Do You Know What Your Auto Insurance Policy Really Covers?
In Colorado it is illegal to drive a vehicle without insurance to cover your liability of at least $25,000 in case you cause an accident. The penalties for driving without proof of insurance can be harsh, including points against your driving license – which might result in a revocation of your license, monetary fines, and even community service hours. But simply obtaining auto insurance isn’t enough. Responsible drivers must also understand what is – and isn’t – covered by their automobile insurance policy.
A 2010 survey by the National Association of Insurance Commissioners (NAIC) indicates that more than half of Americans don’t know basic facts about auto insurance. A mere 45 percent feel confident when deciding on automobile insurance. When it comes to automobile insurance, what you don’t know may indeed harm you. Here are some of the biggest areas of confusion when it comes to automobile insurance.
Before you decline the additional coverage offered next time you rent a vehicle, first understand that your own automobile insurance will usually only cover damage that you cause to the rental car. Other incidental expenses such as loss of use while the rental car is being repaired will not be covered. Another issue may arise if you total the rental vehicle. Most auto insurance policies will only pay for the actual value of the vehicle or the cost of repair whichever is less. If the rental car company pursues you for the replacement value of a totaled rental vehicle, you could be on the hook for the difference.
Also, there are always medical expenses if you or anyone else is injured in the accident. Sometimes medical costs, especially hospitalization or long-term care (depending on the severity of the injuries) can be the most expensive bill(s) after an accident.
With more than 2,000 vehicle thefts happening in the U.S every day, your odds of having your vehicle broken into or stolen are high. If you have comprehensive auto insurance, the damage to your vehicle will be covered. However, personal property that is taken from your vehicle, such as sporting equipment or non-factory installed items, won’t be covered unless you have endorsements to your auto policy for those items.
Your auto insurance provides coverage for the drivers listed on the policy and anyone living outside the named insured’s home who borrows the vehicle with permission. However, failing to add someone you live with as a named insured on your auto insurance policy may result in no coverage should that person cause an accident or damage your car. Insurance companies include this exclusion to prevent low risk drivers from obtaining auto insurance for someone they live with who may be a higher risk.
In 2012, approximately 16.2% of drivers on the road in Colorado (according to Rocky Mountain Insurance Information Association) were driving without insurance. In some states that rate is even higher. If you happen to be involved in an accident caused by someone who has no liability insurance you may have no insurance to pay for your injuries and car damage. For example, if the accident is not your fault, the other party’s auto insurance should cover your damages.
If, however, the other driver doesn’t have any (or enough) liability insurance, then you will have to look to your own policy to cover the difference, in the form of uninsured/underinsured insurance. Unless you have adequate uninsured/underinsured motorist coverage on your own policy, you could be facing a gap in coverage. This type of insurance is usually quite reasonable, so ask your insurance agent for information regarding this coverage.
When it comes to purchasing automobile insurance, all policies are not created equal, and you should be careful when comparing policies based on premium payments alone. Be sure you are comparing apples to apples in terms of liability limits, uninsured motorist coverage and other important factors. When it comes to insurance protection for your automobile and the lives of those who ride in it, finding out what you don’t know after an accident happens can be devastating.Back to the Blog