Here’s what happened to a friend of mine. They had bought a brand new Lexus IS Sedan last year. The first thing they did prior to driving it off the lot was add it to their insurance. They figured that it was during this time that it would be good to look into changing to a different provider, as they weren’t happy with their prior insurance company, who shall remain nameless. After searching for a few days, they found one they were happy about and began to build their policy. They decided to cut a few corners here and there assuming though that the coverage they had was more than enough for their vehicle to be fixed if they ever got into an accident, so they were happy with the coverage they picked out. Of course hindsight is 20/20 and after the story I’m about to recount, if they had only paid an extra $50 a month, it would have saved them the hassle that happened later.
During a particularly stormy day, they ran their new Lexus IS into a light pole. Go ahead, laugh, this’ll be the only funny part of the story. This light pole must have been fortified with limestone or titanium steel, because it hurt their vehicle a lot more than they hurt the pole. Not to mention it hurt them; they had burns on their forearms from the airbag, and a cut on their face that required a stitch and a visit to the ER. The damage to their pride is still undetermined (though thankfully they’ve given permission to share this story).
Unfortunately, the damage that was caused when hitting the pole left their vehicle totaled. They had only bought the vehicle 6 months prior to the accident, so they owed a lot on their loan. When their insurance company called them with their total loss evaluation, they were surprised to hear that it was less than what they actually owed on my loan. Plus an additional $500 subtracted for their deductible. Another corner they had cut in their financing was with GAP insurance, which will generally cover whatever is left over when you are, as they say in the industry, “upside down” on your car loan, or you owe more than the vehicle is worth. It happens very often, and if they had paid for GAP insurance in the beginning, they would have been in much better shape.
Due to their cutting of corners, they were not able to replace their vehicle with the same quality of vehicle they originally purchased; they still owed money on the vehicle that had to be rolled over into their next loan. To make things worse, the ER sent them a bill for their visit. Wait a sec, didn’t they have health insurance? Little did they know, once the health insurance found out they were in a car wreck, they would not cover the bill. Then what about the car insurance? There was another corner they had cut early on; they declined Personal Injury Protection coverage, so no medical bills would be paid under their policy in a wreck like this one.
Where did they go wrong?
Contrary to popular nomenclature, there is no such thing as FULL COVERAGE. Your own insurance agent may even reference that word, but it is purely subjective. Many times people think they have FULL COVERAGE, and they get in a wreck and find out they don’t have rental coverage. Sure, your car will be fixed, after a $500 deductible, but how are you going to get to work and drop the kids off at school while your car is in the shop? With the average rental car costing $38 a day, 3 weeks of repairs will run you about $798 before the avalanche of taxes that come with rental cars. Your $500 deductible just became around $1500. Not to mention you had no chance to prepare, car accidents are notorious for happening at non opportune times. Don’t forget to check for this. Rental is often deleted from a policy to lower the premium.
Also, some folks think that when they get in a wreck, their insurance has to pay for their medical bills. WRONG. There are even health professionals that will tell you this at the scene; it is not true. It is entirely dependent on the type of wreck, who is at fault, and what type of coverage is available. If you are not at fault, and the person who hits you is insured, there is a pretty good chance an ambulance bill would be covered. But if you are at fault, you don’t have any additional medical coverage on your policy, you could be stuck with that medical bill. Not to mention, the medical bill will come straight to you and it is your responsibility, as the patient, to make sure this is taken care of. Your credit is the one that gets hit if that bill isn’t paid. My suggestion is think for a minute before declining this coverage.
Insurance is supposed to take care of you, make you whole again when you are in a bad situation. But without the proper coverage, there is nothing in place to make you whole again; it is not a given.