What Your Car Insurance Policy Really Covers
There’s a great deal of confusion among drivers as to what is covered under a car insurance policy. Most people know that it’s there to help pay for damages incurred as a result of an accident. What damages are covered and to what extent depends greatly on the limits of the policy as well as on the coverage options you select when you take out the policy. What can you expect to have covered on your policy? Here is an overview of the basic coverage options and how they work.
Third Party Liability
This coverage is required by law in a minimum amount as determined by the province in which you live. Third party liability coverage is designed to pay for property damages and injuries to another party that occur as a result of an accident in which you are found to be at fault. The insurance company will pay out in an amount not to exceed the policy limits. These limits are indicated on your policy.
Along with third party liability you are also required to carry accident benefits insurance. This is a coverage that pays out for a variety of different items including lost wages and medical costs not covered elsewhere.
Comprehensive and Collision Coverage
These coverages are optional unless you have a loan on your car, in which case your lender likely requires you to carry them. Comprehensive coverage pays for loss or damages sustained in any incident that does not involve a collision. The two most common comprehensive claims are for theft and for vandalism. Cracked windshields also fall under this coverage
Collision coverage comes into play when you are in an accident for which you are found at fault. It pays to repair the damage to your car or to replace your car entirely in the event of a complete write-off. For both of these coverages you will pay a deductible, beyond which your damages are covered.
It’s in the area of the other options for coverage that the most confusion occurs. In many cases drivers assume that they have this coverage automatically, while in truth many of these must be added to the policy to be available.
Rental car coverage allows you to extend your insurance coverage to a rental car while you are driving it. This coverage is often not included and must be added to your policy for an additional premium. Coverage to pay for a rental car in the case of an accident, so that you can drive around while your car is being repaired is a service most insurance policies offer – but it may not be part of the package. Again, you may need to add it separately.
Many auto insurance companies now advertise accident forgiveness, but many people don’t realize it doesn’t always come automatically. You may need to add it to the policy. The same goes for waiver of depreciation, a coverage that allows you to get the full brand-new value of a new car if it’s totaled in an accident.
The Coverage You Didn’t Know You Had
There are a few surprises in the average auto policy that most people aren’t aware of. One of the most common is that your auto insurance can provide coverage for an accident that involves pedestrians, cyclists or others on the street. That goes not only for situations where you strike a pedestrian or cyclist, but when you are the one struck by a car when you are on the bike or on foot.
Auto insurance can provide for everything from lost wages to funeral expenses, depending on the situation. Most people have more coverage than they are aware of under their policy.
What Auto Insurance Doesn’t Cover
Almost as important as knowing what your car insurance does cover; it’s important to know what it doesn’t cover. While auto policies do generally have a small amount of coverage for personal property, it’s very minimal. Valuables that are stolen from your car are unlikely to be replaced by your auto insurer. Instead, you will have to look to a home insurance policy for that coverage.
Also not covered are certain after-market parts and additions unless you have specifically added them to the policy or taken out a policy designed for specially modified vehicles.
Auto insurance may exclude any number of items, and it’s up to you as the driver and the consumer to know what those exclusions might be. Discuss your policy with your insurance professional. It’s important to have a good understanding of your policy so that you can get the most value out of it, especially when shopping around for car insurance quotes – and so you won’t be surprised by what’s not covered after an accident.