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What You Don't Know About Car Insurance Can Hurt You

Many people do not pay close attention to the intricacies of their car insurance until they are involved in an accident. If you are unaware of what your policy covers, you could be spending more for insurance than you should. You could also find yourself unpleasantly surprised if you need to file a claim for damages from a collision.

The Importance Gap Insurance

Gap insurance has become some of the most important car insurance many consumers do not realize exists. This type of insurance is extremely important if you are paying off a high car loan or leasing a car.

Simply put, gap coverage fills the gap between what your car is worth and what you still owe for your car. Since most cars begin depreciating as soon as they leave the dealer's lot, the gap between actual value and owed value can sometimes be very expensive. Gap coverage allows you to pay off the damaged car so that you can afford to buy a new one.

It is not Difficult to Switch Insurance Providers

A common misconception about car insurance is that it is difficult to change from one insurance company to another one. Switching providers is not very complicated at all. Most insurance companies will allow you to terminate your policy at any time as long as you submit a written request to cease the service. Do not assume stopping payment will cause your current insurance to be canceled. It is important to communicate with your insurance company so that you do not create financial problems that could harm your credit rating.

What Comprehensive Insurance Really Covers

Comprehensive insurance is not always understood by car insurance consumers. When you purchase a comprehensive policy, you are buying protection for anything that happens to your car that is not the result of a collision with another vehicle.

Comprehensive coverage will reimburse you for damage caused by vandalism, theft, fire, flood, or other natural disasters. It also pays for the replacement of window glass damaged by road debris or other flying objects. Comprehensive coverage is best for newer cars that can be more expensive to repair.

Choosing the Right Parts for Repair

When you have been involved in an accident, there is more to worry about than just how to get around without your car while it is being repaired. Your insurance policy usually states it will only cover certain types of repair parts.

The auto body shop will need to know whether you want to use original manufacturer equipment (OEM), or aftermarket parts in the repair work. OEM parts are more expensive, but they are also more likely to be covered by a standard or comprehensive insurance policy. Most insurance does not cover aftermarket parts, because there is no guarantee of the quality of the parts.

Understanding Actual Cash Value

If you are involved in an accident or you have sustained damage to your vehicle, your insurance company will offer you the actual cash value for your repair work. You may be surprised the actual cash value is less than the amount you reported as the value of your vehicle. That is because the actual cash value is the amount that the vehicle is worth at the moment after depreciation. Every vehicle depreciates every day, which means the value goes down, as the vehicle gets older. It is a good idea to check on the real value of your vehicle with your car insurance company regularly.

The Truth about Full Coverage

Full coverage does not mean your car is covered for any situation that may occur. Full coverage only means that you have purchased all of the minimum coverage required for vehicles in your state.

Full coverage means your car insurance meets all of the requirements so that you can register the tag and title and renew the tag annually. Every state has a different set of legally required minimum insurance. Your local insurance agent will be able to tell you what you need in order to carry full coverage.

What No-Fault Insurance Covers

Some states require all drivers to carry no-fault insurance coverage. No-fault coverage means the insurance company will reimburse the driver and passengers regardless of who is found at-fault for the accident.

There may still be blame assigned after an accident, but no-fault coverage will pay out even if no one is found to be at fault. It protects the driver from being left without any insurance coverage under any situation. No-fault insurance is usually a last resort that does not apply unless the accident involved an unusual combination of events.

The Difference between Uninsured and Underinsured Motorist Coverage

Uninsured Motorist (UM) and underinsured motorist (UIM) sound similar, but they are treated differently in the case of an accident. If the person who carries UM insurance is in a collision with another driver who has no insurance at all, the UM insurance will cover all of the costs of the collision and any necessary medical costs.

With UIM, the insurance makes up the difference between the real cost of the accident and the amount of insurance that the other driver has purchased. UIM will not be necessary if the other driver carries enough insurance, while UM is vital when the other driver carries no insurance at all.

When Medical Coverage Begins

Medical coverage is included in Personal Injury Protection (PIP) policies. The PIP policy covers medical bills, missed work, and many of the other incidentals that can be expensive after an accident. Additional medical coverage, often called Medical Payments or Extraordinary Medical Coverage, begins to apply when someone suffers from a severe injury that requires extensive emergency treatment, exhausting the available PIP coverage.

The coverage also kicks in when someone needs to miss a great deal of work or needs treatment for an extended period. Medical Payments coverage can apply differently in different kinds of situations or jurisdictions, but usually provides protection for unusually difficult circumstances.