If you are looking to cut back on car insurance costs, one of the first things you should probably consider is getting rid of some of your add-on coverages. Because they are add-ons, you may think that they aren’t necessary. However, while some add-on coverages can be discarded and aren’t worth the cost, there are a few you should consider keeping.
We want to clarify that one coverage you should never get rid of is auto liability coverage, as this is legally required in every state. But you may be wondering, what is the difference between general liability and auto liability?
Auto liability is a coverage that pays car accident costs, while general liability protects a business against injuries or deaths. Because liability coverage is so essential, it is vital that you follow the law and always carry it on your vehicle.
Read on to learn more about how to decide which add-on coverages may be discarded and which you should keep on your auto insurance policy.
Consider the Consequences of Removing Add-Ons
The first thing you should do is sit down and calculate exactly how much your add-on coverage adds to your monthly or yearly rate. Once you have this number, compare it to the financial benefits you get from the add-on coverage to decide if keeping the add-on coverage is worth it.
The most important question you should ask while doing these calculations is if getting rid of the add-on coverage would leave you open to high costs if you were in an accident.
For example, let’s say you have made expensive modifications to a car, such as a new stereo system or a custom paint job. If you discard your modified car insurance, you won’t be reimbursed for the modified car parts if you get into an accident. This means you will be paid significantly less than the value of your car.
Another example of coverage that might save you from high costs after an accident is gap insurance. If you have a new car from a dealership that is being loaned or leased and are trying to make sense of gap car insurance coverage, know that gap is an add-on you should always consider keeping.
Why? If you have gap coverage and get into an accident, you won’t be stuck paying off the rest of the loan or lease on your new car. Since gap coverage generally only costs a few extra dollars a month, it is well worth paying the increase in rates for a few years to make sure your car is adequately covered.
Consider the Benefits of Removing Add-Ons
With important add-ons like Gap and modified car coverage, it is important that you consider the financial losses with and without the add-on coverage after an accident. However, there are some situations where the cost of paying for an add-on insurance policy isn’t worth the benefits of the coverage.
For example, if you have two cars, it isn’t really necessary to pay for add-on coverages like rental car reimbursement, as you won’t need a rental car to get around if your car is in the shop. And if you have a car that is in decent shape and isn’t prone to breaking down, you could probably discard roadside assistance coverage.
So sit down, calculate how much more you are paying for the add-on coverage, and then determine your accident costs without the coverage as well as your chances of using the coverage. If your chance of having to use a coverage is high and you are vulnerable to financial loss without it, keep it. But if you don’t think you’ll really ever need the coverage and you’ve calculated that you won’t have huge bills after an accident if you discard it, get rid of it.
How to Lower Costs of Add-On Coverages
If you are on the fence about an add-on coverage, try to lower car insurance costs through the following tips:
- Shop around for quotes – See if you can get your add-on coverage cheaper at another provider, as switching car insurance companies could save you hundreds.
- Check discounts – Make sure you are qualifying for as many discounts as possible, as discounts can help you afford your add-on coverage.
- Raise deductibles – If you raise your deductible on a qualifying coverage, such as gap coverage, you can reduce your rates. Just keep in mind that you will have to pay more for repairs after an accident.
By using one or more of these tips, you can reduce rates enough to keep your add-on coverage on your policy. These tips will also help you save on your legally required coverages, such as liability insurance.
Add-On Coverages You Should Always Keep
There are two kinds of add-on coverage you should always keep. While the Insurance Information Institute’s (III) list of required coverages shows that these two coverages aren’t required in every state like liability insurance, they should always be carried by every driver.
The first coverage, collision coverage, will pay for driver’s repair costs after a collision with another vehicle or object. The second coverage, comprehensive coverage, will pay for repair costs after damages from animal collisions, weather, theft, and more.
So whether you hit a deer in the road or another car, your accident costs will be covered if you have both collision and comprehensive coverage.
If you don’t have these two add-on coverages, your car repair costs won’t be covered after accidents. Liability insurance only covers other drivers’ repair costs if you cause an accident. So not carrying collision and comprehensive coverage leaves drivers vulnerable to expensive repair bills after an accident.
Add-On Coverage Shouldn’t Automatically Be Removed
Bottom line? Remember that just because a coverage is an add-on doesn’t mean it can be discarded. Keep add-on coverages if you are vulnerable to expensive bills if you get into an accident.
On the other hand, if the add-on coverage isn’t vital and you are a low-risk driver, you can get rid of it. If you can’t make up your mind about an add-on coverage, try lowering costs in order to keep the add-on coverage.