If hail stones hit your car, will your insurance company pay? If wildfires, floods, tornadoes and other natural disasters destroy your automobile, are you protected? One company says maybe. Really?
Natural Disasters pummel Motorists, Pocket Books
Urging drivers to “make sure they are covered for losses due to natural disasters,” Online Auto Insurance (OAI) told PR Newswire on Monday that only some forms of auto insurance coverage pay weather-related claims. Quoting federal agencies, OAI explained that this year alone, costs due to weather-related disasters top $35 billion. Although not legally mandated as part of the minimum coverage a motorist must carry, comprehensive coverage is the only type of policy that covers most of the financial damage associated with natural disasters.
Trends show a Decrease in Comprehensive Policies
Consumers may not realize that minimum coverage fails to protect their rides from flood waters and wildfires. In fact, the National Association of Insurance Commissioners (NAIC) pointed to an alarming trend among insured motorists, which showed that approximately 20 percent of drivers either canceled their policies outright or downgraded them in an effort to save money.
Bucking the Trend saves Money — maybe
Although the trends show that downgrading from comprehensive- to legally mandated liability coverage saves money in the short run, there is a good chance that it actually costs more in the long term. For example, did you know that comprehensive coverage insures against so-called acts of God or other mishaps — aside from a collision with another vehicle? This might just make the difference between trying to dry out a flooded vehicle and letting the insurer total it and then replacing the ride.
To be fair, even here there are pitfalls. For example, if you are upside down in your car — you owe more than the insurer’s estimate of the vehicle’s cash value — you stand to lose money. That is, unless you thought of also purchasing gap coverage, which literally covers the gap between what you owe to the lender and what the vehicle is actually worth in the eyes of the insurer.
Playing the Odds
If the Car Insurance Rates site is to be believed, 2005 figures proved that among the locales hardest hit by natural disasters, Mississippi and Florida ranked close to the top. These are the same states that the Insurance Research Council identifies as leading the pack of states with the highest percentage of uninsured motorists in 2009. In fact, Mississippi came in with 28 percent of uninsured drivers, while Florida reported 24 percent.
It is clear that current insurance trends see a change toward cost-cutting. At the same time, an uptick in natural disasters is causing unprecedented damage to property. Are consumers unaware of the need for full comprehensive coverage, or are insurance companies oblivious to the current economic climate? As usual, the truth most likely sits somewhere in the middle.