First, you need to know the difference between “Full Coverage” and “Just Liability.” Full coverage means that you would carry both the State liability requirements and also Comprehensive(Covers: theft, vandalism, fire, falling objects, animals) and Collision (Covers: Damage from accident with another vehicle or property). If you just carry Liability coverage, this just protects you legally if you are found “At Fault” in an accident and would pay for the other persons injuries and damages. Liability coverage also includes your Uninsured and Underinsured Motorist Coverage, which pays for your injuries and vehicle if you are hit by an Uninsured Motorist. **Please check your state DMV website for details on your states required liability limits.**
It is recommended that you carry just liability coverage if your vehicle is over 10 years of age. The reason for this is that you would most likely pay more monthly for insuring your vehicle then your insurance company would pay you in the event of an accident, minus your deductible. ***(Example: Billy Bob is insuring a 1988 Chevy Truck with Full Coverage and he has a $500.00 deductible if his car is stolen. Billy Bob’s 6 month insurance premium is $750.00 for Full Coverage. So, he has been insured with his insurance company for 2 years and then his vehicle gets stolen. He pays his $500.00 deductible and his insurance pays him the “Actual Cash Value” of his vehicle at the time of the loss, which is $3,000 in this case. So he paid $750.00 per 6 months which totals $3,000 for the 2 years plus he had to pay his $500.00 deductible to get his car replaced, and Billy Bob only gets $3,000 for his car. He paid more to insure his vehicle then what he got out of it. Imagine if he was accident free for 5 years? That’s alot of money that you may just throw away for a junker!)
Check the actual cash value of your vehicle. You can get a good idea of what your vehicle is worth by going to www.kbb.com (Kelly Blue Book). This will let you know approximately how much money you may receive from your insurance company if your vehicle is involved in an accident and considered a total loss.If you are financing your vehicle, your Lienholder will require you to carry Full Coverage with no higher then a $500.00 Comprehensive and Collision deductible.
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