Banks and financiers require you to take full insurance coverage on your vehicle
if you have taken a loan out on it. This protects not only the vehicle owner’s interests,
but also those of the title holder – the party that finances the purchase. However,
the term ‘full coverage’ is subject to interpretation and insurance companies often
have policies that widely differ when it comes to the extent of coverage provided.
It is essential you find out exactly what you are paying for when taking a full
coverage policy.
To begin with, full coverage does not mean you do not pay your deductible. Your
total deductible is a sum of all the individual insurance coverage options that
you have selected. For instance, you may pay $500 for collision insurance and double
that amount for theft. However, you still need to pay your deductible if either
situation occurs. Remember, your policy does not kick in unless the amount of loss
under a particular cover exceeds its deductible.
Secondly, and without actually going into semantics, full coverage does NOT cover
everything. For instance, you cannot file a claim for a flat tire. Tires and similar
items are regarded as ‘consumables’, which basically means they are expected to
wear out over time and require periodic replacement.
When it comes to a claim, while your car could mean a lot to you, the insurance
company applies a strictly business formula. If it works out cheaper to get your
car repaired than to replace it, then a repair is exactly what you will get. It
is always the insurance company’s prerogative to decide the nature and extent of
a payout.
Insurance liability coverage pays for property damage and injury to others in case
of an accident. However, this, like other types of coverage options, comes with
an upper limit that YOU decide when buying the policy. Typically, insurance companies
spell out the limits you place on each individual policy at the time of signing.
The company stops paying when that limit is reached and you could become personally
liable for further payouts.
On the whole, you need to look for a policy that balances out your limits and your
deductibles to a comfortable range. Because full coverage is not necessarily fool-proof!