5 car insurance add-ons you don't (always) need
With the average car insurance premium costing more than $120 a month, why pay for unnecessary coverage? Trim that bill.
This post comes from Michael Deane at partner site Investopedia.
Car insurance is one of your biggest bills every month. According to CarInsurance.com, the average yearly premiums for 2011, so far, are about $1,441 -- which is more than $120 per month, putting this expense on par with utilities, cell phones and cable bills.
To cut down on this large expense, it's best to know what types of car insurance you need to avoid. Post continues after video.
Of course, everyone needs basic coverage, and certain types like liability insurance are legally required in many states, but there are some additional types of insurance that are either unnecessary because you're already covered, or intuitively seem like a good idea but in reality are not needed.
We'll look at the types of car insurance that you can avoid, in certain circumstances, to save on your monthly premium. (If car costs are dragging you down, find out how to free yourself of some of the extra weight. Check out "12 car insurance cost-cutters.")
Rental car insurance. If you already have auto insurance or are using your credit card to rent a car, you may already have enough coverage. It's important to go over your policy, and if you're unsure, talk to your insurance agent to find out if you're fully covered. If you have liability, comprehensive and collision insurance already, this can eliminate the need to pay more for rental insurance.
As well, some credit cards extend types of insurance for a rental car, provided that you pay using your credit card. This is another area where you need to find out the details, as it's possible that certain types of cars and certain types of damage are not included.
Collision insurance. Collision insurance, intuitively, seems like a good idea. This type of insurance covers your car if you get into an accident and are liable to cover costs, or if you damage your car in some other way while driving it. Since liability insurance covers the other people's cars and property, collision only covers your own.
So, if you are driving a car that you own and that has a replacement cost of $500, you may want to reconsider whether paying the extra amount for collision insurance is worth it. However, if you don't own the car, the company you are leasing it from or the bank to which you are paying back the car loan may require that you have collision insurance.
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Personal injury protection. If you already have personal health insurance, then you may not need personal injury protection. This type of insurance will pay for your health coverage as well as anyone else who is traveling with you, or if you strike someone with your car. So, if you're pretty sure that your passengers all have health insurance, you may want to reconsider the extra charge for this insurance.
Emergency assistance (towing and labor). If you don't already have it, then this can be a great and inexpensive insurance add-on. However, if you belong to something like the AAA in the U.S. or CAA in Canada, or have something like OnStar already in your vehicle, it's totally unnecessary to get this auto insurance add-on -- no matter what horror stories your agent might tell you.
As well, keep in mind that there are often limits on how much this insurance will cover for you, such as a limit on cost of towing, or the number of times you can be towed in a year or get your door unlocked after you've lost your keys. (Accident, theft, vandalism -- make sure your coverage will protect you when you need it most. See "Top tips for cheaper, better car insurance.")
Funeral or accidental death insurance. Funeral and accidental death insurance can be unnecessary additions for your auto insurance package if you already have a life insurance policy with a funeral rider. Known as "preneed" services, some life insurance policies make sure that some of the insurance money is sent directly to a funeral home, so you don't need to double up by putting this on your auto insurance as well.
As for accidental death insurance, if you already have this insurance included in your life insurance policy, there's no use to double up. You will be covered whether the accidental death occurs in a car or otherwise.
The bottom line
Car insurance is an important thing to have, especially if you ever get into an accident or have some other auto-related mishap. That said, there's no sense in buying the same insurance twice. That's just wasting money.
Be sure to consult with your insurance broker, and make sure you're already covered before you start canceling portions of your auto insurance. Again, it's always better to be safe than sorry.
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This type of insurance will pay for your health coverage as well as anyone else who is traveling with you, or if you strike someone with your car. So, if you're pretty sure that your passengers all have health insurance, you may want to reconsider the extra charge for this insurance.
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