Does car insurance cover natural disasters? Let us jump straight to the answer. YES! Your car insurance will cover natural disasters if you have comprehensive coverage. But, it still does not covers every peril. Your personal coverage will depend on the policy you buy. This article discusses which disasters car insurance covers and which ones it doesn’t. We also have a tax tip for those who would like to have a sneak peek.
So, let’s start!
Does Car Insurance Cover Natural Disasters?
Some basic coverages of car insurance are liability, medical coverage, and collision. These cover you in case of accidents, whether by your fault or somebody others. But there is one more coverage that is optional but still very important. It is comprehensive coverage. Comprehensive car coverage protects you in case of mishaps other than accidents.
Also read: Flood Insurance: What It Is? How Does It Work? What Does It Cost?
So, what can these mishaps be? There are many mishaps other than a collision that can cause damage to your car, like theft, vandalism, fire, and, most importantly, natural disasters. There is quite a list of damage sources that comprehensive insurance protects you from. Let’s see what it is:
- Vandalism
- Theft
- Fire
- Falling Objects
- Riots
- Civil Disruptions
- Natural disasters
Yes, natural disasters too!
But no policy is perfect. There are a couple of terms and conditions that you should keep in mind as you consider buying comprehensive car insurance.
- Maybe the location you live in is too prone to a particular disaster. In such a case, your insurance provider may not cover such a peril. Therefore, it would help if you could check your policy papers or consult your insurance agent.
- There is a binding restriction as well. Say you buy a policy just after the warning for a hurricane has come, or it is already creating havoc. Your car gets damaged in the hurricane, and you file a claim. Your insurance company will not accept this claim. The insurance companies do so to protect themselves from an onslaught of claims during such perils.
What this teaches us is that do not wait for a disaster to come for buying insurance. If you are in a high-risk zone, consult your insurance agent for comprehensive car insurance before the disaster strikes.
Also read: How to choose the best car insurance company?
Now, let’s learn what does comprehensive coverage cover in-depth.
Which Natural Disasters Does Comprehensive Coverage Cover?
Here is a list of natural disasters that comprehensive car coverage covers:
- Flood
- Wildfire
- Hurricane
- Earthquake
- Hail
- Sinkholes
- Landslides
- Mudslides
- Volcanoes
These are the major disasters that comprehensive coverage protects you from, but it is always good to consult your insurance agent for the specific requirements of your locality.
All said and done; it is always good to stay protected. But do you need comprehensive car coverage?
Do You Need Comprehensive Car Coverage?
Ask the below-mentioned questions to yourself to understand whether you need comprehensive coverage? And if yes, how much?
Question: Is your vehicle’s value high enough to protect it from comprehensive coverage?
Answer: If your vehicle is worth $4,000 or less, your insurance agent might advise you not to go for this coverage because the total loss payout will be minimal.
Question: Are you taking the vehicle on lease or finance?
Answer: Yes, in this case, you must get comprehensive coverage. The reason? You would need it to protect the investment of the other party- the dealer or the lender.
Question: Do you plan on reselling the vehicle?
Answer: If you are planning to resell the vehicle in the future, it is in your interest to maintain the value of your car. And comprehensive and collision coverage are good tools to maintain your car’s value.
Once you have pondered the above questions, you can be pretty sure whether you need the coverage or not.
How Much Increment Can You Expect After Filing A Claim?
You must have heard that insurance companies increase the premium once you have filed a claim.
But insurance companies understand that you filed a claim because of an ‘Act of God’ and not due to any of your fault. Therefore, keeping this in mind, the increment in the premiums is lesser. It is approx 7%, which is less than at-fault incidents.
Another reason your premiums may be hiked is rate revision. Rate revision is the increase in premium when a year sees a lot of natural calamities. Thus, to balance the access claims with their books, they revise the rates and increase them. This is entirely out of your control but certainly affects you.
Can I Get A Tax Advantage Due To Car Damage From Natural Disasters?
And the answer is yes and no. You can write off your damage on your taxes but only a portion of it. IRS has rules on what and how much you can write off as damages from a natural disaster. And some of the essential rules are:
- Never include any losses you incurred because of wear and tear instead of natural disasters.
- You should have filed an insurance claim within a specific time frame.
- You must file the deduction in the same tax year in which you incurred the loss.
- Also, if your car is a total loss after the disaster, you are not allowed to write off the car’s total price. IRS needs you to adjust your deductions according to certain factors. Some of them are the claim money you got from the insurance company and standardized adjustments, etc.
And lastly, if you are a tax-savvy person, you can claim your deductions through Form 4684 and Schedule A itemized deductions. But if not, then you can always consult a certified tax professional or use tax preparation software.
In A Nutshell…
Comprehensive car insurance can protect you from major financial disasters caused by perils like earthquakes, floods, etc. Still, always remember to read your policy documents properly and ask any doubts you have from your insurance agent. Another thing to keep in mind is binding restrictions. Thus do not wait for the disaster to strike. Be proactive and act before a mishap occurs.
So, we hope now you know everything about does car insurance cover natural disasters. And if you have any doubts, questions, or suggestions, please drop them below. We are all ears and reply ASAP!
