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Car insurance pitfalls are commonly seen: too little or too much insurance coverage, neglecting car insurance, and not understanding, or even misunderstanding the coverage of policy. These pitfalls are very commonly seen in US and will be thoroughly explained below.
Insufficient coverage. \”State minimum required coverage equals to sufficient coverage\” is a common thoughts in drivers’ mind. They never think how the minimum required coverage is decided, simply the amount the state wants you to have. The state has not considered drivers’ personal situation before setting it. If you own a home, or other substantial assets, the minimum car insurance cannot protect your home. Therefore, it is best to talk to your accountant or your income tax preparer before deciding the limits of your car insurance.
If you are in an at fault accident and your insurance coverage does not sufficiently cover the damages, either medical bills of the injured parties or property damage repair or replacement, you are personally responsible for the balance of the bills. That is not to say that the injured party can take your home, but it may require that you borrow against the equity in your home in order to pay the bills for which you are responsible.
Buy too much insurance. Some drivers want to be carefree and simply decide to buy the maximum limits of all available coverage. This may not be a bad choice, only if you will not be stunned by the sky high premium.
Hoping you can get by without it. This is probably the biggest pitfall of car insurance. Too many drivers on the road in the U.S. drive with no insurance. Even in states where insurance is required. In Florida, 57% of the vehicles owned and registered in the state do not have car insurance. In some states you cannot get a license plate without proof of the state minimum required car insurance.
The vehicle owners get by with this in an ingenious way. When their license plate comes up for renewal, usually once a year, then they go into their local insurance agent, get the cheapest coverage they can, based on their state’s minimum requirements, make the down payment, go the license plate office, show their proof of insurance, get their license plate, and then?. never make another insurance payment.
Thinking you’re insured when you are not. This is more common than people realize and it is most common in the situation of divorce. In the throws of the problems of separation, it is not likely that you will put on the top of your list to check on your car insurance. The rules for this vary from state to state. For example, in some states, if the wife purchases the insurance in her name alone, because she was the one that went to the insurance office and signed the papers, even though she is married, she can delete her spouse from the policy without the spouse’s knowledge or consent.
These are only tip of the iceberg. The best practice should be a regular contact with your insurance agent, Appropriate coverage updates are needed when your liability, such as buying a home, increases. You should also renew your policy before renewal to ensure a proper coverage for your changing situation.