Massachusetts Car Insurance Myths – Part II

What’s true and what’s false about Massachusetts car insurance? HUB International provides the real facts about five common myths – Part II

There are a lot of interesting beliefs out there about car insurance, including one that we tackled in Part I of this series about Massachusetts car insurance myths. Perhaps one of the most misunderstood car insurance concepts has to do with our state’s minimum auto insurance requirements. Many drivers believe that just getting the bare minimum coverage required is enough protection for their vehicles, their passengers, and other drivers on the road in the event of an accident. If you haven’t yet read our professional thoughts on this belief, then, spoiler alert, these requirements fall way short.

At HUB International we have fielded questions about this myth and pretty much every other car insurance belief out there. So, as your local insurance professional, we feel it is our responsibility to try to demystify this often puzzling coverage by providing the real facts about some of the most widespread misconceptions.

Below, we set the record straight on four more myths about Massachusetts car insurance:

• Car Insurance Myth #2 – You don’t need Collision or Comprehensive after you pay off your loan.
• Car Insurance Myth #3 – You should always file an auto insurance claim.
• Car Insurance Myth #4 – Your insurer will pay off your car loan should you have a total loss.
• Car Insurance Myth #5 – You don’t need to worry about out-of-state tickets or traffic violations.

Massachusetts Car Insurance Myth #2

When you pay off your car, there’s no need for Collision or Comprehensive coverage any more.

The Facts

Let’s first investigate what kind of important coverage Collision and Comprehensive provide. Both of these coverage options relate to damages that occur to your car; however, they protect against two different types of situations:

• Collision provides coverage so that you can repair or replace your car if it is damaged or totaled in an accident, whether it involves other vehicles or not.
• Comprehensive provides coverage so that you can repair or replace your car if it is damaged or totaled as a result of an impact with an animal or a falling object, like a tree. This protection also safeguards your vehicle against damages resulting from a fire, theft, vandalism, or severe weather, and also includes glass breakage.

Whether you’ve leased or financed your car, the lender has likely required you to purchase both Collision and Comprehensive. Once you have paid off all outstanding loans on your vehicle, this lender requirement obviously no longer applies, and you could make the choice to drop these optional coverages altogether.

However, here are three key things to consider before you make the decision to end collision and comprehensive:

• How much is your car still worth after you’ve paid off your loan? If your car is only a few years old, you’ve put minimal mileage on it, and/or you’ve kept it in mint condition, there still might be some meaningful value left in your vehicle. In this scenario, it might be well worth it to keep paying for Collision and Comprehensive in order to ensure you have coverage for the cost of repairing or replacing your vehicle in the event of an accident. This is especially true if you don’t have much of an emergency fund and would not be able to pull money out of your own pocket to make necessary repairs.
• How much do you want to rely on another driver’s insurance to pay up? If you do not have collision coverage when you are hit by another driver, then you are depending on another driver’s auto insurance for reimbursement. You might think that this will generally work out just fine for you, but there are many reasons why it might not be wise to put all your eggs in that one basket. The at-fault driver could be uninsured – in fact, neighboring states like New Hampshire allow drivers to register a car without proof of insurance – could be driving a stolen car, could hit-and-run so you never get any information on them, or could have only the basic state minimum required levels of insurance which are generally not nearly sufficient to cover the cost of repairs for today’s high-tech cars.

Depending on how you respond to these questions, you may not want to drop your Collision and Comprehensive right away.

Massachusetts Car Insurance Myth #3

No matter what type of accident you’re involved in, you should always file an auto insurance claim for damages.

The Facts

While your auto insurance may indeed cover that dent in your bumper, it actually might not be financially wise to put in a claim. We always suggest talking it over with your agent first and getting their advice on whether or not going through the claims process makes sense. The factors to consider before you file a claim, either on your own or with the help of your insurance professional, include:

• How much is the estimate for repairs?
• How much will your insurance carrier pay out after any deductible is met?
• What is the likely annual surcharge that the carrier will charge you after making this claim?

