Just bought a new car? Well, you probably already know that you now need to buy a car insurance policy to insure it. And before you buy auto insurance coverage, it makes a lot of sense to learn about the components of a policy. After all, you don’t want to be slapped with high premiums just because you failed to read through, or didn’t understand, the terms and conditions of your contract.
Therefore, we recommend that you at least understand the minimum coverage that is required by your state. This usually consists of minimum coverage limits for Personal Injury Protection, Bodily Injury Liability, and Property Damage Liability.
However, this article does not deal with these basic requirements of individual auto insurance policies, but rather with the less obvious clauses, terms, and coverage types that you may not even notice. Breakdown coverage, gap coverage, courtesy car coverage, overseas insurance coverage, etc. Have you ever even heard of these? If not, read on to find out all about them.
Towing and Roadside Assistance Insurance
Some drivers are surprised to learn that towing isn’t included in an ordinary car insurance policy. Typically, car insurance only covers the cost of towing after an accident. If your car breaks down on the side of the road, then you could be out of luck if you don’t have towing and roadside assistance insurance.
All major insurance companies offer roadside assistance insurance for a few extra dollars per month (typically around $50 to $100 per year). Additionally, you can buy roadside assistance insurance from a third party provider like AAA.
If you are interested in purchasing roadside assistance with breakdown coverage, please check out our list of the top 10 roadside assistance programs.
Rental Car / Courtesy Car Reimbursement
A courtesy car is a vehicle that is rented out to you if your personal vehicle cannot be driven because of repair works, or if it was damaged beyond repair in an accident.
As a general rule of thumb, the cheaper the auto insurance for yourself, the less probable it is for you to find offers of courtesy cars in your auto insurance policy. Still, you must look through your individual auto insurance policy carefully to make sure of this.
As such, courtesy cars represent a possible service that you might never utilize – especially if you have multiple vehicles in your household. You may be paying higher premiums for a scenario that’ll never happen!
The coverage that you apply for should suit your needs. Ask yourself: if your vehicle is non-functional, do you have any other vehicle that you can use other than a courtesy car? It should be noted that the rental of your auto insurer’s courtesy car might bear hidden charges, especially if the courtesy car belongs to an individual outside of your auto insurer’s jurisdiction.
Read our article on rental car reimbursement for more information on courtesy cars.
Overseas Insurance Coverage
Are you a frequent business traveler? If so, you might be driving a lot outside of the U.S. If you intend to do so, you should consider whether the auto insurance for yourself includes overseas insurance coverage.
Do note that the overseas insurance coverage might only cover vehicles that have been named. Thus, if you are driving a vehicle registered overseas without the knowledge of your auto insurer, you may not be able to claim repair and damages costs in the event of an accident with the unnamed vehicle.
Unfortunately, you might find overseas insurance coverage exorbitantly expensive. Also, your auto insurer might provide only very basic insurance coverage for your foreign vehicles. If that is the case, you might be better off looking for auto insurance in the foreign country where you are visiting frequently.
New cars depreciate in value quickly. If you get into an accident with your new vehicle, then your insurance payout might be less than what you owe on the vehicle. You may have paid $50,000 for your brand new truck six weeks ago, but the insurance company says the truck is only worth $40,000 today because of its depreciated value.
This is the ‘gap’ that gap insurance is designed to cover. Gap insurance can help certain drivers cover the amount owed on a vehicle after a total loss or theft. Most major car insurance companies offer gap coverage. Sometimes, gap coverage is also bundled into your leasing or financing payments because the lender wants to protect the collateral (your vehicle).
Some car insurance companies also call gap insurance ‘loan/lease payoff’ insurance.
Classic Car Insurance
Do you have a classic car that you only drive a few months a year? Classic car insurance is a specialized type of car insurance priced differently than ordinary insurance. It’s designed for the unique needs of vintage and classic car owners. It can protect your classic car against all types of unexpected events while still costing considerably less than ordinary car insurance.
Umbrella insurance can significantly raise your coverage limits. If you only have the lowest minimum required amount of car insurance in your state, for example, then you could be taking on enormous financial risk. With an umbrella policy, you’re protected against a wider range of situations, including collisions involving multiple passengers and collisions with high-end vehicles.
Often, umbrella insurance only costs a few extra dollars per month. In exchange for a few extra dollars, you can vastly expand your car insurance coverage limits, helping you avoid financial problems in the future.
Homeowner’s or Renter’s Insurance (To Cover Valuables Inside your Vehicle)
Yes, we know this article is about car insurance coverage. However, some drivers are surprised to learn that car insurance doesn’t cover the items within your vehicle.
Let’s say your vehicle gets stolen with your $2,000 laptop inside, for example, or that someone breaks into your vehicle and steals your wallet. In this situation, car insurance will cover the cost of replacing your vehicle (if it was stolen) or repairing the vehicle’s window (if it was broken into). Car insurance is not designed to cover, however, any valuables stored inside the vehicle.
To cover valuables stored inside your vehicle, you’ll need homeowner’s or renter’s insurance. This insurance extends to your possessions when they’re in your home or vehicle.
SR-22 or FR-44 Car Insurance
SR-22 car insurance, also called FR-44 car insurance in some states, is a special type of insurance certificate required for high-risk drivers. It’s not technically car insurance; instead, the SR-22 and FR-44 are certificates of financial responsibility. It’s a piece of paper filed by your car insurance company to your state’s DMV. It shows the DMV you have car insurance and are a ‘financially responsible’ driver.
Today, certain high-risk car insurance policies are colloquially bundled under the names ‘SR-22 insurance’ or ‘FR-44 insurance’.
Final Word On Little Known Car Insurance Coverage Types
Your auto insurance coverage may cover a lot of things, but are you sure that everything that they cover is relevant to you and your needs? Always plan what you need first before you contact your favorite auto insurance agent to purchase an auto insurance policy. This additional step in educating yourself will definitely save you on premiums and deductibles!
To learn more about the different types of insurance, please read our article Explaining Automobile Insurance Coverage Types.