Feb. 1 is “National Car Insurance Day” Check your coverage!

It’s no secret that auto insurance rates are rising. Between inflation, sky-high auto repair costs and supply shortages, consumers are paying more for insurance. When you’re on a budget, it can be tempting to choose the cheapest option available. You may even consider taking your chances and skipping insurance entirely.

But, as you may have guessed, that’s not a good idea. Here’s why quality car insurance is well worth the investment.

Reasons to invest in quality auto insurance

Car theft

The National Insurance Crime Bureau (NICB) reports over 1 million cars were stolen in 2023. The District of Columbia, Colorado, Nevada, Washington and California had the highest rates, but auto theft can happen anywhere.

And new vehicle technology is only making it easier for criminals to target cars. According to the NICB, criminals are exploiting keyless entry and vehicle security systems to remotely control and hijack cars. Common sense measures like not leaving your keys in your vehicle are useful, but they can only go so far in the age of advanced technology.

If your car is stolen or vandalized, or you hit an animal, collision coverage won’t help. Collision only covers the cost impacts of other vehicles and objects. You need comprehensive auto coverage for things like theft, vandalism and animal encounters.

Severe weather

According to the Department of Transportation, about 21% of car crashes are due to bad weather. As snowstorms and other severe weather events become increasingly common, adequate collision coverage remains essential while driving your car.

But what if your car is parked when it’s damaged by a flash flood, an earthquake, hail or a falling tree branch? You need comprehensive coverage for that, too.

And if your car is in the shop for repairs, you’ll need rental car coverage to get a loaner. Uninsured and underinsured drivers

One in seven drivers don’t have auto insurance, according to the Insurance Information Institute. As of 2022, the District of Columbia, New Mexico, Mississippi, Tennessee and Michigan had the highest rates of uninsured drivers.

If you’re hit by an uninsured or underinsured driver, who pays for the bodily injury and property damage? Your insurance company (and you, once your limits are exhausted).

But if you have uninsured/underinsured motorist coverage, your insurance pays the cost of the claim. It steps in if you’re involved in a collision with another driver who’s at fault but lacks insurance or doesn’t have enough to cover the damages.

For example, Iowa’s state minimum for auto insurance is $15,000 in property damage liability. The average cost of a new car in 2024 is around $47,000, according to Kelley Blue Book. If you get into an accident with someone with the state minimum coverage and your car is totaled, their insurance won’t come close to covering the value of your car.

If the possibility of being struck by an uninsured or underinsured driver isn’t convincing enough, you may even be required to carry uninsured/underinsured motorist coverage, depending on your state.

Medical payments

If you’re in an accident and you’re at fault, your car insurance will cover the other driver’s medical expenses. However, it may not cover yours or your passengers’. You’ll be covered under your own medical insurance, but again, your passengers won’t.

Medical payments (aka MedPay) or personal injury protection (PIP) insurance can help cover your out-of- pocket medical expenses and the medical claims of your injured passengers. PIP insurance can even pay for child care or other types of essential services, lost wages and funeral expenses, up to the coverage limit.

Some states require either MedPay or PIP insurance. But even if it’s optional in your state, it’s a good way to supplement your health insurance and protect your passengers.

While you’re at it, review your auto liability coverage maximum for bodily injury (BI).

Using the Iowa state minimum example, Iowa’s state minimum BI coverage is $40,000 for all passengers in the other person’s vehicle. $40,000 isn’t much coverage if you hit a family of four and they’re all injured.

When your auto insurance hits the $40,000 threshold, your insurance stops paying and you’re on the line for payments. The people in the other vehicle can sue you for future earnings and all of your assets. Having the state minimum might be good enough for a fender bender, but you’ll be underinsured if you cause a major accident.

Ask your agent about increasing your liability coverage limits or adding umbrella insurance. An umbrella can increase your liability limits to $1 million or more. Umbrella policies cover your car and home (or renters) liability coverage.

Depreciation

Imagine you just bought a new $30,000 car with an auto loan. One day, you’re driving it on the freeway when another driver suddenly merges into your lane without looking. They crash into you, totaling your car.

The other driver’s insurance company will only compensate you $20,000, due to depreciation. But you still owe

$25,000 on your auto loan. If you just have basic collision coverage, you’re out of luck.

According to the vehicle data service Carfax, the value of a car can decrease by up to 20% within the first year of ownership. But if you have guaranteed asset protection (GAP) insurance, your insurer will cover the difference between the value of your loan (or lease) and what the insurance company is willing to pay.

Ask your agent about the best auto coverage for your needs

The right type of coverage for you depends on various factors, like the value of your car and whether it’s financed or you own it outright. Your agent can elaborate on the various types of coverage and whether they make sense for your situation. They may also be able to help with safe driver, telematics or bundling discounts to help you stay within budget. (Verify the terms of your telematics program to ensure your data privacy and that your rates won’t go up based on your driving or if you decide to leave.)

National Car Insurance Day is Feb. 1. It’s a great time to contact your agent for a coverage review. You’ll be glad you did!

This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem.

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