At HUB International, we believe it’s important to review our clients’ policies with them to help them make an informed decision about whether to make a claim for any given situation. For example, let’s say you backed into a cement pole in a parking garage and caused $1,500 worth of damage to your car bumper. If you have a Collision coverage deductible of $500, then your insurer will pay out $1,000. Accepting this payout from your insurer sure sounds like a good idea and much better than paying the entire cost of repairs out of your own pocket, right? But, what you should consider before submitting your claim, is the impact that doing so could have on your insurance premium every year from here on out for the next six years.

Insurance companies have the right to add a surcharge to your annual premium for any claims of $1,000 or more, no matter how serious your claim is. This additional charge could add hundreds of dollars each year to your car insurance rate. It is also likely that, after a claim, your carrier will take away any safe driver credits you have built up, which again could bump up your insurance premium.

So, what do you do? There is an excellent insurance option for drivers that can make the decision of whether to file or not to file, a whole lot easier. For about $50 a year, you can purchase Accident Forgiveness, an endorsement that could ensure that, after an accident, you will not only get your claim paid out, but that you may also avoid hundreds of dollars in increases to your annual auto insurance premium.

Massachusetts Car Insurance Myth #4

Your car insurance company will pay off the remainder of your loan if you get into an accident and total your car.

The Facts

If you were to get in an accident in which your car was considered a total loss, you might assume that, at the very least, you would walk away from that mess with a check from your insurer that you could use towards a brand-new vehicle. However, in reality, your insurance is only going to pay out the actual cash value of your vehicle at the time of the accident and your claim. So, if you owe more on your car lease or loan than what your car is worth at the time of the loss, then this can leave you with a sizeable gap to pay out of your own pocket to satisfy the lender.

However, there is an extremely affordable insurance option that can help you avoid such a bind – Loan/Lease Gap Insurance Coverage. As its name suggests, this insurance option will provide coverage for the gap between how much you owe on your car and how much it is worth at the time of your claim.

While the dealership will often offer gap insurance at the time of purchase, we strongly recommend you speak with your insurance professional before deciding to purchase loan/lease gap coverage through the auto dealer. You’ll be pleasantly surprised to find that getting this endorsement through your local agent will most likely be way more cost-effective than buying it through the dealer.

Massachusetts Car Insurance Myth #5

You can just circular file that out-of-state speeding ticket, or other traffic violation, because it won’t follow you back to Massachusetts.

The Facts

First of all, without question, you must pay this speeding ticket. If you ignore the ticket, your fine will only increase, sometimes doubling after missing just the first payment deadline. After that, your license could be suspended and, in an extreme case, failure to pay your traffic ticket for a period of time can result in a warrant out for your arrest. While you might hate writing that check, it’s better than the alternatives!

If you got this ticket outside of Massachusetts, then you might think that after you pay for it, you can just forget it. While it’s true that your insurance professional will not be able to pull up an out-of-state ticket in the Massachusetts registry, you’re only hurting yourself by not letting your agent know that you had a violation. Whether your policy is up for renewal, or you’re looking to change carriers to get a better price, if you don’t tell your insurance partner about all recent traffic violations, they will be quoting your new or renewing policy without having all of the necessary information. And, once your application is in the hands of the carrier, there will be an extended DMV search that will uncover your violation in the other state’s records.

Okay, so what’s the worst that can happen then? The upshot is that you will be surcharged for the incident, even though it occurred out-of-state, and you will lose any safe driver credits you may have accrued. It really is always best to be upfront with your insurance professional about even the most minor violations and to let them use their expertise and knowledge to try to find you the best priced option for your insurance needs.

You can count on HUB International to give you the real facts about car insurance

While we can’t tell you where all of these car insurance myths came from, we do hope that we have helped dispel these widely held beliefs and cleared up some common misunderstandings you might have had about your coverage. However, we’re sure you have other questions about your auto insurance, so we welcome you to contact us for help understanding this complex coverage, to review your current policy, or for help making an informed decision about protecting your vehicles.

If you’re ready for a more personal relationship with a trusted insurance agent, and a whole new outlook on car insurance, call us today at 833-GoCallHUB.