If you are buying a new – or “new to you” – car, there is a good chance you are working with a lender to help make that dream a reality. That means budgeting for car payments, planning for maintenance, and of course, purchasing full coverage auto insurance. If you have never had full coverage auto insurance, chances are your lender will require it – and for good reason, too. After all, you do not own your car outright until you make the final payment on your loan. Continue reading as we break down the details surrounding full coverage and what it means for you.
What is “Full Coverage Insurance”?” The truth is, there is no such coverage. Full Coverage doesn’t exist. While that it a fact, the term has been used in the insurance industry for years to describe a policy that provides physical damage coverage by way of comprehensive and collision coverages in addition to Wisconsin’s state-mandated liability coverage.
If a lender still holds the title to your vehicle, you are probably required to carry full coverage. Going without it could violate the terms of your agreement and may even cause the full balance of your loan to come due or otherwise allow the lender to charge you for single-interest coverage. Since you probably want to avoid such a scenario, you will want to ensure your insurance policy provides you with the coverage you need. So what exactly do you need to know about full coverage?
Going Beyond State Minimum Coverage
Here in Wisconsin, drivers are required by law to purchase a minimum amount of liability coverage, as well as uninsured/underinsured motorist coverage. Full coverage builds upon that foundation, with the addition of collision and comprehensive insurance. Unlike liability, which is designed to cover injuries and losses to others, collision and comprehensive are designed to protect your own investment when your vehicle is damaged or lost. This is important to a lender, who has a direct financial interest in the valuation of your vehicle.
Collision insurance
Collision insurance is coverage for your vehicle if you are in a traffic accident. From fender benders to major collisions, you simply pay a deductible, and your insurance policy helps cover the rest. An accident can happen in the blink of an eye. Collision insurance can protect your vehicle’s value and your investment in owning it.
Comprehensive Insurance
Comprehensive insurance is coverage for your vehicle’s damages that were caused by most things other than a collision. If your car is pounded by hail one night, comprehensive takes care of the repairs. If it is stolen from your driveway, comprehensive helps pay to replace it. From wild animals and fires to severe weather and theft, comprehensive offers peace of mind in the midst of events that are out of your control.
When Your Car Loan is Paid in Full
Shelling out the extra cash for full coverage could be well worth it – even if you do not necessarily have to do it. Once your car loan is paid in full, you are free to choose any type and amount of auto insurance you wish, so long as it is compliant with state law. However, just because you can shed your full coverage auto insurance does not mean you should. If your vehicle is still worth any significant amount of money, the cost of coverage likely pales in comparison to how much money would be on the line in an accident without full coverage.
If you recently purchased a car or are planning to purchase one very soon, it is time to start exploring your auto insurance options. Contact our office to find out more about full coverage and find out if it could be right for you. We look forward to serving you soon.
