Car Insurance: A Tangible Asset

By K. Pollow

When buying a car, a common exchange of goods and services between buyer and seller takes place. The customer leaves the transaction with a tangible object – the car. When purchasing car insurance, consumers often feel as if they are leaving with just a lighter wallet and seemingly nothing else. In reality, they have purchased an important bundle of financial tools and safeguards.

Foremost among those tools is public liability and property damage, or PLPD, which will not only satisfy legal obligations required by the state but also protect consumer assets in case of a lawsuit stemming from an accident. This risk management tool allows for liability to be shared among millions of drivers, in most cases limiting out-of pocket expenses for accidents caused by the insured to just the premium and the deductible, leaving the insured’s financial assets, e.g., home, savings and investments, protected from legal claims.

Collision and comprehensive coverage is a useful tool to defray costs for a major repair due to an accident. Again, out-of-pocket expenses are usually limited to the amount of the deductible of the insured’s policy, allowing for advance financial planning since costs are known in advance. If the consumer finances the newly purchased auto, the lender will require this coverage in order to protect the car’s value. Even without a loan, protecting the value of personal assets is always a good idea.

Uninsured/Underinsured coverage provides protection against accidents caused by drivers who either have no insurance or minimal coverage. In such cases, repair and medical bills will be covered up to the amount of the insured’s policy rather than that of the driver at fault and covers both driver and passengers.

For drivers who lack sufficient health coverage or would prefer more, medical payment/personal injury protection is available. These options will cover medical bills not only for the insured but also any passengers, who may lack sufficient coverage themselves, if either are ever seriously hurt in an accident. Other available tools include rental reimbursement that will cover the cost of a rental car and loan/lease payoff coverage that will pay off a loan or lease in case of theft or total loss due to damage. Auto repair insurance can help defray the costs of breakdowns and normal wear and tear.

Beginning with the required liability coverage, any combination of these and other options create the policy that is purchased. Consumers can pick and choose coverage and deductible amounts for each option depending on individual needs and finances. Choosing a higher deductible generally results in a lower premium up front but higher costs at the time of the claim while a lower deductible has higher premiums and lower claim costs. Again, individual deductibles and coverage amounts can be set for each option, offering the consumer greater flexibility to tailor fit their needs.

Upon completing a transaction for car insurance, consumers need not feel as if they are leaving empty handed. Car insurance provides a variety of useful services that, if not tangible, are invaluable asset protection and financial planning aid.

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Source:

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