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Auto INSURANCE
Auto Insurance Basics
Really understanding your auto insurance coverage is an important part of being a driver. Making sense of your actual policy can be a little tricky.
This guide will:
1) Describe all required auto insurance coverages
2) Explain all additional optional coverages
3) Reviews the contents of an auto insurance policy document
Understanding your auto insurance.
Don’t let a lack of information keep you from the coverage you need. This quick consumer guide to auto insurance can give you the start to help.
1. Standard Auto insurance, describes liability, uninsured/underinsured, and medical payments coverages
2. Optional Auto Insurance explains collision and comprehensive coverages, as well as optional endorsements.
3. Understanding your policy describes the pieces that make up your insurance policy document.
Liability Insurance
This is probably the most important type of car insurance, and its required by most state auto insurance laws. Liability car insurance protects you against the cost of personal injury to others, and property damage insurance protects you from the cost of damage you cause to any physical property.
You have probably seen auto policies described by three numbers (like 100/300/100). These numbers refer to auto liability insurance.
They are usually called the split limits of liability insurance. Under our example auto liability insurance policy, you would be covered for up to:
• $100,000 worth of bodily injury caused to another person
• $300,000 for bodily injuries caused to everyone
• $100,000 worth of property damages.
Your states car insurance laws will require a certain level of auto liability insurance. You can check directly with the state insurance offices to determine what your state requirements are.
Even though it may be tempting to save a few dollars by going with the minimum liability required in your state, it is always worth investing in a little extra protection.
Medical payments Insurance Consultants Inc.
This policy provides for the immediate treatment of injuries caused by a car accident. You, your family members and any other passengers in your vehicle are covered, regardless of who is at fault for the accident.
Depending on the specifics of the policy, medical payments coverage may also compensate for last wages or services of a person injured in the car accident.
PIP or personal injury protection, is similar to medical payments coverage, but usually provides broader coverage. Many PIP policies provide compensation for lost wages, funeral expenses, and pain and suffering.
Most states that require personal injury protection are “no fault” states, but Maryland, Delaware, and Oregon also do. Again, you are able to determine your state’s auto insurance laws and minimums thru the state insurance website.
Underinsured and Uninsured Motorist Insurance Consultants Inc.
Both of these types of insurance protect you against injury caused in an automobile accident where at-fault driver’s liability car insurance coverage is inadequate. Though they are often lumped together, they are really two distinct policies.
Uninsured motorist insurance is needed when the other driver has no liability coverage.
Underinsured motorist insurance pays for the cost of your injuries that exceed the other driver’s coverage maximum.
Most states require neither type of coverage, but some require one or the other, and a few even require both. They are more often required in no fault states.
OPTIONAL AUTOMOBILE Insurance Consultants Inc.
Even though some types of automobile insurance are not required by law, you may still want coverage to protect your vehicle. Comprehensive and collision insurance policies do just that.
This page:
• Describes collision and comprehensive auto insurance policies
• Explains insurance deductibles and how they work
• Lists other automobile insurance policy extras
Collision Insurance
Collision insurance coverage pays for damage cause to your vehicle in an automobile accident, when you are deemed “at fault”. A standard collision automobile insurance policy will pay for any repairs up to the fair market value of your car.
NOTE:
It is important to remember that this value can be significantly lower than the cost of replacing your vehicle (or your loan balance.) if your car is financed or leased, you will need gap insurance to reimburse you for the difference between what you owe and what the car is worth.
Collision coverage usually also comes with an insurance deductible. It’s the amount of money you pay towards repairs before your collision insurance kicks in. The higher the deductible you are willing to pay, the less the collision premium will cost.
Collision insurance coverage is not required by law in any state. However, if you are driving a car purchased from a dealership or financed thru a lender, you may be required by the dealership or lender to carry collision insurance.
Comprehensive Automobile Insurance
Comprehensive is very similar to collision insurance, the main difference being that comprehensive covers damage caused to your vehicle caused by any unknown party or “act of God”.
