coverage
MED cover the policy holder, family members and or passengers for medical or funeral costs whether they are at fault or not.
Uninsured/Underinsured Motorist Bodily Injury (UMBI) Coverage
As explained above in #3, can cover expenses you may face due to injury from an accident with an at fault uninsured driver. Would suggest minimum of $100,000/300,000 as minimum limits in California are simply to low leaving you and your passengers pretty exposed.
Roadside Assistance (RD ASST) Coverage
If you don’t have AAA separate program, this helps rescue you when facing a flat or breakdown. Usually quite inexpensive and well worth adding if you do much driving especially with an older vehicle.
Rental Reimbursement (RR) Coverage
If you are at fault and have damage to your car, this will allow you to obtain a rental vehicle while yours is in for repair. Normal repair times can take 10 days to several weeks so this could save you $750.00 or more depending on your coverage.
If you have any questions about automobile insurance, please don’t hesitate to contact Chris Wilson at (619) 980-7263. He will be happy to help you understand the coverage requirements and options you have in insuring your car.
