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Wednesday, November 15, 2006
Does Your Car Have the Insurance Coverage You Think it Does?
Now that the new 2007 new car lines have been rolled out, buyers can find great deals on 2006 inventories. But it is important that new car buyers be sure that their auto insurance properly protects their big investments—or they could wind up regretting it.
"Take a few minutes to ensure that you truly have the auto insurance you need," said Ron Moore, MetLife Auto & Home manager of product development. "Surprisingly, a new car depreciates up to 30 percent during the first year, and many insurers will take a deduction for depreciation during this time. That means that a person could pay $20,000 for a vehicle, but only receive $14,000 if it is 'totaled.' In addition, if you have a loan on the vehicle or if the vehicle is leased, the bank or leasing company could ask you to pay for the difference between the amounts the insurance company pays and the payoff amount of the loan or lease. As a result, you might have to pay several thousand dollars out of your pocket."
According to Moore, many people take for granted that all features of their new vehicle are automatically covered. "People just assume their auto insurance will cover the entire vehicle and everything in it," Moore observed. "If your new vehicle has any add-ons that are not standard equipment, such as a mobile video player for the kids or a GPS or navigation system, they may not be covered by some insurance companies. By asking the right questions, however, you can avoid some nasty surprises, and also, find ways to save money on the insurance you're purchasing."
Not all insurance policies are the same, and many buyers do not capitalize on available insurance discounts. Before you purchase a new vehicle, ask these questions:
- What is actually covered by my auto insurance? For example, if your new car is totaled, will your insurance agent replace it with a new car, or take that deduction for depreciation? Be sure to determine beforehand the level of protection actually afforded under the terms of the policy.
- Does image mean everything to you? You could end up paying more for the flair of an eye-catching car. If a car is considered expensive to repair, or has a historically higher theft rate, it could carry a higher insurance cost. Specialty vehicles and sports cars are in this category, often costing more to insure.
- Will you be able to pay off the loan or lease if your new car is damaged beyond repair? Does your insurer offer Lease or Loan Gap coverage?
- Are extras like special rims, tires, or video players covered in the event of an accident? Would your insurance company pay the whole cost of the customization, or would they only cover a limited amount of the cost?
- Do you qualify for insurance discounts if your new vehicle comes equipped with such things as anti-theft/alarm devices or anti-lock brakes?
- Do you qualify for additional discounts? Insurers offer discounts for factors like driving record, certain safe driving courses, the number of drivers using the vehicle, low annual mileage, and if the vehicle is parked in a garage overnight or left on the street.
- Can your good driving history work in your favor? Should a loss occur, some insurance companies would reward customers for accruing a good driving record by reducing his or her deductible for each year of loss-free driving. Be sure to ask if your company offers it.
- How safe is your vehicle? Cars considered "crashworthy" typically cost less to insure. Before buying, pay a visit to http://www.highwaysafety.org/ to rate your prospective new vehicle.
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