While removing “full coverage” from your Rhode Island auto insurance policy may save you some money in the short-term, you need to know the facts first. You could be taking on more risk than you realize. Here are a few things that you should think about before you drop full coverage.
What Coverage Will I Lose?
First off, “Full coverage” is a bit of a misnomer because we all know every insurance policy has exclusions, and deductibles but for the sake of discussion we will use this terminology since it’s often what we here customers say. Typically when they say “full coverage” they are referring to comprehensive and collision coverage. Collision provides coverage for the damage to your car if you colide with something (another car, a building, a pole, etc). Comprehensive provides coverage for the damage to your car caused by anything other than a collision (theft, vandalism, fire, hail, falling objects, etc). If you reduce your coverage to remove these, you’ll just have liability coverage and possibly uninsured motorist and medical coverage.
This means that your policy will not pay for damage to your car if you’re in an accident or if it’s damaged by hail, fire, or vandalism, or if your car is stolen. However, your policy will pay for the damages you cause to someone else’s property and their associated expenses from the accident – up to your policy’s liability limits. Without full coverage on your vehicle, the only time that you’ll receive compensation for damage to your car is if you’re hit by another person who is insured and you are found not at fault. In that scenario, their liability coverage pays for your damages and injuries. However, you can be compensated for damages under your own policy if you are hit by an uninsured driver and you have uninsured motorist property damage, an optional coverage. Otherwise, it’s your responsibility to pay for your damages.
Your Lender May Require Full Coverage
If you’re making payments on your vehicle, chances are you’ll need full coverage. Lienholders often insist on it until you satisfy the terms of your loan. Likewise if you’ve used your vehicle as collateral to obtain a loan, they’ll likely want full coverage to protect the asset so they can recoup their money if you default on your loan.
Full Coverage Often Includes Perks
Since a full coverage policy typically includes several types of car insurance coverage, it provides a solid level of protection in case of an accident. In addition, it often includes items such as roadside assistance and other perks that you’d miss out on if you only had liability insurance in place.
The Price Difference May Not Be Worth Additional Risk
The reason most drivers consider dropping full coverage is price. However, full coverage doesn’t have to be very expensive. Discuss your insurance needs with your agent. You may be able to bundle your automobile and home insurance for a lower rate, and you may qualify for discounts, too. Your agent will work with you to find the ideal balance between price and coverage.
Consider Increasing Your Deductible Instead
Rather than dropping full coverage, consider raising your deductible. This reduces your monthly costs, without sacrificing all of the coverage. Before making the decision to increase your deductible, make sure that you’ll be able to comfortably make the payment if you ever need to file a claim. While raising your deductible from $500 to $1,000 may save you some money, it’s only a good idea if you can afford to pay that $1,000.