3 Common Reasons for an Auto Insurance Disaster

An auto insurance disaster has many facets and can be the result of not being properly insured or paying too much for your coverage. Auto insurance disasters are often avoidable, however, and by understanding some of the most common causes of auto insurance disasters, you can better protect yourself and your finances.

1. Driving Underinsured

One of the biggest reasons for auto insurance disasters is driving underinsured. An underinsured driver runs great risk not only to others on the road but also to him or herself. If an underinsured driver causes an accident, they will be responsible for covering the damage, oftentimes out of pocket. If you can’t cover these costs, which can be quite high, in the hundreds of thousands of dollars, you could face a personal financial crisis or law suit. While driving with very minimal or no insurance may save you money on your monthly bills, in the long run it can be detrimental to your financial livelihood.

2. Wrong Types of Coverage

Another reason auto insurance disasters occur is when a driver has inappropriate types of coverage through their auto insurance policy. There are certain types of coverage that are mandatory for drivers across the board, in every state. These include property damage liability and bodily injury liability and they serve to protect you from legal action if you damage another persons’ property or body while driving. Other types of insurance that are recommended but not always required include collision and comprehensive coverage. Collision protects your car by covering repairs (regardless of who caused them) and comprehensive covers just about anything else that can damage your car typically including fire, wind, natural disasters, and theft. There are other add-ons that you can consider to make sure you have the right kind of coverage, including coverage to pay for the cost of a rental car if your car is in the shop after an accident. Review the coverage you currently have and talk with your auto insurance provider to make sure that you’re properly covered with the right kinds of coverage.

3. Knowing How to Make the Most from Premiums and Deductibles

Premiums refer to the regular payments that you make to your auto insurance company and deductibles refer to the amount that you will have to pay in case to the auto insurance company when they are paying to repair your car, under your policy. By having higher premiums, you will have lower deductibles and by having lower premiums you will have higher deductibles. When you raise your premiums you end up paying more on each payment but less in the event of needing to fix your car after an accident or incurred damage. By lowering your premiums you can save hundreds or even thousands of dollars every year on your auto insurance payments; in turn, you will pay more out of pocket for damages to your car but you will have saved much more than this in the long run. Avoid the disaster of paying too much for your car insurance and consider lowering your premiums.

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