| Frequently Asked Questions about Auto Insurance
Questions about Auto
Insurance
Insureme.com
How Can I Lower My Premiums?
What Should I Do If I Am In An Accident?
Questions about Auto Insurance
What
Is Auto Insurance?
An auto insurance policy is a contract between you and an insurance
company. You pay a premium. In exchange, the insurance company promises to
pay for specific car-related financial losses, within the selected
coverage limits, that you may have during the term of the agreement.
Most states require that you carry automobile liability insurance in
certain minimum amounts. If you are at fault in an accident the law
requires that you pay the damages sustained by the person who is not at
fault. These can include property damage, which is the cost to repair or
replace any property that you have damaged. These can also include damages
for personal injuries, which include not only the other person's medical
expenses and lost wages but also damages for pain and suffering, permanent
injury, and loss of enjoyment of life. These damages can come to thousands
of dollars even for a minor accident. That's why adequate insurance is
essential to your economic health.
What's In My Auto Policy?
The standard private passenger automobile insurance policy affords up to
four types of coverage. These coverages include: Liability Coverage,
Medical Payments Coverage, Uninsured Motorist Coverage (Underinsured
Motorist Coverage) and Coverage for Damage to Your Auto (Comprehensive and
Collision).
Liability coverage protects you from property damage or personal injury
claims arising out of the ownership, maintenance or use of a covered
automobile. Unless specifically restricted by your policy, you will have
coverage while driving any car, pickup, or van so long as you have the
owner's permission to use the vehicle. A person who is using your car,
pickup, or van with your permission will also be covered. At the time the
policy is issued you will choose the limits of liability that you want.
The limits that you select are the most that we will pay in the event of a
loss.
Medical payments coverage pays for medical expenses that you, or a family
member, incur as the result of an automobile accident. It also covers
persons who are occupying a covered automobile. At the time the policy is
issued you will choose a coverage limit. The limits that you select are
the most that will be paid for each person in connection with a single
accident.
Even though liability coverage is advisable and often required, there are
many irresponsible people who do not buy insurance. If an uninsured
motorist causes an accident you will not be able to recover any damages
that you sustain. If you purchase uninsured motorist insurance, though,
your insurance company will pay you for the property damage and bodily
injury caused by an uninsured motorist. It will cover you, any family
member, and anyone occupying a covered automobile. The limits for this
coverage are usually the same limits that you selected for liability,
although you can choose lower limits.
There are also times when a person who causes an accident has liability
insurance but your damages exceed the limits of that person's coverage. In
some states underinsured motorist coverage is included in your uninsured
motorist coverage. In other states, you can purchase underinsured motorist
insurance which covers your excess losses up to the limit set forth in the
policy.
If you have comprehensive and collision coverage, the insurance company
will pay for damage to a covered automobile regardless of fault. Most
banks and finance companies require you to maintain comprehensive and
collision coverage on your car if it is financed.
Who Is Covered?
Liability coverage extends to you, your spouse, and any resident family
member for the ownership, maintenance, or use of any car, pickup, or van
unless specifically restricted by your policy. Most state laws require
that you carry a minimum amount of liability insurance, which pays for
injuries or damages you cause to someone else. (We recommend that you
carry much more than the minimum - - enough to protect all your assets.)
What Is Covered?
This part is up to you. Once you've met the legal requirements for
liability (and we tell you what these are when you get a quote), you
should select other types and amounts of coverage that will tailor your
policy to your own needs. Here's what an auto policy can cover, above and
beyond your liability:
- Your car -- your
automobiles as listed on the policy and any additional vehicles you buy
over the next year. (Just make sure you register them with your carrier
within 30 days of purchase.)
- Your car against
collisions - your car is covered against collisions it may have with any
other object, no matter who caused it. (See collision insurance for more
detail.)
- Your car against
damage from almost anything else - vandalism, theft, broken glass,
storms, and falling objects. (See comprehensive insurance for more
detail.)
- You, your
passengers, and your car against uninsured or underinsured motorists -
if you are hit by someone who either does not have insurance, or does
not have enough insurance to cover the accident, your loss is covered
under your auto policy. (See uninsured, underinsured insurance for more
detail.)
- You and your
passengers for medical injury payments - reasonable medical (and
funeral) expenses incurred as a result of injuries sustained in an
accident. (See medical payments insurance for more detail.)
What Is No Fault Insurance?
In states with no-fault insurance victims of automobile accidents are
compensated by their own insurance company, regardless of who caused the
accident. No attempt is made to determine fault. This is different from
the traditional insurance coverage where the party at fault is primarily
responsible for paying the costs of an accident, either individually or
through his or her insurance company. In certain circumstances, though,
victims can sue the other party; the limitations vary among no-fault
states.
