Auto Insurance Optional/Additional Coverages: Separating the Worthwhile from the Worthless

​ When you get a quote for auto insurance or purchase a policy, secondary coverages are (and should be) an afterthought. That's because your five basic auto insurance coverages are more important to think about first. So it's very important you know this information before ever worrying about additional optional coverages. But with that, you still need to look at and consider the secondary coverages offered as well. Some are very important while others are worthless. So you need to know which coverages are worth looking further into, and which ones you should ignore.


   I have comprised a list of these common additional coverages and the rundown on them. You will notice that some are very cut and dry regarding their value while others can go either way, depending on the company that offers the coverage. For those types of coverages, you're going to have to take a close look at each individual policy and find out exactly what that additional coverage offers because it can vary by a lot. I'll explain those as we get to them. But here's a list of additional coverages and also some advice to help you separate the worthwhile from the worthless:

• Gap insurance.For people who buy new cars or almost new, gap insurance coverage is a must have! It protects you from becoming upside down on your car loan in the event of a total loss. For example, let's say that you buy a brand-new car for $30,000. And let's say that after driving the car for nearly a year, you wreck the vehicle and completely total it. .... The problem in this case is that having regular auto insurance may not, and probably will not be enough to cover the total loan you took out on the car. As you know, vehicles depreciate very quickly once they leave the dealership parking lot. By the time of your accident, the actual market value of your vehicle may have fallen to say $25 -26,000. But with the way car loan payment schedules work, your first few months of installment payments only pay mostly the interest part of your loan and not the principal. So you may still owe over $29,000 on the loan. This is where gap insurance comes in. It will cover that difference for you. Depending on the company, some policies pay off exactly the difference between a loan and the payout amount. While other companies may go ahead and just replace your vehicle with a brand-new similar vehicle. Either way, you come out much better ahead than if you only purchase the basic comprehensive and collision coverage. Besides the deductible, you will also have to eat the difference in the loan if you do not have this gap coverage. Gap coverage is usually very inexpensive. In my opinion for a new car or any car that qualifies, it's a no-brainer to have gap coverage!

• Total loss replacement coverage. This works the same way as gap coverage does. It helps protect you from becoming upside down on your loan. Although it's usually not quite as generous as the coverage on gap insurance is, it is very close. Insurance will pay over and above your basic auto insurance coverage by a certain percentage, usually 25%. So in the original example, I used buying a $30,000 vehicle, both gap or total loss replacement coverage would protect you. However, most companies do not offer both gap and total replacement coverage. Most only offer one or the other. But no matter which one is offered, I believe it's a no-brainer to take it. The possible benefits far outweigh the small increase in premium.

• Roadside assistance coverage. Just about any of the insurance companies offer some form of roadside assistance coverage nowadays. But here's one area where you have to be really careful and read your policy closely to see exactly what you are covered for. Some provide very broad and extensive coverage, while other roadside assistance coverages are lousy and very limited. Remember that the auto insurance company usually does not handle roadside assistance claims themselves. They contract these claims out to a third-party. And because of that, that's why you have such a big variance in quality between one roadside assistance coverage to the next. My advice: some roadside assistance packages are very inexpensive nice to have. The key is to look and see exactly what's covered how far away from home what limits and then compare that to the premium and decide for yourself whether or not it's worth it to have. Some of your better roadside assistance coverages may also offer vacation coverage (a.k.a. lost trip interruption coverage). This covers you if your vehicle breaks down while you're visiting out of town. This will not only include the cost to tow your vehicle to a mechanic as roadside assistance coverage does, but this also offers extra money for meals and lodging. Again, look at exactly what's covered and for how much and decide for yourself.

• Rental coverage. In the event of a loss in which the insured vehicle or a replacement vehicle is not available, this coverage will provide you the rental, or at least pay for part of the rental until you get your vehicle back. It's important to look at whether or not the vehicle will be rented up front by the company or if you have to pay that up front and they reimburse you later. Many companies will give you an option of different dollar amounts per day as to how much coverage you want. Generally with most auto insurance policies, this is pretty good coverage to have simply because it's inexpensive. But you do have to look because some companies are kind of skimpy as far as coverage is concerned. Know what you're getting for the money you're spending before you make a decision.

• Disappearing deductible coverage. When you select this option you pay a little extra premium for the chance that for every policy period that you do not file a claim, a certain percentage of your deductible gets lowered. This usually continues as long as you go claim-free until the deductible reaches zero. I personally am sort of indifferent on this one. I think the biggest key is what your deductible is currently. I think that if you have a high dollar deductible like a thousand dollars or more, then this might be a very good idea. If you have a low deductible such as 250 or less, it may not be worth the trouble because your deductibles are already small anyway. And for the common $500 deductible, that's sort of middle of the road. Bottom line: Look at how long it takes the decuctible to drop to zero and the extra price it takes to get there and decide for yourself. Sometimes this is the better option. But other times, it may just be easier to go with a lower deductible to begin with.

• Accessory coverage. This coverage offers specific coverage on additions you've made to your vehicle. For example, let's say you buy a van and have a conversion package installed on it. Insurance is only going to cover you for the value of the original van unless you have accessory coverage to cover your expenses for the conversion package. A lot of automobiles and trucks have a lot of accessories added to them as well. Generally speaking, many companies will offer free accessory coverage up to a certain amount. And then if you want to purchase more coverage you have the option to do so. Again, you have to look at what is covered in the price. Of course if it's free you'll definitely want to take that. If you put a lot of money into accessory coverage, I think it's a good idea to insure it as well. For the most part, accessory coverage that is purchased beyond the free coverage is generally inexpensive as long as you don't get into the really high dollar accessories.

• Personal property coverage. This offers coverage for personal contents that are in your vehicle at the time of a loss. An example would be having comprehensive coverage on your car and it gets broken into. Personally, I have always believed this coverage is kind of silly! With comprehensive coverage, you already have a limited amount of coverage included with it anyways. Why not simply take your personal property with you instead of leaving it in your vehicle where it becomes a theft magnet? Apparently, auto insurance companies mostly believe this is a silly idea also. Because very few offer this personal property coverage. But I have noticed recently that it's becoming more common and more companies are starting to offer it. Personally, the only time this coverage ever made any reasonable sense to me would be on something like a boat insurance policy. I don't think it's of much value for an auto insurance policy.

• Death and Disability benefits.This coverage is self-explanatory. But the real question is how much is covered? How much does the benefit provide to your family if you're killed in a vehicle accident? And also how much will the disability part pay you if you're disabled as a result of an auto accident? This type of coverage varies greatly from one company to the next. It can also vary greatly from one state to the next depending on that state's laws. Some states already have this coverage included in the basic auto policy structure, but most don't. From the coverages I have seen personally regarding death and disability benefits, it's usually not a bad idea to take this coverage if offered because it is very inexpensive in most cases.  So even if coverage is lousy, in many cases it still worth taking.

   
     Summary: Some optional coverages are very worthwhile to carry while others are not. I recommend you take some of these coverages and stay away from others. But in many instances, you are going to need to look deeper into what is covered for what price and decide for yourself. But the bottom line is, for most secondary coverages, you should at least find out these particulars because some are definitely worth having.


     


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