If You're Missing These 4 Types of Auto Insurance Coverage, You Could Face Financial Disaster

Auto insurance isn't a fun purchase but it's a crucial purchase to avoid financial disaster. More than 6 million auto accidents happen across the United States each year, and auto thefts are on the rise with more than a million vehicles stolen in 2022. Cars can also be damaged or destroyed by many other causes, including falling trees or vandalism or hail.

Every driver needs to make sure they aren't forced to drain their bank account to pay for repairs or replacement of their vehicle when something happens. Sadly, many only buy the minimum coverage and are left without financial protection.

To make sure this doesn't happen, drivers should check to see if they have these four kinds of coverage because without them, they could be faced with a personal finance crisis.

1. Collision coverage

The average cost of a new car is over $48,000, with prices driven up by the fact that car makers tend to focus on pricey SUVs and have been dropping entry-level vehicles from their lineups. Unfortunately, this means that if a car is totaled in a crash and a driver must buy a new one, they're looking at spending a lot of money. Repairs can also be expensive, so a driver could be out thousands even when a car is damaged but not destroyed.

If another driver caused the crash, their insurance should pay. But in single-vehicle accidents or when the policyholder is at fault, their insurance won't offer any coverage at all unless they have collision insurance.

While some lenders require collision coverage for this very reason, it's not required by law so some people view it as optional -- but unless a policyholder is rich enough that they won't care about paying cash to replace their car, collision coverage really shouldn't be skipped.

2. Comprehensive coverage

A crash isn't the only thing that could lead to buying a new car or needing extensive repairs. A lot of other things could go wrong, like a hailstorm, a tree falling on the car, vandalism, or car theft. These problems won't be covered without a comprehensive policy.

Comprehensive policies pay for non-crash related costs, and they could save a policyholder thousands when a problem happens. Again, they're optional unless lenders require them, but those who pass them up will be left with regrets if they have to pay personally to replace their car that fell into a sinkhole or was damaged by a tornado.

3. Rental car coverage

When a car is destroyed beyond repair, it can take a while for an insurer to cut a check and the policyholder to buy a new car. When a vehicle is being replaced, it can also take days or even weeks to be finished.

During this time, most people are going to need some kind of vehicle to get around -- and that will probably have to be a rental since most people don't just have a spare car sitting somewhere. Rental cars are expensive, though, typically coming in at more than $100 a day.

Rental car coverage is optional and usually not required by auto lenders. But it covers these costs, so policyholders don't go broke paying to get around while they wait for a covered loss to be repaired or a check to buy a new car.

4. Gap insurance

Finally, gap insurance can be crucial for anyone with a car loan who may owe more than their vehicle is worth. That's a lot of people, as data shows American consumers owe, on average $6,054 more on their loans than the market value of their cars.

Insurers typically only pay what a car is worth if it is totaled. If that's not enough to pay off the remaining car loan balance, drivers get stuck paying it out of pocket for a car they don't have anymore. Gap insurance can prevent this by picking up the difference.

Again, some lenders do require gap coverage, but it's not required by law so it may be tempting to pass up. Don't do that, though, as paying off a large loan for a totaled car could be a huge financial burden.

Passing up any of these four kinds of coverage is a bad idea for most people. Drivers should check their policies today to make sure they have all these coverages in place -- and should let their car insurance company or agent know they want to buy them ASAP if they don't.