Not all insurance is created equal. People often tell us they have “full coverage” insurance. That description covers a lot of ground but may not mean much. It may not be an exciting topic, but it’s better to know your limits and potential exposure before an accident, rather than after. Here are the main things to consider:
Full coverage insurance may mean that the policy only covers the car. In other words, it pays to either fix the car or what the insurance company thinksis the market value of the vehicle. That can be less than the payoff on the vehicle.
If you pay a note, it is usually a good idea to get gap coverage. It covers the difference between what the insurance company will pay and what is owed on the car. This can be a pile of cash. Cars usually fall in value faster than the note. Without gap coverage, the “at fault” party in the case of a wreck– or your insurer– is only liable for the value of the vehicle.
Another thing not covered by so-called “full coverage” is uninsured/under-insured “at fault” drivers. The majority of drivers only carry the state’s minimum amount of coverage. In Louisiana, those limits are $15,000 per person with a cap of $30,000 per wreck, regardless of how many people are involved. If someone with no insurance (or not enough insurance) hits you…youcan come up short. Many of our clients figure they will sue the other driver and garnish his wages. That usually does not work out too well. Most folks do not have many assets and will consider bankruptcy before paying out a garnishment.
Another thing that leaves a lot of people hanging is the cost of a car rental. If the other guy is “at fault” and has insurance, his company should pay the cost of your car rental. If he doesn’t have insurance or it’s your fault, youare on the hook for renting a car or making other arrangements when your car is in the shop. Body shop repairs usually average several days to over a week – a long time to be without wheels.
You can also get insurance that pays for the loss of wages and medical expenses, regardless of fault.
Finally…consider the deductible. The higher the deductible, the cheaper the policy will be. If there is no “at fault” party, however–are you ready to pay several hundred to a few thousand dollars in out-of-pocket costs to fix your car?
Written by: Greg Gouner