Coverage Limits, Policy Riders & Gap Insurance
In addition to types of coverage and deductibles, it is also important to understand coverage limits. Insurance policies stipulate monetary limits for claims. These limits are separated into the categories of property damage, personal injury to others, and personal injury for all parties (total per claim). Each policy will have its own coverage amount for each category. Policies will have property damage limits anywhere from $25,000-$100,000 or more, bodily injury (to others) limits of $50,000-$100,000, and bodily injury limits (total per claim) of $100,000-$300,000. Coverage limits will vary according to your monthly premium (the amount you pay for coverage) and state law. The higher the coverage limit you select, the higher your premiums will be. The converse is also true. Additionally, state law will outline minimum coverage amounts below which you cannot buy a policy.
Policy riders or endorsements are optional types of coverage that you can add to your basic insurance policy. You can add riders that cover emergency roadside assistance, rental cars, auto glass damage, and uninsured motorists.
- Emergency roadside assistance covers towing, tire changing, and repairs done on the spot. It will not cover any repairs made at a service station.
- Rental car coverage will pay for you to rent a car while you car is being repaired. The insurance company will only cover this cost if your car was damage as the result of a covered event (accident, vandalism etc).
- Auto glass coverage protects you by eliminating or lowering your deductible when you need to repair a broken car window.
- Personal Injury Protection pays you a disability income in the event you are disabled in an automobile accident.
- Uninsured/underinsured motorist coverage protects you when you are involved in an accident where the at-fault driver is either underinsured or does not have insurance at all. Some states require uninsured/underinsured motorist coverage, so it may not be optional coverage in your state.
This is by no means an all-inclusive list of available insurance riders. Rather, it covers the most common riders the average person may want to consider.
Gap insurance is coverage for people who are leasing or have a loan on a car. It covers the difference between what is owed on the vehicle and the resale value, which can be much lower. A new car depreciates the moment you drive it off the lot because it then becomes a used car. However, the amount you owe on your lease or loan does not decrease simply because the value of the car has. When you owe more than the car is worth, you are said to be "upside down". If the vehicle is destroyed in an accident, you would not have enough coverage in a normal policy to pay what you owe because a normal insurance policy will pay market value for the car, not what is still owed on it. Gap insurance resolves this situation by paying the difference between market value and the full amount owed on the car. This is a very good type of insurance to have for anyone that is leasing or has to finance a car.