Other kinds of coverage to know about

Car Insurance

Do other coverage options fit your needs?

Many people take great pride in the vehicle they drive. They want to have the newest, most expensive model with a set of state-of-the-art features. Car companies are continually bringing out new models and updating the designs of popular models that have been around for years. Years ago, it was fairly simple for insurance companies to decide what premium to charge for a certain type of physical property because there wasn't that much diversity in the market. Now there are more brands and models for all types of goods, which makes things more complex for insurers.

A car from the most recent year is likely to cost you significantly more money than the same model from just a few years ago. And once you've driven a car around for a few years, it's value declines. It's no longer worth the money you paid for it at the dealership. Buying the newest model of the same vehicle would cost you more than your current vehicle is worth. This presents an issue for insurers. If someone totals a car that's a few years old, an insurance company could choose to replace it with an up-to-date model, but this wouldn't be a sound plan financially. In addition, it could encourage some people to intentionally wreck their cars just so the insurance company would purchase them a brand new one. Instead, policyholders are offered a replacement that's equal to the current value of their damaged vehicle. This approach costs the insurance company less money because they're paying for a used vehicle, and it helps keeps rates lower for the insured. Some policies do provide drivers with a new vehicle if their's is damaged, but the premiums tend to be much higher.

Drivers who still owe money on their vehicle may want to consider buying a gap policy. When you take out a loan to purchase a vehicle, you usually agree to pay a certain amount of interest. Meanwhile, once you drive the car off the dealership lot, it automatically decreases in value. As a result, you may owe more money on the loan than you could currently sell the car for. This can become a serious problem if your car is totaled in an accident, and your insurance policy is only going to pay for what the car is worth. You're still responsible for paying the difference to your loan provider. A gap policy will cover that difference and ensure that you won't have financial trouble if your car is seriously damaged.

Another option is an umbrella policy. Let's say you have an accident involving an extremely expensive car. The liability claim may be much higher than if you ran into an average-priced vehicle, and you may be forced to deplete your savings to cover the costs. In this instance, an umbrella policy can help. Whether or not you choose to purchase an umbrella policy is up to you, but you want to make sure you have an adequate amount of liability coverage regardless. Some cheap car insurance policies give their customers the absolute minimum amount of coverage and ask them to pay higher rates for things like vehicle towing and storage. Searching for free insurance quotes can help you protect yourself from this.