Vandalism, flood, hurricane, theft, and fire are all events usually covered by comprehensive automobile insurance. (But make sure to read your comprehensive insurance policy for exact coverage details.) Like collision automobile insurance, comprehensive coverage will pay up to the fair market value of your car (less your insurance deductible). And although it’s not legally required in any state, you will probably need it if your car is financed.
Automobile Insurance Endorsements
Automobile insurance endorsement is just a fancy term for any of those policy extras like towing insurance, auto glass insurance, daily rental insurance, and emergency roadside insurance.
These policies are never required by any state, but many drivers value the security and convenience they provide.
Here are the coverages as they are broken down as to what your paying for:
• Auto towing insurance pays for towing your vehicle anytime you need it
• Auto glass insurance gives you a lower deductible or no deductible when it comes to repairing any broken window on your vehicle.
• Daily rental insurance, which covers the cost of a replacement or rental vehicle while yours is being repaired because of a covered peril. (You will usually need both comprehensive and collision insurance to qualify.)
• Emergency roadside assistance covers repairs done on the spot. Changing a flat roadside may be covered, but you will have to pay for any repairs at the garage. This policy is often combined with auto towing coverage and referred to as roadside emergency towing insurance.
In some states, medical payments coverage and uninsured/underinsured motorists coverages are voluntary coverages. In others, they are mandatory.
Understanding your Auto Insurance Policy
The contents of your insurance policy
Your auto insurance policy is a binding legal contract.
But don’t let that keep you from reading it, because it is actually very important to do so.
Your personal auto policy with have five distinct parts.
• Declarations
• Insuring agreement
• Definitions
• Conditions
• Exclusions
In most personal auto policy documents, some of these parts will be combined. But they will all be there.
Declarations
This section will likely be the first thing in your auto insurance policy, and it is almost always its own section. Unlike the rest of your policy, it will have been prepared especially for you.
The declarations lists all relevant information about your personal auto policy.
This includes:
• The year, make and model of your vehicle
• Its VIN (vehicle identification number)
• The name of the insured (you or you and your spouse)
• The dates the policy is effective
• The policy’s coverage types and limits
• The policy’s cost (total premium)
Sometimes other information is included (like whether you use the vehicle for business or for pleasure).
And if your vehicle is financed, the lender who holds the lein on the vehicle will be listed here as the “loss payee”. (If the car is ‘Totalled”, they’ll need to be reimbursed.)
Insuring Agreement
This section is the centerpiece of the personal auto policy. It outlines exactly what the insurance company promises to provide in return for the payment of premium.
The type and extent of each coverage you’ve purchased will be described in detail here. This section will also outline exactly who is covered under each provision. It is a long and complicated section, but it’s probably the most important part of your auto insurance policy.
Definitions
Want to guess what this section’s all about? Yep. All annoying insurance jargon will be clarified here.
Sometimes this section is simply written into the insuring agreement. But in either case, you can be sure that every relevant term will be narrowly defined, so as to cut down on the possibility of a misunderstanding between you and the insurance company.
Exclusions
This is an important section, because it lets you know what, when and who wont be covered by your policy. The insurance policy exclusions section is really just a list of all possible circumstances that would free the insurer from the responsibility of paying a claim.
An example: most auto insurance contain an exclusion that exempts the insurer from having to pay in the case of intentionally caused damage or injury. Make sure that you understand the exclusions, because you don’t want to be caught relying on some kind of coverage that you don’t actually have.
Conditions
This will become a very important section should you ever be involved in an accident. It lists your duties and responsibilities as the insured in the event of a claim situation.
This part of an auto insurance policy usually includes guidelines for contacting the insurance company, obtaining a police report, and filing a claim. Information on auto insurance policy cancellation will be outlined in this section as well.
Car insurance that is right for you
Car insurance is a trade off. More security means a larger premium, while budgeting too closely can leave you without the protection you want. However, you can design a car insurance plan that will cover your needs without costing you an arm and leg.
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