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Car insurance may help protect you, your passengers, and your vehicle from a wide range of mishaps. But there are several myths about car insurance that can be problematic. If you’re misinformed about coverage, for example, you may not be covered when you think you are. Here are three common car insurance myths and the facts behind them.

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MYTH 1: LIABILITY INSURANCE COVERAGE THAT MEETS MINIMUM LEGAL REQUIREMENTS OFFERS ADEQUATE PROTECTION.

Fact: Minimum liability limits may not be enough to cover expenses if you accidentally injure someone or damage their property with your car.

Most states require liability coverage by law and set minimum limits on the two types of liability coverage that you must purchase. Here’s an example:

  • Bodily injury liability
    • Per-person limit: $25,000
    • Per-accident limit: $50,000
  • Property damage liability: $20,000 limit

A limit is a maximum amount your insurance will pay toward a covered loss.

Bodily injury liability may help pay for legal fees, medical expenses, and lost income compensation for other people if they’re injured in an accident you cause with your vehicle. The per-person limit applies to each person involved in the accident. The per-accident limit applies to each accident you cause.

Property damage liability may help pay for someone else’s belongings (their car, their mailbox, or their front porch, for example) if you accidentally damage them with your vehicle.

So say, for example, you cause a serious accident that injures multiple people, and you’ve been found liable to help pay for their medical bills. If you had the bodily injury liability limits in the example above, your insurance would not help cover the injured parties’ medical bills beyond $50,000. In other words, if the medical bills exceed $50,000, you’d likely have to pay the rest out of your own pocket.

It’s important to think about these types of scenarios when choosing limits for your liability coverage.

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MYTH 2: COMPREHENSIVE COVERAGE IS ALL-ENCOMPASSING.

Fact: Comprehensive does not cover all damage to your vehicle.

Comprehensive coverage typically extends only to certain perils — things like theft, fire, or natural disasters. Think of comprehensive coverage as a way to help protect your car if it’s damaged in an accident that’s not a collision.

If your car is vandalized, comprehensive may help pay to repair it. But if your car is damaged when you hit another vehicle, comprehensive coverage would not apply. (In that instance, you’d need collision coverage to help pay to repair damage to your car.)

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MYTH 3: IF MY CAR IS TOTALED, INSURANCE WILL PAY FOR ME TO BUY A BRAND-NEW CAR.

Fact: In a covered total loss, your insurance payout typically takes depreciation into account.

Coverage that helps protect your vehicle — for example, comprehensive coverage or collision coverage — typically has a limit equal to the actual cash value of your car. According to the Insurance Information Institute (III), insurers determine the value of your car by referring to guides that list depreciation values for vehicles.

So, if your 10-year-old vehicle is totaled in a covered loss, don’t assume that you can go out and buy the latest model with an insurance reimbursement alone.

However, if you drive a brand-new car, some insurers offer additional coverage to help protect your investment. New car replacement coverage may allow you to replace a brand-new vehicle that’s totaled in a covered loss with a new vehicle of the same make, model, and equipment. However, this type of coverage may only apply if the vehicle is no more than a couple of model years old.

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Now that you’re aware of these common car insurance myths, you can make more informed decisions about your coverage. Have questions? Contact a local agent, who can explain coverage options in more detail.