Every state has a minimum amount of liability coverage that drivers are required to carry, but your insurance agent will likely also offer you several ancillary or add-on coverages that are optional. Some are worth adding and some are rarely worth the extra cost. Here are five add-ons that you should investigate when buying auto insurance.

TUTORIAL: Intro To Insurance

1. Gap Insurance
Gap insurance protects you in the event that you owe more money on the vehicle than the insurance company will pay you. Insurance companies use standard valuation measures to determine what your car was worth at the time of the accident; that's the amount they will pay to you. However, if you financed or leased your car, you may owe more on the loan or lease than what the insurance company gives you. This is the gap and, if it is not insured, it can cost you money out-of-pocket if you get into an accident.

The gap is greatest when you first drive a brand new car off the lot as its book value depreciates very drastically. However, after two to three years, the rate of depreciation levels off and the lease or loan payments may catch up to it, making the gap disappear. Consider adding on gap insurance on a new car purchase and then dropping it in a few years. (For related reading, see Beginner's Guide To Auto Insurance.)

2. Roadside Assistance
Roadside assistance consists of mobile repair and towing services if your car breaks down on the road. Mechanics are equipped to change tires, fill up an empty tank and assess mechanical problems. If they are unable to fix the problem on the side of the road, they will tow the vehicle to the nearest repair facility. This is an important service to have, especially if you often travel alone or with children. If you have roadside assistance through other means, such as AAA coverage or benefits on your credit card account, you will not need to sign up for it with your insurance policy. However, if you do not have it already, it is a worthwhile add-on. (For related reading, see 10 Car Insurance Myths.)

3. Vanishing Deductible
This feature is something that is becoming commonly offered as part of premium auto insurance policies. When you are comparing policies between companies, it is a benefit worth having. Vanishing deductible reduces your deductible by a certain amount (usually $50-$100) at the beginning of the policy and then the same amount annually until it reaches zero. Deductibles drop as long as you maintain a clean driving record and have no accidents. If you have an accident, you pay the lower amount rather than your original deductible. More companies are adding this benefit as time goes on so do your homework and check around. (For related reading, see 12 Car Insurance Cost-Cutters.)

4. Personal Injury Protection (PIP)
PIP insurance covers a variety of expenses in the event of an accident, depending on the policy. The main costs it covers are medical expenses for the insured driver, her family and other passengers up to a certain dollar amount. In no-fault insurance states, PIP is required as there is no recovery of medical expenses from the other driver. PIP may also cover funeral or loss-of-income expenses. While your health insurance policy may cover some of these expenses, PIP can fill in and make up for co-pays and deductibles.

5. Uninsured Motorist Coverage
If you do not live in a no-fault state, you run the risk of being hit by an uninsured motorist, in which case, there is no insurance to cover you. This is the purpose of uninsured motorist coverage. Your own policy will kick in rather than having to sue the other driver and spend copious amounts of time in court. Most standard policies add this coverage in but many discount insurance policies do not. Check your current coverage carefully.

The Bottom Line
There are many bells and whistles available when buying auto insurance. Many of them are unnecessary in most situations and will simply drain money out of your pocket. But there are several that are worth adding on to make sure that you are adequately protected in the event of a car accident. (For related reading, see 15 Insurance Policies You Don't Need.)

Related Articles
  1. Personal Finance

    The World's Most Luxurious Vacation Retreats

    White sand beaches, nature preserves, amazing hot springs...if you're looking for heaven on earth, these spots qualify.
  2. Economics

    Understanding Switching Costs

    Consumers incur switching costs when they receive a monetary or other type of penalty for changing a supplier, brand or product.
  3. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  4. Economics

    Explaining Market Penetration

    Market penetration is the measure of how much a good or service is being used within a total potential market.
  5. Economics

    Calculating the Marginal Rate of Substitution

    The marginal rate of substitution determines how much of one good a consumer will give up to obtain extra units of another good.
  6. Savings

    How Volatile Exchange Rates Affect Your Vacation

    Those ever-changing fluctuations can make a difference in anything from your hotel room to an ATM transaction.
  7. Insurance

    Top 5 Car Insurance Companies in Florida

    Learn which car insurance companies lead the Florida market in terms of market share and new premium dollars, and discover which companies are growing fastest.
  8. Personal Finance

    6 Tips for Investing in Antiques

    Historically, antiques are highly appreciating assets, but be prepared for a long-term investment.
  9. Home & Auto

    5 Cars That Will Save You Money in 2015

    Learn which cars will save you money in 2015, whether you are looking for a compact, mid-size or full-size car, or even a pickup truck.
  10. Stock Analysis

    Is the Apple Watch a Real Threat to Fitbit?

    Examine the potential for marketplace competition between Fitbit and the Apple Watch in the rapidly growing consumer wearables industry.
RELATED TERMS
  1. Duty Free

    Goods that international travelers can purchase without paying ...
  2. Basic Reparations Benefits

    Automobile insurance coverage benefits that provide medical, ...
  3. Omnibus Clause

    An automobile liability insurance policy clause which extends ...
  4. Anti-Stacking Provisions

    An insurance policy provision which prevents more than one limit ...
  5. Class 2 Insurance

    Insurance that covers individuals that are not specifically named ...
  6. Bingo Card Program

    A motor vehicle registration method that required the operator ...
RELATED FAQS
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  3. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  4. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
  5. Which emerging markets are seeing the strongest growth in the insurance sector?

    The emerging market economies seeing the strongest growth for the insurance sector are primarily the main emerging market ... Read Full Answer >>
  6. What has the retail sector evolved to its current structure?

    Retail is the catch-all phrase for the sale of final goods to consumers; a retail transaction is considered an "end" and ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!