Little-known car insurance policy might not protect you if you’re involved in a crash – it could cost you thousands

A QUIRKY policy for car insurance could cost motorists thousands of dollars.

The uncovering of this little-known policy comes as insurance prices have sky-rocketed.

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Premiums are spiralling due to higher costs for replacement parts and vehicle repairs, according to CBS News.

Insurance prices were 11.3% higher in December than the previous year, said the Bureau of Labor Statistics (BLS).

The Consumer Price Index (CPI) has shown a 51% spike in the cost of auto insurance over the past three years.

“This rise is six times faster than overall inflation,” reported the Insurance Business Mag.

CBS said that drivers who live in certain states could face premiums as much as 50% higher.

So, how do Americans save money when purchasing car insurance?

You can drop certain coverages from your policy, advised the broadcaster.

It added on Monday: “If you finance your vehicle, your lender or leasing company likely requires you to carry full coverage, which includes comprehensive, collision and liability coverage.

“However, if you own your car outright, you may be able to drop comprehensive and collision coverage and keep only liability insurance, which most states mandate.”

But, what about extra protection?

Motorists can enjoy huge savings if they don’t pay for comprehensive and collision insurance coverage.

Liability-only insurance is a more affordable option.

However, if you have a crash – and you’re to blame for that collision – you might have to pay for damages and medical bills.

But for motorists carrying full coverage protection, the insurer is more likely to cover repair or replacement costs for your car.

Kress Staheli, a Farmers Insurance agent in St. George, Utah, told CBS that even “for cautious and experienced drivers, an incident could occur that results in the need to file a claim.

“Cars and trucks these days are built with high-tech features that cause them to be expensive.

“So the biggest benefit is that the insurance carrier will pay for the physical damage to your vehicle, and the full cost of the incident (you still pay a deductible) will not come out of your wallet.”

Having comprehensive and collision insurance gives motorists peace of mind, knowing they’re fully covered.

COSTLY COVERAGE

However, there are pitfalls here, too.

The price of full coverage could be up to three times the cost of a motorist’s state’s minimum liability needs, warned Miranda Marquit, an insurance agent and financial wellness advocate, of Idaho Falls in Idaho.

Also, it would pay not to assume that a full coverage policy covers every cost following a crash.

It pays to check for any gaps, such as medical bills or lost wages.

Sometimes – if you’re paying off your car for example – a lender or leasing firm will insist you take out full coverage.

But if you own a car outright, it might pay to consider whether it’s worth paying more money.

Marquit said that, for example, if your vehicle is only worth $3,000, “and your deductible is $1,000, you’d only get $2,000 when it comes to your coverage.”

So you’d end up losing money.

Staheli recommended that car owners could consider dumping their comprehensive and collision coverage when the vehicle is about a decade old.

CBS said that the bottom line was to do your research, compare insurance costs across several providers, and “remove coverages you no longer need.”

CLASSIC COSTS

And if you’re a classic auto owner, you likely face a huge financial hurdle, the Insurance Business Mag warned in January.

It wrote, “In many cases, insurers do not offer discounts for owners who drive their collector cars less than the typical 12,000 miles per year.

“As a result, these owners are, in effect, subsidizing the losses from higher-risk drivers.”

To save some money, experts told the website that classic car owners should look into “unbundling” their insurance policies.

For instance, forget about bundling your auto and home insurance as it won’t necessarily reduce costs – and could in fact result in coverage gaps.

The Wall Street Journal reported yesterday that tariffs will make car insurance even more expensive.

This is due to car insurance prices being especially “sensitive to tariffs,” it said.

Drivers can take these crucial steps to lower car insurance prices

The national average cost of car insurance is $2,670 per year for a full coverage policy

Browse different car insurance companies before committing.

Rates vary between insurers, so shopping around can help you find the best deal.

Get multiple quotes before choosing a policy.

You should also check for hidden increases – for example, a new transparency rule in Washington state requires insurers to disclose premium changes at renewal.

Don’t forget, you can always adjust your coverage.

If your car is older, consider dropping comprehensive or collision coverage.

Ask yourself: If your car is totaled, can you afford to replace it out of pocket? Only pay for coverage that makes financial sense.

Source: CBS affiliate KIRO-TV

The WSJ added, “That’s because of the impact those levies can have on car parts and used vehicles.

“This, in turn, is bad news for the inflation outlook.

“In the surprisingly high inflation reading for January released on Wednesday, auto-related costs were particularly elevated.”

U.S. consumer prices spiked by the most in nearly 1-1/2 years in January, with Americans facing higher costs for a range of goods and services.

The Labor Department on Wednesday said this increase was likely partly due to businesses raising prices at the start of the year, evident in a spike in motor vehicle insurance.