While it might be easy to tell whether the next “as seen on TV” miracle product is going to revolutionize your life, when it comes to car insurance, things might be tougher to sort out. But fear not! This article will teach you how to assess your own needs and determine whether car insurance policy add-ons are worth it for you, or whether you should just stick with the basic coverage you already have.
What Are Your Risks?
The first step to determining whether you should go for the upgrades offered by your insurance company is to take a look at your own risk factors. If you only drive your mid-80’s hatchback to the grocery store on weekends, you’re exposed to minimal risk on the road. On the other hand, if you commute 20 miles to work each day in heavy highway traffic and drive on nights and weekends, your driving habits put you at higher risk of an accident. To get a full sense of the factors that affect your insurance rates and how you can stay on top of them, check out this guide to assessing your own risk.
Take a look at your driving habits and consider five questions:
- 1. Do you commute in heavy traffic on a regular basis?
- 2. Do you experience a “close call” on the road each week? Each month?
- 3. Do you ever feel tired while driving?
- 4. Do you drive at late hours, when there could be drunk drivers on the road?
- 5. Do you park in areas where parking is tight, where people might bump your car and drive off, or where it might get vandalized?
If you answered “yes” to any of these, you’ll want to consider some insurance add-ons to protect you, your passengers, and your vehicle.
Which Add-ons Are Right For Me?
Let’s start with the basics of insurance: All 50 states require some sort of basic liability coverage, which pays for damage and injuries you cause to other drivers, their passengers, their cars, and other property. Beyond that, there are a number of upgrades, add-ons, and options. In insurance industry speak, these are commonly called “policy endorsements.” Here are the most common, with some details on why they might or might not be worth it:
Extra Liability Coverage: Most basic liability coverage pays for $10,000 in damages to another vehicle and about the same for injuries to the driver. If you run into the back of an expensive car, the driver or their insurer might sue you for the costs beyond what your policy covers. If you often find yourself driving down the Sunset Strip amongst high-end cars, you might want to get some extra coverage in case you bump into one of them.
Personal Injury Protection: If you don’t have health insurance and you spend a lot of time behind the wheel, you’ll want to have Personal Injury Protection. If you’re involved in a serious accident, hospital bills can surpass tens of thousands of dollars very quickly, and you would be on the hook for the costs if you don’t have this coverage, or if you’re the victim of an accident caused by a driver with no insurance. Most personal injury protection coverage is less than $100 per month.
Roadside Assistance: Do you take a lot of road trips, go camping, or drive in rough weather? If so, you’ll want to pay for some form of roadside assistance. Paying $300 or even $800 at the drop of a hat (or pop of a tire!) for a tow truck to pick your car up from the middle of nowhere is a lot to stomach, and there are a variety of roadside assistance plans out there to choose from.
Gap Insurance: If you have a loan or a note on your car, you need gap insurance! If your car is heavily damaged and declared a total loss, this pays for the difference between the balance on the note or loan and the value of the car. If you owe $12,000 but the car is only worth $10,000, this coverage pays for the difference so you don’t have to. Would you rather pay $2,000 on the spot, or an extra $50 or so per month?
Vanishing Deductible: If you find yourself living paycheck-to-paycheck or you’re not always on top of your finances, this can be a nice perk. Not all of us can fork over $500 on short notice, so a vanishing deductible allows you to pay a little more per month in order to pay a smaller deductible later on. For most drivers who are on top of their finances, this shouldn’t be something worth paying extra for unless you can get the coverage for only a few dollars extra per month.
Uninsured Motorist Coverage: This coverage pays for damage caused by a driver with no insurance, and for hit-and-run accidents. Most insurers break it down into two parts: damage to your car, and injuries to you and your passengers. If you drive often in poorer neighborhoods or parts of the country where drivers are less likely to have their own insurance, or where drivers are likely to bump into your car while it’s parked and drive off, you’ll want to have this coverage.
Nearly all of these add-ons involve an accident or damage to your car, so you’ll want to know how to handle an insurance claim. Check out The Simple Dollar Guide to Car Insurance for steps on how to handle claims, among other detailed car insurance information.
When it comes down to it, it’s a matter of weighing your own risks against your budget. If your driving habits are very limited, you can probably afford to save the extra $50 or $100 per month, but if you’re on the road a lot, the peace of mind you’ll get from being fully protected is well worth the extra expense.
About the Author: Jeff Rieger is a contributor to The Simple Dollar on car insurance, personal injury claims, and cars in general. As a former personal injury paralegal and body shop estimator, Jeff has dealt with nearly every scenario imaginable in terms of car insurance claims, so you can count on him for great advice and real talk for consumers of all varieties. Visit him on his google+ profile.