October 14, 2010

Why There Is No Such Thing As Full Insurance Coverage

Many people wish to find 100-percent, full auto insurance coverage. Unfortunately, there is no such thing. People often get "comprehensive" coverage confused with "full" coverage when they start speaking about auto insurance coverages. A "full" coverage policy would mean that you were protected against every possibly problem that could arise without you even having to pay for anything, but that just doesn't happen. Insurance helps you spread risk around, but it does not relieve you from all risk.

Every auto insurance plan has what is called a "deductible." Though a typical deductible is usually around $500, it can go as high as $2000. The deductible is the amount that you have to pay before the insurance company will pay anything. So, let us say that you get into an automobile accident. Before the insurance company will pay to have your car repaired, you must come up with that deductible. If you do not have it, the insurance company will not help you at all. If you take your car to an auto repair shop and have the car fixed, but you do not have the deductible, the shop will not give you your car back.

Second, every policy has a limit on how much they will pay. There is a collision coverage amount that you accept when you buy auto insurance, often $25,000 or $50,000. If the damage exceeds the coverage amount, perhaps by going up to $60,000, you will have to cover the difference. This limit can sometimes be very shocking for people who have just suffered an automobile accident because they are not aware of it as part of their policy.

It works the same way for liability. If you do more damage in an at-fault accident than your liability policy covers, you are still responsible for the difference. It can sometimes pay to have a higher liability policy as a result, even if that means higher auto insurance rates. If you get into an accident, you will probably be glad that you took this extra precaution.

Some optional coverages can help fill the gaps in your overall coverage, and certain options can make your limits so high and your deductibles so low that you do not necessarily feel it when there is a problem, making you feel like you have full auto insurance coverage. However, these auto insurance coverages will not be as small of a monthly expense as you might like. You will have to figure out your level of risk tolerance and decide what is best for your family. Auto insurance is an unavoidable expense, but having to pay for damages that your policy does not cover is an avoidable expense.