Auto Insurance

Auto insurance is not as difficult as you might think.  It gets much easier once you  know what types are available, how an auto insurance policy is organized, and the coverage amounts and limits that are most appropriate for your particular situation.

Parts of an Auto Policy

The six basic types of coverages
All coverages are limited to the amount of coverage purchased as noted on the declarations page of the policy.  

The common types of auto insurance coverages are:

1. Bodily Injury Liability
   Provides coverage for injury or death claims made against you in an auto accident and the cost of legal defense.
2. Property Damage Liability
   Provides coverage for damage to the property of others caused by an auto accident.
3. Medical Payments
   Pays for medical and hospital expenses and the expense of funeral services resulting from an auto accident, regardless of fault.
4. Uninsured/Underinsured Motorists
   Provides the insured driver(s) and passengers bodily injury coverage, up to the policy limits, for those involved in an accident caused by the owner or operator of an insured vehicle, a "hit-and-run" driver, or when the at-fault driver's policy limits are insufficient to cover losses.
5. Collision
   Pays for damages to your car as a result of an accident.  It is available with a deductible, meaning that upon a claim, the car owner pays a specified amount before the insurance company pays the remainder.  As general rule, the greater your deductible, the lower your premium.
6. Other Than Collision
   Also known as "comprehensive", it pays for vehicle damages other than those caused by a collision or overturn.  This coverage is also available with a deductible.  Examples include auto theft, fire, windstorm and flooding. Covered perils are listed in your policy.  Be sure to review exclusions.

The five basic parts of an insurance policy

1. Declarations
   This part personalizes the policy and makes it specific to you. It includes such information as name and address, make and model of the auto, vehicle identification number (VIN), policy period, policy number, other drivers covered, types of coverages purchased, policy limits and deductibles, premium and additional forms or endorsements.
2. Coverage Parts
   This part details the coverages purchased.  The types of coverage parts usually include: Liability, Medical Payments, Uninsured/Underinsured Motorists, Collision and Other Than Collision.
3. Exclusions
   This part states what is not covered by the policy.  This is a very important part of the policy because it explains the policy's limitations.  You can usually purchase coverage for exclusions by purchasing endorsements at an additional premium.
4. Conditions
   This part outlines the duties and responsibilities of both the insurance company and the policyholder.  It includes premium payment obligations, steps you must take in filing a claim, and disagreement resolution and policy cancellation notice procedures.
5. Definitions/General Provisions
   This part includes items such as definitions of terms and miscellaneous conditions regarding the rights of the policyholder and insurance company.

Deciding on Appropriate Coverage
When determining which coverages and limits of auto insurance you need, consider the following points:

Deciding How Much You Need
Decide which coverages you need.  Here are some points to consider:

1. Your financial responsibility
   Every driver has a responsibility not only for driving in a safe manner, but also for injuries or damages he or she might cause.  Most states have laws which make it important - or even necessary - to have insurance.  They require that you file a report if you have an accident involving bodily injury or substantial property damage. You then may be asked to present proof that you can pay damages up to amounts required by law.
2. Your car
   If you drive an older model, its value might seem low compared to the cost of collision coverage.  In this case, you may decide not to buy collision insurance.
3. Your personal finances
   Collision and comprehensive coverage are available with a deductible.  This means that the car owner agrees to pay a specified amount - the first $50, $200 or $500 - of damage to his/her car in each loss and the insurance company agrees to pay the remainder.  By eliminating the cost of processing small claims, the company can provide such coverage at a lower price.  You must decide whether you prefer full coverage, a small deductible at a higher price, or a higher deductible at a lower price.

Now that You're Insured

Remember that an insurance policy is a legal contract which defines the duties and responsibilities of both the insurance company and the consumer.  It is important for you to have complete confidence in the service to be provided by your insurance company and its representative.  Compare costs, quality and coverages and choose the policy that's right for you.

You've made an informed decision in selecting your policy.  To get the best value for your insurance dollar, you should:

1. Know what kinds of coverages your policy provides.  (Ask questions about parts you don't understand.)
2. Report to your insurance representative any change which might affect your premium or coverage.
3. Report accidents or claims promptly and accurately.
4. Keep your car in good repair, drive defensively, obey traffic laws and observe common courtesy and rules of the road.
   
