Sifting through car insurance policy add-ons can be confusing and stressful. Which ones should you say yes to? Will you be irresponsible for saying no to some? Which ones are worth the money and which ones aren’t? We’ll help you sift through the myths and come out with the best policy for your individual needs.
First things first: What is an add-on?
An add-on to your car insurance policy is basically extra protection offered to you when you come face-to-face with the sales portion of insurance. These protections go beyond the legal minimum required by your state—in other words, you don’t have to have them, but you might find yourself wanting them, depending on your personal circumstances.
Add-ons you might want to consider:
- Gap insurance:
Gap insurance protects you in the situation that you owe more money on the vehicle than your insurance company will pay you. (If you’re up to your neck in car loans, gap insurance may be a life-saver for you). A standard valuation is used when insurance companies determine what your car was worth at the time of the accident and that’s the amount they will pay you. However, if your car was leased or financed at the time of the accident you may owe more on the loan or lease than what the insurance company gave you. According to carinsurance.org, a side note to remember is that gap coverage is typically only available if you have comprehensive and collision coverage, and if the car is financed or leased—so you may not be eligible for this add-on. But, if you do apply to these requirements they also added that “Gap insurance is worth considering if you put down less than 20 percent of a vehicle’s cost, financed it for 60 months or longer, leased it, bought a vehicle that depreciates faster than average or rolled a balance from an old car loan into a new loan, the institute advises. It says gap insurance generally adds about $20 to your annual premium.”
- Roadside assistance:
If you travel alone or with children and you do not have AAA coverage or other means of roadside assistance, this is something you should really consider (not to mention it’s generally extremely cheap—we’re talking a couple bucks a month). Roadside assistance will come in handy if you’re broken down on the side of the road: It comes with mobile repair and towing services. Your mechanic will be equipped to assess any mechanical issues as well as change tires and fill up an empty gas tank. In the event that they are unable to fix the problem on the side of the road, they will have your vehicle towed to the nearest repair facility.
- Vanishing Deductible:
Vanishing deductible reduces your deductible by a certain amount (generally around $50-$100 but you can get up to a total of $500) at the beginning of your policy and then the same amount yearly until it reaches zero. As long as you do not have any accidents and maintain a clean driving record, your deductible will drop.
Which to ditch:
These are some add-ons that might just be an extra charge to your bank account; check out the details and see if you can afford to cut out a few:
- Rental car insurance:
A credit card and/or auto insurance may already be enough coverage. Ivestopedia.com reports that, “If you already have auto insurance or are using your credit card to rent a car, you may already have enough coverage. It’s important to go over your policy, and if you’re unsure, talk to your insurance agent to find out if you’re fully covered. If you have liability, comprehensive and collision insurance already, this can eliminate the need to pay more for rental insurance. As well, some credit cards extend types of insurance for a rental car, provided that you pay using your credit card. This is another area where you need to find out the details, as it’s possible that certain types of cars and certain types of damage are not included.”
- Funeral or Accidental death insurance:
Although no one likes this morbid topic, this can be an unnecessary charge to your bank account if you look into it. If you already have a life insurance policy with pre-need services (a funeral rider) some life insurance policies make sure that at least some of the insurance money is sent directly to a funeral home. So putting this on your auto insurance might be unnecessary because you’ll be covered whether the accidental death happens in a car or in other circumstances.
- Personal Injury protection (PIP):
This type of insurance will pay for your medical expenses, as well as those of anyone else who is traveling with you, whether or not you were at fault in the accident. But, if your passengers are all health insured this insurance could be just an extra charge. It is, however, mandatory in 15 states—check here to see if yours is one of them.
Remember that these are simply some tips to consider if you are trying to save money. When in doubt, talk with your agent and make sure you are covered the way you need to be to have peace of mind and pocket.