Let’s face it: buying car insurance is a pretty big hassle. There are zillions of options out there sold by zillions of different companies at zillions of different prices. Sorting through all of your choices can get exhausting, not to mention confusing. Who new there were so many different ways that your car could cost you money?
Most people are familiar with the three “major” types of car insurance: collision, comprehensive, and liability. However, as anyone who’s ever shopped for an auto insurance policy knows, there are lots of different types of additional coverage out there. Most people balk at the thought of buying more insurance (the expense!) but do you know what those types of insurance actually cover? Are you passing up coverage that you potentially need, or, alternatively, buying more insurance than you really need?
Take a look below at three types of car insurance you might not completely understand, and the pros and cons of each:
Personal Injury Protection (PIP)
Personal injury protection is a type of insurance that covers the medical bills incurred by you and your passengers if you’re involved in an accident, no matter which driver is ruled to be at fault in the accident.
Pros – PIP could protect you from the financial devastation of having to pay expensive medical bills for yourself or others.
Cons – PIP is not available in every state, and it may be redundant if you and your family have very good health insurance
Gap Insurance
Unfortunately, cars depreciate very quickly, so if you borrowed money to purchase your car, it’s likely that you owe more on your vehicle than it’s worth. If you get into an accident that totals your car, you could get stuck having to pay the difference between what you owe on the car and what it’s worth. Gap insurance protects against just this situation and pays the “gap” between what you owe and what the car is worth.
Pros – If you’re significantly “underwater” on your car loan and don’t have savings, gap insurance could save you from having to pay a huge bill.
Cons – This coverage is expensive, and unnecessary if you have enough in savings to pay for the “gap” yourself.
Uninsured Motorist Protection
This type of insurance covers you in the event that you get into an accident with a driver who doesn’t have insurance and he or she is ruled to be at fault; with uninsured motorist protection, your policy would cover the cost of repairs to your vehicle.
Pros – This type of insurance could save you a lot of headaches if you get into a crash with an uninsured motorist; you won’t be on the hook for fixing your car and you don’t have to wait around for the other driver to get the cash together.
Cons – Uninsured motorist protection is also costly and is theoretically unnecessary because if the other driver causes the accident, he or she is still on the hook for fixing your car, insured or not. However, in reality you might never see that money – this one is a personal judgment call.
Don’t let purchasing car insurance be an intimidating process – arm yourself with the information above and pick the coverage that’s right for you!
