You’ve researched your car options for several weeks and have finally decided on the perfect make and model. The winner is a brand-new SUV with glowing safety ratings and excellent customer reviews. One day as you’re driving that new SUV to work, something terrible happens. The driver of a truck decides to quickly check a text message, takes his eyes off the road and slams into the back of your new vehicle.
You’re heartbroken and a little sore, but otherwise uninjured due to your seat belt and air bags. Your brand-new SUV, however, didn’t do as well. The insurance company determines that it’s a total loss.
Most new car owners hope this situation never happens, but when it does, having the right coverage in place is key. Determining what type of coverage is best isn’t always easy, however. Check out these six helpful tips to help you decide.
1. Know your insurance company’s rules about new-vehicle coverage. Do you have other vehicles insured with the same insurance company? If so, it’s possible that coverage extends to your new vehicle for a limited number of days. For example, an insurance company might allow coverage on a replacement vehicle up to 30 days after purchase. The type of coverage provided is typically what you have on the prior vehicle. Talk with your JAISIN insurance professional prior to making the purchase to understand coverage rules and limitations.
2. Understand the basic types of new car insurance coverage. A basic amount of coverage is typically required by state law and finance companies. Understanding the types of coverage offered can help you determine which is best. Here are typical types of coverage to consider on a new vehicle purchase:
- Bodily injury. This limit is defined per person and per accident.
- Property damage liability. This is defined per accident and is designed to cover damage when you’re responsible for the accident. For example, let’s say that you accidentally fail to stop at a red light and hit a vehicle. Property damage liability would cover the damage resulting from the incident. If you hit a city sign, this coverage would also cover those costs. This coverage, however, does not include damage to your vehicle, which is paid under collision insurance.
- Personal injury protection. This coverage may include limits for medical expenses, loss of income and other costs as defined by the policy.
- Uninsured or underinsured motorist protection. This covers costs associated with an accident should the person at fault not have auto insurance, or not have enough.
- Collision. This coverage protects repairs to your vehicle after an accident.
- Comprehensive. This covers the cost if your car is stolen or damage occurs outside of a typical accident situation.
Most states only require the first two — bodily injury liability and property damage liability — but with a new vehicle purchase, you’ll want to consider the other coverages so you have full protection.
3. Check your state’s insurance laws. All states require some type of car insurance, but the details of laws vary by state. Your state’s insurance and coverage requirements can be found online. In addition, calling your JAISIN advisor is valuable, as they will be well-versed in the state’s coverage requirements.
For instance, California requires that vehicles carry $15,000 in personal bodily injury protection, $30,000 in bodily insurance to cover more than one person and $5,000 in property damage liability per accident. Note the low limit on the property damage. It’s very easy to have an “underinsured” situation with only $5,000 of property damage coverage. Your new vehicle, for example, is worth well over $5,000. If the person who hits you carries only state limits, they will quickly run out of coverage, which makes uninsured/underinsured coverage a valuable option.
4. Understand the bank’s insurance requirements. Most finance companies require that vehicle owners carry full insurance coverage, which includes collision and comprehensive coverages. The financer has a vested interest until the vehicle is paid in full, which is why they have special insurance requirements to protect their loan.
5. Select the right deductible. The deductible is the amount that you will pay to repair your vehicle. For example, let’s say you accidentally hit your mailbox. The damage would fall under “collision coverage.” The deductible is the amount that you would pay before the insurance starts to pay the damages.
In this situation, you take your new car to the auto body shop and they estimate damages are $2,500. You have a $500 deductible, so you pay the first $500 and the insurance company picks up the rest of the tab. A higher deductible decreases the premium, so it’s tempting to elect higher deductibles. Financing companies, however, have rules about deductibles and typically won’t allow you to raise deductibles much higher than $500.
6. Check into gap insurance. A new car typically depreciates as soon as you drive it off the lot. As a result, a situation may occur where you owe more on the vehicle than it’s worth. Let’s say that you’re driving and a dump truck rear-ends your vehicle. The dump truck is found at fault, and the insurance company will pay to replace your totaled vehicle. Replacement cost is $20,000, but you owe $23,000 on the vehicle. The result is a $3,000 difference that you’re left holding after the claim is closed. Gap insurance offsets the difference so you aren’t left holding additional bills.
Moving forward with greater safety
Purchasing a new car is exciting, and car insurance is an important consideration before driving the car off the lot. Carefully considering what types of insurance are required and the right protection levels for you and your new car is worthwhile and provides greater peace of mind should an accident take place in the future.
Your JAISIN insurance professional is a great resource to explain the coverage options that are most suitable for you.
This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem.
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