5 car insurance add-ons worth paying for

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Before shopping for auto insurance, it's important to understand which policies are worth it.

Key points

  • Drivers must purchase the minimum auto insurance required by their state.
  • However, they can also choose to purchase additional protection.
  • There are five types of additional coverage worth paying for, including collision, gap, and new car replacement.

Buying car insurance can be complicated. Most states require drivers to meet certain minimum coverage requirements, but there are also many additional types of auto insurance that are optional. And whether to buy these optional protections can sometimes be a more confusing question.

While not every type of extra protection is worth paying for, there are definitely some policy protections that are very important. In fact, here are five that are worth paying for.

1. Collision coverage

Collision coverage is one of the most important types of optional insurance. In fact, for people with a car loan, it may not be optional, as lenders typically require this coverage because it's so essential.

Collision coverage pays to repair or replace a vehicle if the policyholder causes an accident. Without this, a driver who caused a collision would have to replace his vehicle at his expense or pay for necessary repairs without financial assistance.

This is because the required insurance drivers must purchase generally only covers property damage to other people's vehicles if the driver causes a crash; it does nothing to pay for the driver's own car when something goes wrong.

Collision coverage ensures that a driver will not have to pay in full if their car is damaged or destroyed in a crash. It is a type of coverage that most motorists cannot do without.

2. Broad coverage

Comprehensive coverage, such as collision coverage, is an optional add-on that many auto loan lenders require motorists to purchase. This type of policy protects the driver from any loss not related to a collision. For example, if a car is vandalized, a tree falls on it, or it is stolen, this would be the insurance that pays the bill.

Without comprehensive coverage, a motorist would be out of luck if something went wrong that wasn't caused by an accident, so again motorists will want this protection so they don't have to pay out of pocket to repair or replace the car.

3. Gap insurance

Gap insurance is a crucial type of additional coverage for any motorist with a car loan. Without it, drivers could end up facing severe financial hardship if their car is totaled or stolen and not recovered.

Look, insurance only pays the fair market value of the car at the time something happens to it. But the amount owed on the car loan may be more than that amount. A driver would still have to pay the full amount due even if insurance didn't pay out that much money. Gap insurance will make sure this doesn't have to come out of pocket, because it will pay the difference between what the insurer says the car is worth and what the driver owes.

Lenders often require this, too, and for good reason, as most people can't afford to keep making loan payments on a car they no longer own.

4. Rental Car Reimbursement

Most drivers should also seriously consider purchasing rental car reimbursement insurance, even though it is not required by any lender and is not required by state law.

This policy add-on pays most or all of the costs of a rental vehicle while a car is being repaired after covered damage or while an insurance case is settled after a total loss. Without it, a motorist could go weeks without a vehicle or pay out of pocket for a rental car.

5. New Car Replacement Coverage

Finally, new car replacement coverage is a great add-on for motorists who have a newer vehicle model. Since new cars depreciate very quickly, insurance will generally pay much less than it would cost to replace a new vehicle. New car replacement coverage ensures that a motorist can get a comparable new car if something goes wrong.

Each of these different types of coverage add a little extra cost to insurance premiums, but they're worth adding to a policy to avoid serious out-of-pocket losses if covered issues arise.

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