Only pay for what you need for auto insurance?
Only pay for what you need is a dangerous concept for auto insurance?
We hear the auto insurance ads on TV and radio every day. “Only pay for what you need.”
But is it even a possibility to make this happen?
The major issue we have wit this slogan is, can you really know how much insurance you really need?
I will discuss why the slogan ‘only pay for what you need” for auto insurance can be a dangerous concept.
Only pay for what you need for auto insurance
Is it possible to only pay for what you need for your car insurance?
There are several parts to an auto insurance policy. There are actually some coverages on the policy that you can choose to pay for what you need.
Physical Damage portion of the auto insurance policy
For example, you can choose to have comprehensive and/or collision coverage. This is often referred to as physical damage coverage and sometimes erroneously as “Full Coverage” (which really does not exist). And within those coverages, you can choose the amount of the deductible that you want to carry. The deductible is the portion that you would be responsible for paying should you file a claim.
So, if you have an older car, you may not need to carry collision coverage. This is because the value of the car diminished so much, that it does not make sense to pay for the collision coverage. So in this case, you can say that you do not need to pay for this coverage.
For physical damage coverage, the risk amount is known. You know the value of your car (or at least the approximate value). And you know the deductible amounts that you have chosen to pay for. So if there is a claim, you know what you will be responsible for, whether or not you have physical damage coverage on your car insurance policy.
Liability portion of the auto insurance policy
Unlike the physical damage coverage above, liability coverage is a great unknown. If you ask us how much liability insurance you need, we cannot give an amount as an answer. Our answer to this question is “as much as you can afford to buy.”
In my opinion, it is impossible to only pay for what you need for liability insurance.
If you are at fault for an auto accident:
- Can you tell me the extent of the injuries to the other party before it happens?
- Can you tell me how much work they will miss or even if they will be able to work again?
- Are you able you tell me the value of the person’s life should loss of life occur?
- Can you tell me the amount of the lawsuit that you will be handed from the injured person’s attorney?
The short answer to all of the above questions is NO. There is no way to know the answers to these questions ahead of time.
So therefore, how would it be possible to only pay for what you need for your auto liability insurance?
Are there auto insurance coverages that you can only pay for what you need?
There are some coverages on the auto insurance policy that you do not have to pay for if you do not need them. They are usually the smaller add on coverages though.
These coverages can include:
- Roadside Assistance: If you have AAA or another third party service for roadside assistance, then you do not need to pay for it on your auto insurance.
- Rental Reimbursement: If you have enough vehicles in your household, then you may not need to pay for rental reimbursement on your auto insurance.
- Identity Theft: If you have identity theft coverage on you home insurance or through a third party, then you do not have to pay for it on your car insurance.
- Original Equipment Manufacturer (OEM) Coverage: If you are Ok with using aftermarket parts for repairs to your vehicle, you do not need to pay for the OEM coverage on your auto insurance.
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