4 Reasons Your Auto Insurance Coverage May Disappoint You After an Accident

Drivers purchase auto insurance coverage so they have protection in place if an accident happens. But, many people assume their insurance will do more for them than it actually will. As a result, they could be disappointed in the financial help they get when a crash occurs.

Here are four big reasons why some motorists will end up feeling like their insurer didn’t do enough when something has gone wrong.

1. Not all drivers will have coverage for their losses

Most states have minimum coverage requirements that include liability insurance. But it’s generally not required for drivers to have collision coverage. If a driver is found to be at fault for an accident and does not have collision coverage, they would not get an insurance payout if they damaged their vehicle. This could mean they are stuck paying all crash-related costs out of their checking account.

Drivers do not want to face this fate, so it is important to understand what different types of auto insurance cover and to get the right protections in place. Most drivers who cannot afford to just replace their car outright if a crash occurs should put collision and comprehensive coverage in place so they get an insurance check if something goes wrong.

2. The deductible may mean paying hundreds or thousands of dollars out of pocket

When a driver signs up for auto insurance, they typically choose a policy with a deductible. That is money that has to be paid before an insurer starts covering costs. For example, a policyholder might have a $500 deductible or a $1,000 deductible, but it could be higher.

When a covered loss happens and a driver’s own insurance covers it, the driver has to pay this deductible first. Say, for example, a motorist hit a deer and incurred $5,000 in damage. Even if they had the necessary add-on coverages for their insurer to pay for their losses, they’d have to pay their deductible first. If they had a $2,500 deductible, they’d be responsible for covering fully half the cost of damages.

It’s important for drivers to think about how much they can afford to pay after a covered loss when deciding how big their deductible should be. Policies with smaller deductibles have higher premiums, but they also mean less out-of-pocket cost — and less disappointment — after an accident happens.

3. The insurance may not pay enough to repay an entire car loan

If a car is totaled, the insurer will pay fair market value for it. This is true whether a driver recovers from their own insurer or from another motorist’s insurer if the other motorist caused the crash.

Sometimes, the amount the policyholder owes on the car is more than the vehicle’s fair market value. This would mean the insurance payout isn’t enough to pay the loan balance in full. This could be a huge problem as the driver would have to come up with the rest of the money out of their own pocket.

This can be avoided by purchasing gap insurance, which would cover the difference between what the insurer paid out as the car’s fair market value and the outstanding loan balance.

4. The insurance may not pay enough to replace a totaled vehicle

Finally, an insurer may not always pay out enough to replace a totaled car without bringing extra cash to the table.

Say, for example, a driver had a great 2016 SUV they’d kept in perfect condition. Since the car is older, it wouldn’t necessarily be worth much so they might not get a big check if the car is totaled. When they go to buy a new car, they may not be able to find an equivalent 2016 SUV they could buy with their payout. To get something that they trust as much as their old car (and in the same condition), they might have to spend more for a newer and costlier vehicle.

For all of these reasons, drivers could find themselves disappointed with their auto insurance after a crash. Motorists need to make sure they buy the right insurance, understand the extent of their coverage, and have an emergency fund in case a crash occurs. That’s the only way to fully protect their finances in the event of an accident.

Our best car insurance companies for 2022

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.