No fault programs are designed to reduce the cost of auto insurance by
reducing claims and litigation. About one-half of the states have enacted
some type of no fault or auto insurance reform legislation. No-fault
insurance laws vary widely, so you should check with your insurance
commissioner's office or an insurance agent for requirements in your
state. If part of your coverage is based on no-fault laws, find out if it
covers you when you drive in other states.
What Is the Difference Between Collision and Comprehensive
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.
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.
How Can I Lower My Premiums?
Are
There Things I Can Do to Lower My Premiums?
There are a number of factors that affect the cost of your automobile
insurance - some of which you can control and some of which are beyond
your control. Don't worry about those factors that you cannot control
(i.e. age and sex) -- let's focus on those that you can.
The first thing to think consider is your needs. What do you really need
in your car insurance? The answer to this question will drive several
factors - limits, deductibles, coverage selections, etc.
The next step is to review your current policy (if you do not understand
your current policy, call your agent or broker to review it). Have your
needs changed? Situations change over time and the decisions you made and
circumstances that existed a year ago may not exist for this policy
period.
Other things to consider:
- Type of car - The
type and age of your car are two critical factors. If you have a choice,
choose carefully. Newer model years and top line cars will cost more to
insure. Also, popular cars drive your premiums up, due to theft and
vandalism rates.
- Your driving
record - There is no surer way to keep the cost of insurance down than
to be a careful driver because each time you get a ticket or have an
accident, your insurance premium increases. However, if that advice is a
little late (i.e. your driving record has blemishes), it is usually
worth your time and money to contest a ticket and also to attend driver
training courses.
- Take a driving
course - There are several courses, depending on your age that will help
lower your insurance premiums. If you are still in high school, take a
drivers education course. Many insurance companies offer a discount for
these courses. Also, in certain states (usually for older drivers) there
are accident prevention or defensive driving courses. The National
Safety Council will have information on locations and availability.
- Pay your bills on
time - Each time your policy lapses (i.e. you don't pay your bills),
there are fees that are added to the original premium amount to
reinstate your policy. It's a far better thing to pay your bills on time
than to pay the fees (and premium) later.
- Where you live -
Areas that have higher traffic volume are usually more expensive to
insure. If you are in the market to buy a new home, this may be
something to consider.
- Higher
deductibles lower premiums - most policies have a standard $200 or $250
deductible on Comprehensive and Collision. Today's higher priced
vehicles are more expensive to repair, thus higher deductibles (or the
portion you pay) bring greater savings. Be sure you can afford the
increased deductible before purchasing the coverage.
- Multi-car
discounts - Combining two or more cars on the same policy can reduce
your premium by up to 25% (varies by company).
- Carefully
consider you coverage -- Many people still carry full coverage on
vehicles with little or no book value. For example, your car is worth
$600 and you pay $180 per year for Comprehensive and Collision Coverage
with a $500 deductible. The car is a total loss in an accident. You
would receive $100 after the $500 deductible, but paid $180 for full
coverage, so you lose $80
Note: If you are
in your states assigned risk plan, check with your broker as to when you
will be eligible for insurance through normal channels.
I have an older car whose current market value is very low - do I
really need to purchase automobile insurance?
Most states have enacted compulsory insurance laws that require drivers to
have at least some automobile liability insurance. 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 (comprehensive and collision). 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.
Will My Rates Go Up Because I've Had A Claim?
Actuaries and statisticians who have studied the claiming behavior of
people involved in accidents have long known 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.
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.
What Should I Do When Renting A Car?
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 and coverages now
vary widely from company to company and from state to state. The best way
to find out what rental car coverage you have under your automobile policy
is to call your insurance company or your agent.
Suppose I lend my car to a friend, is he/she
covered under my automobile insurance policy?
It depends on your
coverage. There are several instances where coverage would not apply to
anyone else driving your car (named owner policies, restricted policies,
etc). However, most of the time when you knowingly loan your car to a
friend or an associate, he or she will be covered under your automobile
insurance policy.
What Should I Do If I Am In An Accident?
The duties you need
to perform after you have an accident are prescribed both by state law and
by the terms of your contract. Obviously, the first thing you should do is
make sure everyone is all right and call an ambulance if one is needed.
Second, 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).
Fourth, at 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. Failure to complete any
of these actions can, and sometimes does, result in non-payment by your
insurance company for losses that otherwise would have been covered
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