The Reality of Three Auto Insurance Myths
While auto insurance is a normal part of life for most Americans who drive, it's likely the least understood product on the market. Taking time to learn as much as you can about auto insurance may help you save money and avoid making mistakes that might affect your coverage. To start you off, here's the truth behind three auto insurance myths.
You Must Insure an Inactive Vehicle
Possibly the most common auto insurance myth is that you are required to have insurance on a vehicle you are not driving. This is true to a certain extent. If your car or truck is registered with the DMV, then it must be insured, even if it's sitting idle in your garage or at a storage facility.
However, unregistered vehicles don't need to be insured, though it's not a bad idea to purchase coverage if you expect something might happen to the vehicle while it's being stored. Additionally, in some states, you can file a notice with the Department of Vehicles about the nonoperational status of the car or truck and the department will waive the insurance requirement for the time period the vehicle is not being used.
For instance, you can file an Affidavit of Non-Use (ANU) in California that will suspend the insurance requirement during the time the vehicle is nonoperational. The vehicle must currently be registered to use this option, and you cannot operate it at all while the ANU is in effect; otherwise you will be fined and the ANU may be revoked.
Some states have a planned nonoperation (PNO) option that will suspend the requirement for you to register the vehicle if you won't be using it for the entire registration period. This will also eliminate the need for you to carry insurance on the vehicle until you are ready to start using it again.
You Must Buy Insurance
Although the majority of states in America require drivers to be insured, purchasing auto insurance isn't the only way to accomplish this feat, though it is the easiest. The state's primary concern is that drivers have the ability to pay for damages caused in an accident, and many offer alternative options for drivers to provide that guarantee.
Depending on where you live, you can get around compulsory insurance by leaving a cash deposit with the relevant agency, obtaining a surety bond (a type of financial contract), or self-insuring (usually only available to people or companies that own a fleet of vehicles). In Utah, for instance, you can give the state treasury department a $160,000 deposit in lieu of getting a policy with an insurance provider.
Whether this is a good option for you depends on your particular circumstances, though. You won't have to pay a monthly premium. At the same time, you will not have access to that cash for the entire time you exercise this option, though you can switch to traditional insurance at any time and get your money back. You should speak to an insurance representative or financial planner to fully explore the pros and cons of this option before making a decision either way.
Auto Insurance Covers Personal Belongings
A third popular myth is that if your vehicle is stolen, your auto insurance will also cover the cost of personal belongings that may have been in the car or truck. Unfortunately, this is not true. In general, auto insurance only covers damage to and theft of the vehicle. It may cover some items if those items are permanently attached to the vehicle. For instance, the insurance may cover a custom stereo system you installed. However, the provider would not pay to replace your CDs.
Replacement of personal items typically falls under the responsibility of your homeowner's or renter's insurance. If you don't have either of these products, then the cost of replacement will come out of your pocket.
For more information about auto insurance or to get a quote for a policy, contact an agent from an establishment like Northeast Insurance Agency.