When your car is damaged in an accident, it is possible that the person who caused the accident may not have enough coverage to repair or replace your vehicle. If you have optional collision coverage in your own automobile insurance policy, it can be used to help pay for this damage. Using your collision coverage will not increase your insurance premium unless you were at fault.
Also, sometimes when you are involved in an accident the other insurance may move slowly in paying for your car. You can request that your insurance company pay you for the car and then your carrier will seek reimbursement from the insurance company for the person who caused the accident.
Although some insurance companies have recently been offering “new car replacement” coverage, you should know that as a general rule an insurance company only has to pay the fair market value of your car – or the cost or repair – whichever is less. For folks who finance their car with a loan, this can be a serious problem. Many car dealers will offer car loans for 5 or more years. The problem with these loans is that in many instances the car will depreciate at a faster rate than the payoff on the loan. In these circumstances, a person may have to continue to pay on a car that was totaled in an accident even though the accident was not their fault. For that reason you almost would never want to finance a car for more than 3 years. Consider this worse case scenario. Your car was totaled by someone else and the check from the insurance company for the fair market value does not cover the amount of debt on the car. Then you would have to continue to make payments on a car that you do not own – and you would need to buy another car.
There is also coverage known as Comprehensive coverage. This insurance pays for your car in the event it is damaged by an event other than a wreck. For example, if a tree fell on your car or a rock broke your windshield, this type of policy would pay for that damage. You would still be responsible, however, for the deductible. (However, usually windshield replacements do not have a deductible).
The North Carolina Department of Insurance has an excellent brochure explaining the types of coverage. For more information on this topic, please go to:
North Carolina Automobile Insurance Coverages.
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