With the cost of living in some cities it can be tempting to find ways to save money. While cutting back on your favorite latte or canceling that one streaming subscription you never use might be a good idea, one thing you shouldn’t do is try to skimp on your auto insurance. Auto insurance does much more than just protect us when we get into an accident, there are several reasons why maintaining adequate coverage is beneficial.
It’s The Law
Auto insurance can be a major expense for many people, especially depending on factors like age, driving history and the type and age of your vehicle, but one of the most important reasons not to cut back on your insurance coverage is because in many places having a certain level of coverage is mandatory by law.
Many states require at minimum some form of liability accident coverage, but may also require other coverage such as uninsured motorist coverage. This protects motorists in the event of accidents and gives them a way to seek compensation even if the other motorist is uninsured.
Your Auto Loan Mandates It
If you haven’t tried to purchase a new car in a while, then you may be unaware that most auto loan lenders require full coverage insurance protection to secure the loan. This is because the lender wants the asset they are loaning against to be protected in the event of an accident or other unfortunate event.
In most cases insurance is required throughout the duration of the loan. Once the loan is repaid and the title to the vehicle is transferred to the owner, then the level of insurance can be lowered if chosen.
In fact, failure to maintain adequate coverage at any period while you are still paying on a vehicle can result in one of two outcomes: The lender may acquire insurance for you and add it to your payments each month, or they may repossess the vehicle on account of liability risk. So if you want to keep your vehicle and protect your credit score, it’s a good idea to maintain your insurance coverage.
Auto Insurance Does More Than Cover Collisions
It’s a good thing to have auto insurance when you’re in an accident, but auto insurance covers much more than just collision damage.
There are all sorts of protections that are included with the coverage that you pay for. As we’ve discussed above, there are specific types of coverage for things like uninsured motorists, as well as plans that cover damage due to natural occurrences such as poor weather. Imagine having a tree fall on your vehicle and having to pay for it out of pocket.
Other types of coverage include rental car coverage for while your vehicle is being repaired, meaning that you won’t have to be without a car just because yours was damaged, flood or fire damage coverage, and coverage for specific non-warranty repairs.
Lastly, your insurance may provide additional benefits that can be very useful, such as paying for basic maintenance and repairs and covering roadside assistance. For new and young or inexperienced drivers this is a very important benefit as it protects them in the event that they need help while out driving.
In the end, a little bit of extra protection when you need it is worth the money. That Monday morning espresso on the hand, not so much.
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Rule of thumb: only insure what you can’t afford to pay. People tend to over-insure themselves when it comes to their car. Keep your deductibles as high as possible.
For liability coverage, consider a lower number within the auto policy (minimum), but purchase an umbrella policy that will provide coverage for both auto and other liabilities (home, boat, etc.). So you end up with higher overall coverage for a wider variety of exposures.