Do you currently have an auto loan that has not yet been paid off? If so, you should know that the minimum amount of auto insurance required by law will not likely provide you with the financial protection you require. This is because the law only requires you to carry liability insurance on your vehicle. All other coverage is considered optional. The problem with this is that liability coverage will not protect against damage to your vehicle. This can be a serious problem if your vehicle is being financed since you are responsible for paying off your auto loan even if the vehicle you purchased with this loan is no longer operational. Thankfully there are a few types of optional auto insurance coverage that can ensure you are protected no matter what happens to your vehicle. You can learn more about each of these different coverage options below.
#1: Collision Coverage
If you are found liable for causing an accident, you will need to have collision coverage in order to cover the cost of repairing or replacing your vehicle. If you do not have this type of coverage, you could find yourself stuck with an inoperable vehicle that still needs to be paid for each month until your auto loan has been paid off. This is precisely why some lenders will require you to carry collision coverage as part of the terms of your auto loan.
#2: Comprehensive Coverage
In addition to being damaged in an accident, your vehicle could also be damaged as the result of severe weather, poor road conditions, vandalism, or theft. These other perils are not commonly covered under a standard auto insurance policy. Consequently, you could be stuck covering the cost of these damages out of your own pocket if you do not choose to include comprehensive coverage in your auto insurance policy. Additionally, comprehensive coverage will typically cover the cost of replacing your vehicle if it is stolen and law enforcement is unable to recover it.
#3: Uninsured And Underinsured Motorist Coverage
If an uninsured driver ever hits you, you will likely find that getting the money owed for the damages they did to your vehicle is a long and often ineffective process. This is because seeking these damages through a civil lawsuit will often be the only available option. Thankfully, carrying uninsured motorist coverage on your auto insurance policy will provide you with another option. This is because uninsured motorist coverage allows you to file a claim for damages with your insurance company if the other driver does not have insurance.
Uninsured motorist coverage is often bundled with underinsured motorist coverage. This type of coverage can also be very important if your vehicle is currently being financed. This is because not all drivers will have enough insurance to fully cover the cost of your auto loan in the event that your vehicle is totaled. With underinsured motorist coverage, you will be able to seek any remaining damages from your own insurance company once the other driver's coverage has been exhausted.