Insurance and Maintenance for Your Vehicle

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Insurance and Maintenance for Your Vehicle

If you have a car, truck, minivan, or other vehicle, you most likely already have auto insurance on it. It’s required in some form or other in nearly every state. Most drivers understand the need for auto insurance because they know that the costs of an accident can be very high (even into the hundreds of thousands of dollars), and insurance is not prohibitively expensive. It’s a small price to pay for peace of mind while you’re behind the wheel. But does your insurance cover what you need it to cover? Does it cover too much or too little?

Liability coverage

Liability coverage is so named because it pays for damages that you cause to someone else. It does not cover you. Liability coverage is offered for two scenarios: bodily injury and property damage. Actual coverage amounts vary, and you can increase yours for an extra charge on your monthly premium. Bodily injury covers medical and rehabilitation expenses when an insured driver causes bodily harm to another person and is deemed responsible for it. Property damage pays for property that an insured driver destroys; for example, if he or she hits a fence or another car. States require certain minimum levels of liability insurance. The insurance covers anyone driving the insured vehicle with the owner’s permission.

Liability coverage is often presented as a series of three numbers separated by slashes, e.g., 25/50/10. These numbers refer to the three limits on bodily injury per person, bodily injury per accident, and property damage. Here are examples from three states:

• Wisconsin: 25/50/10
• Minnesota: 30/60/10
• California: 15/30/5

*Source: The American Institute of Certified Public Accountants

Liability also covers legal fees if you are sued and found responsible for causing damage to another.

Other coverage

You can supplement your liability coverage with other forms of coverage:

• Collision. Collision coverage is for crashes. It pays for damages to a vehicle; if the vehicle is totaled, it pays the cash value of the vehicle. Collision coverage is optional, but if you take out a loan, the lender may require you to carry it.
• Comprehensive. Comprehensive coverage is for damages to your vehicle that are caused by incidents other than collisions. Examples of these incidents are theft, vandalism, weather damages, or hitting animals.
• Medical payments and personal injury protection. Medical payments and personal injury protection both cover medical expenses incurred by you and your passengers in an auto accident. They may also cover lost wages in some cases. Personal injury protection is mandated in some states.
• Uninsured/underinsured. This covers you if you are hit by someone who has inadequate liability coverage, either because they don’t have enough coverage or any coverage at all. The other party must be at fault, however. The insurance company pays for bodily injury losses.
• Loss of use. Loss of use coverage reimburses you for the inability to use your vehicle if it is being repaired for an insured loss. An example covered expense is a rental car.
• Towing/Roadside assistance. Towing and roadside assistance coverage pay for costs due to road breakdowns.
• Personal property. Personal property in a damaged vehicle is typically not covered under the policy; you usually must claim it under your homeowner’s or renter’s policy. But there are exceptions: some insurance carriers will cover devices that are intended for automobile use, such as navigation devices.

Be sure to keep your insurance card in your vehicle. And if you are in an accident, it is a good idea to not admit fault, as that should be settled later by the experts.

Keep your vehicle in good condition

Long ago, a car would last about 100,000 miles or so before dying, even when you took good care of it. These days, you can reasonably expect a car to go twice as many miles, but you still have to take good care of it. Why? It reduces the chance of having big repairs, and it ultimately saves money in the long run. Changing the fluids and getting tune-ups on a regular maintenance schedule will ultimately prove less expensive than big repairs.

Should you get an extended warranty?

An extended warranty (also called a service contract) is a prolonged coverage that extends past the life of an original warranty that you had on the auto. It costs extra and offers a certain amount of coverage, such as repairs, labor, or parts. Details of coverage vary greatly according to contract. An extended warranty is offered by the manufacturer, the retailer, or by various warranty sellers. Extended warranties may have exclusions in them and should be understood thoroughly before buying.

But should you get one? On the positive side, an extended warranty can buy you some needed peace of mind, and it can save you a lot of money in repair costs. On the other hand, it can cost a good chunk of money, and you may end up never needing it. These warranties are a big source of profit to those who sell them. Ultimately, you must consider the likelihood of your vehicle needing repairs and whether the repair costs would justify the cost of an extended warranty. The only way you will know for sure that you need one is to see it in hindsight.