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Auto Questions |
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There are a number of factors you should consider when purchasing any product or service, and insurance is
no different. Here is a checklist of things you should consider when purchasing automobile insurance. |
Purchase the amount of liability coverage which makes sense for you. Decide which optional coverages you
want. For example, do you want the optional physical damage coverages in Comp/Collision or is the market value
of your car too low to warrant purchasing them. Finally, once you have decided what you want in your automobile
insurance policy, you can now decide who you would like to purchase the insurance from. For example, you may decide
you like the idea of purchasing insurance from a mutual company rather than a stock company. You should also
decide whether you would like an insurance broker (who is likely to tag on a broker fee on top of the policy in
those states where it is legal) to assist you in your purchasing decision or if you would like to buy the insurance
directly from a company that sells insurance over the phone or through the mail.
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Frequently Asked Questions about Auto Insurance
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I have an older car whose current market value is very low - do I really need
to purchase automobile insurance?
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Most states have enacted mandatory insurance laws that require drivers to have at least some automobile liability
insurance, BI/PD. These laws were enacted to ensure that victims of automobile accidents receive compensation
when their losses are caused by the actions of another individual who was negligent. Except for the minimum liability
coverages that you may be required to purchase, many people with older cars decide not to purchase any of the
physical damage coverages. It is often the case that the cost of repairing the damages to an older car is greater
than its value. In these cases, your insurer will usually just "total" the car and give you a check for the car's
market value less the deductible. Many people forgo the Comp/Coll coverages because of the relatively low values
of their automobiles
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How can I lower my automobile insurance rates? |
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There are a number of things you can do to lower the cost of your automobile insurance. The easiest thing to
do is to shop around. It is not surprising to find quotes on automobile insurance that can vary by hundreds of
dollars for the same coverage on the same car. When you shop, be careful to make sure each insurer is offering
the same coverage. Another way to lower the cost of your automobile insurance is to look for any discounts that
you may qualify for. For example, many insurers will offer you a discount if you insure multiple cars under the
same policy, or if you have had a driver education class in the last five years. Be sure to ask your agent or
your company about their discount plans. Another easy way to lower the cost of your automobile insurance is to
increase the deductible. Simply raising your deductible from $250 to $500 can lower your premium sometimes by
as much as five or ten percent. However, you should be careful to make sure that you have the financial resources
necessary to handle the larger deductible.
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Suppose I lend my car to a friend, is he/she covered under my automobile insurance
policy? |
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Whenever you knowingly loan your car to a friend or an associate, he or she may be covered under your automobile
insurance policy. In fact, even if you do not give explicit permission each time a person borrows your car, they
may be covered under your automobile insurance policy as long they had a reasonable belief that you would have
given them permission to drive the car. If you are carrying a named-operator policy, only the individuals named
on the policy are covered on your car with your policy. Although often less expensive, a named operator policy
should be clearly disclosed before you purchase the policy.
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What coverage does my automobile insurance policy provide me when I rent a car? |
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The answer to this question is not as easy as it once was. In the not-too-distant past, most automobile insurance
policies would extend coverage to rental cars whenever you rented one. This is not quite true anymore. In most
cases, your personal automobile insurance policy will provide coverage only when you are renting a car on vacation.
Many insurance companies no longer extend personal automobile insurance coverage when you are traveling on business.
The best way to find out what rental car coverage you have under your automobile policy is to call your insurance
company.
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What is the difference between collision physical damage coverage and comprehensive
physical damage coverage? |
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Both collision and comprehensive are often referred to as Comp/Collision (Comp/Coll) coverage. Collision is
defined as losses you incur when your automobile collides with another car or object. For example, if you hit
a car in a parking lot, the damages to your car will be paid under your collision coverage. While Comprehensive
provides coverage for most other direct physical damage losses you could incur. For example, damage to your car
from a hailstorm will be covered under your comprehensive coverage. It is important to know the differences between
the collision and comprehensive coverages for a couple of reasons. First, in order to make an informed purchasing
decision about these optional coverages, you need to know the difference between them. Second, the deductibles
under the collision and comprehensive coverages are often different in amount.
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What should I do if I have an accident? |
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The duties you need to perform after you have an accident are prescribed both by state law and by terms of
your contract.
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- Obviously, the first thing you should do is make sure everyone is all right and call an ambulance
if one is needed.
- For most accidents in most states, the police should be notified.
- Third, you should give
the other driver(s) involved in the accident your name, address, telephone number, and the name of your insurance
company and/or your insurance agent. You also need to get this same information from the other driver(s).
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the first opportunity, you should contact either your insurance agent or your insurance company to notify them
that you have been involved in an accident.
- Finally, there are a number of conditions in the insurance contract
that you must satisfy in order to receive compensation from your insurer. For example, you need to cooperate with
your insurer during any investigation undertaken during the claims settlement process.
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Why does the premium for my automobile insurance go up if I have an accident or
if I get a ticket? |
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Current school of thought amongst Actuaries and statisticians who have studied the claiming behavior of people
involved in accidents is that people who have either had an accident or received a ticket recently are more likely
to have another accident in the next couple of years than people whose recent driving record has been incident
free. Although there is another school of thought that indicates that a driver with a recent accident or violation
is likely to be more careful and thus more desirable as an insured. There can be few assumptions made with regard
to this question and thus the need to continually assess your insurance costs be shopping around. Insurance companies
use this information not to punish people who have had an accident, but to charge them the premium that most accurately
reflects their likelihood of having an accident. People who are more likely to have accidents should reasonably
be expected to pay higher premiums.
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Why is automobile insurance sometimes referred to as a "packaged policy"? |
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Why is automobile insurance sometimes referred to as a "packaged policy?" What are the parts of the package?
In the past, if a person wanted to purchase all the coverage that the modern day automobile insurance policy provides,
he or she would have had to purchase at least four separate policies. Changes in the laws that regulate the sale
of insurance now allow the insurance industry to sell policies that combine the separate coverages into one all
encompassing policy. The main advantages of combining the various coverages are lower expenses, and therefore
a lower cost to consumers, and the convenience of being able to purchase the property, automobile liability and
other coverages in a single policy. The standard private passenger automobile insurance policy can have up to
four different coverages. Only the first coverage is standard - the remaining three coverages are optional. Bodily
Injury & Property Damage (BI/PD) provides liability coverage that protects the insured from lawsuits arising from
either the negligent operation or ownership of a covered automobile. There are two coverages provided in Part
A - bodily injury liability (BI) and property damage liability (PD).
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- BI provides coverage for the bodily injury claims of people you negligently injure in an accident.
- PD
provides coverage for any third party property damage claims that the courts determine you are responsible to
pay.
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Medical Coverage (MED) provides medical payments to the policy owner and any other passengers in the car when
there is an accident. Uninsured Motorist Liability Bodily Injury (UMBI) provides uninsured motorist and underinsured
motorist protection for the policy owner. Both coverages are designed to compensate the injured policy owner when
the negligent driver has an insufficient amount of liability insurance under his/her own policy. Typically, UMBI
covers only bodily injury losses, but property damage losses are included in some states. Comprehensive and collision
(Comp/Coll) covers damages to your car when it is involved in an accident.
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