Financial planning and insurance

In this article, we cover what you want to do if your car is totaled and what to expect from insurance providers vs. the state.

The average American drives less than 10,000 miles a year on highways that can exceed 147 miles per hour. So it’s really not surprising that a collision with an animal or another car might happen at some point in time. What is shocking is how much the average repair costs: about $3,700 on average!

Most people have never heard of their car insurance deductible before they need it—and then they're surprised when they find out just how little coverage it will provide them.

The deductible is the first thing a consumer should check when shopping for car insurance quotes in New Jersey. But you should also know how much coverage your insurance will actually provide—and how much that will cost.

Q: What’s a deductible?

A: The law generally requires car insurance companies to cover losses to your vehicle up to a certain dollar amount. This is commonly referred to as your "deductible." The minimum amount varies by company and state, but in most cases, the deductible is $100.

Q: What deductible does my car insurance company offer?

A: The deductibles set by your insurance company can be a bit higher or lower than the minimum, but it will likely be at least $100.

Q: So what’s the point of having a deductible? Why don't they just cover everything up front?

A: Research has shown that people are more likely to claim when their car is totaled if there’s a lower deductible involved. In other words, if you have to fork over $100 up front to file a claim, then you are far less likely to spend that money repairing your car afterward.

Keep in mind that if you do end up filing a claim, you can’t just ask for the money to be paid out right away. In most cases, the insurance company will have to investigate the loss first; you won’t get a dime until they determine that your car was hit by another vehicle and it didn’t happen by accident.

Q: All right, I understand that damage from an accident usually has to be investigated first before anything happens to my car payment… but what about things like vandalism? Isn't the deductible supposed to cover all of that as well?

A: In many cases, yes. But there are some instances where an insurance company will not cover damage from vandalism or any other type of intentional act. For example, a car might be stolen and then torched after it has been taken. Your insurance company may not allow you to file a claim for that theft if the fire is deemed arson—even though that’s how the fire started in the first place.

Also, an insurance company may decide not to cover damage caused by criminal activity such as vandalism or robbery. The thief will likely try to avoid getting caught and therefore pay your deductible rather than risk getting arrested. Your insurance company may then decide to drop your coverage altogether as well by refusing to pay out funds which they must turn over to authorities.

Q: I haven’t had any serious accidents or problems with my car in a while, but I know my deductible is $250. Is that high enough that I should consider switching to a lower deductible?

A: The answer to this question depends on your situation. If you don’t have much money in savings and you depend on your car to get around town, then a higher deductible may not be the best strategy for you since it may leave you without transportation if something happens. If, however, you’ve got a good buffer of savings and can lose the ability to drive for awhile—or even buy another new car—then sticking with a high deductible might make sense.

Q: What if I can’t afford a high deductible?

A: In this situation, you should try to find some other way to protect yourself as much as possible. Check out the tips at the end of this article for some ideas.

Q: What if I have a vehicle that doesn’t have a lot of value? Should I still get insurance?

A: In almost all cases, yes. If your car is totaled or stolen, you may be able to get it replaced for less money than what it would have cost you in the first place—thanks to your insurance company.

Q: And what about my income level... should I get insurance?

A: If you don’t have a lot of money to your name, then the ability to get back on the road if something happens—and, more importantly, have a way to get to work—might be worth every penny.

If you decide not to get insurance and an accident happens, you might have no choice but to carry out this repair with cash. That means giving up a meal or paying for car-related expenses with your credit card. In some cases, that may even mean taking money right out of your pocket... in other words, paying for the repairs yourself. That could be devastating.

It’s important to remember that not every insurance company will provide you with car insurance in the event you are in an accident. Some will outright deny liability, while others may not be willing to offer enough coverage to make it worthwhile for them to do business with you. (This is also true of a car that has been damaged by vandalism or theft.)

Q: I know that my car insurance company offers a certain level of coverage. Is there anything I need to add? Should I take the other coverages offered by my insurance company?

A: Many states require drivers to purchase Comprehensive (or “all-risk”) Insurance first and then choose additional coverages separately. In New Jersey, this is not a requirement; but it’s still a good idea.

Some Comprehensive Insurance options are designed to be more expensive, while other are less expensive. The amount of coverage that you’ll get in the event of an accident may also vary by company. You should always shop around for a policy which best suits your needs, though if you have special circumstances (such as credit problems or limited income), your insurance agent might be able to make what at first seems like “too good to be true” sound like a very good deal for you.

Conclusion

Hopefully, the information you’ve read in this article will have given you a better understanding of your options for buying auto insurance. When you are ready to get quotes, one of our associates will be happy to help you set up an appointment. He or she can walk you through the process of finding out what is involved in getting a policy and review all options with you so that you can make the best choice for your budget.

Tags: auto insurance

March 18th, 2017

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