   

   Auto Insurance For Teens

   Someday you may be in an accident or have your car vandalized or stolen. Insurance is available to protect you from the potentially huge costs associated with these risks. Replacing just the bumper on a typical American-made car can cost over $300. Medical bills resulting from an accident could add hundreds, or even thousands of dollars more to the bill.

   Insurance companies generally prefer to sell their insurance to good drivers and may decide not to insure high risk drivers. Unfortunately, statistics show that one out of every three young drivers will have an accident each year. So, insurers do not think of new drivers as "good" drivers. This does not mean that you cannot get insurance, however.

   There are several things about auto insurance that you should know BEFORE you shop around . . .

   How To Buy Auto Insurance

   • Shop around.
     Many companies sell auto insurance. Compare prices - in some states, prices vary by up to 100%. Ask agents, brokers or insurance companies for price comparisons. Some state insurance departments publish guides showing what different companies charge in certain situations in various parts of the state.
   • See if you can lower your insurance rates.
     Many companies offer discounts on the price of auto insurance to people who have passed an approved driver education course or who have a B grade average or better. Take proof of driver education and/or good grades with you when you shop for insurance. Many companies also offer discounts if a car has anti-theft devices or air bags.
   • Investigate the types and amounts of coverage you need.
     For example, if your car is not worth much, you may not want to buy collision coverage.
   • Look for an insurance agent, broker or company representative that you trust.
     Ask friends or relatives, or consult the telephone book. Ask questions.
   • Read your policy.
     As a contract, an insurance policy creates several obligations for both you and the insurance company. For example, the company must defend you in court if you are sued under the policy.  Therefore, its important to give your insurer complete, accurate and timely information about any accident or ticket. Before you sign anything, go over the policy and any confusing language with your insurance representative and family.

   Common Questions About Auto Insurance

   • What is insurance?
     Insurance is a way of spreading financial risks among large numbers of people. You pay a fee to an insurance company for the right to share in funds set aside to pay your costs in certain pre-defined circumstances.
   • Do I have to buy auto insurance?
     Most states require you to carry a minimum amount of liability coverage. Many states have "no-fault" auto insurance systems; in other states, coverage for medical costs for you and your passengers is optional. Coverage for damage to your car is optional.
   • How much will my insurance cost?
     Prices vary widely. The type of car you drive, your driving record, your age, your sex, where you live and how much you drive usually affect cost. You may also qualify for various discounts.
   • Can I be added on to my parents' auto insurance?
     If you drive a family car, you can be added to your parents' policy. However, the cost of the policy will increase. (Some companies insure young drivers only on a family policy.) If you have your own car, your parents' company may sell you a separate policy but at a different rate than your parents. New drivers seeking their own insurance frequently are referred to state-run insurance pools, known as "assigned risk plans," where the cost of insurance is higher.
   • Do I have to be a certain age to buy my own insurance?
     No. However, you must have a valid driver's license. Also, in many states you must be 18 before you can own a car without an adult's name on the auto registration.
   • How often do I have to renew my insurance?
     Auto insurance policies usually last six months. Some last one year. You will receive a notice when it is time to renew your insurance.
   • Will my rates go up or will I lose my insurance if I get into an accident or get a ticket?
     If you are not at fault in an accident, your insurance should not be affected. If you are at fault, get a ticket for a serious violation (such as drunk driving), or are involved in an expensive property damage claim (such as crashing into a tree), the company will consider that when setting the price for your next insurance policy. Your rates for the current policy won't be affected.

   WHAT TO DO IF YOU HAVE AN ACCIDENT:
   First, call for medical help for anyone who may be injured. Call the police and do not leave the scene of the accident before they arrive. Get the name, address, phone number, insurance company and driver's license number of anyone who was involved. Get the names and addresses of anyone who saw the accident. Write down the details of the accident. Notify your insurance agent or company immediately. Get a copy of the police report. Save copies of everything.

   How to Save on Auto Insurance Menu
   Select a topic

    Nine Ways to Save on Auto Insurance
    Auto Insurance, What Drives the Cost and What Can Be Done About It