Automobile Insurance FAQ
Why is automobile insurance sometimes referred to as a "packaged
policy?" What are the parts of the package?
Before the 1950's, 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.
Part A
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 (BIL) and property damage liability (PDL).
-
BIL
provides coverage for the bodily injury claims of people you
negligently injure in an accident.
-
PDL
provides coverage for any third party property damage claims
that the courts determine you are responsible to pay.
Part B
provides medical payments to the policyowner and any other
passengers in the car when there is an accident.
Part C
provides uninsured motorist and underinsured motorist
protection for the policyowner.
Both coverages are designed to compensate the injured policyowner
when the negligent driver has an insufficient amount of liability
insurance under his/her own policy. Typically, Part C covers only
bodily injury losses, but property damage losses are included in
some states.
Part D covers damages to your car when it is involved
in an accident.
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, Part A. 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 Part D coverages because of the relatively low
values of their automobiles.
Suppose I lend my car to a friend, is he/she covered under my
automobile insurance policy?
Whenever you knowingly loan your car to a friend or an associate, he
or she will 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 are still covered under your automobile
insurance policy as long they had a reasonable belief that you would
have given them permission to drive the car.
What coverage does my automobile insurance policy provide me when
I rent 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.
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
talk to one of our representatives.
What is the difference between collision physical damage coverage
and comprehensive physical damage coverage?
Both collision and comprehensive are Part D coverages.
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.
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.
What should I do if I have 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
InsuranceFirst's representative
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.
Why does the premium for my automobile insurance go up if I have
an accident or if I get a ticket?
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.
How can I get insurance for my motorcycle?
Motorcycle insurance can be obtained by adding a
miscellaneous-type vehicle endorsement to your existing
automobile insurance policy. This endorsement will also provide
coverage for mopeds, motor homes, dune buggies and other such
vehicles.
What is no-fault insurance?
With no-fault insurance, the victims of an automobile accident are
compensated by their own insurance company, regardless of who caused
the accident. This outcome is different from what occurs under the
traditional tort system of compensating victims of an accident.
In the tort system, the party who is at fault is required to
compensate the victims of the accident. The idea behind no-fault
insurance is to keep small claims from being settled in our
expensive legal system. To accomplish its purpose, no-fault
insurance restricts the injured person's right to sue the negligent
driver in those instances where the loss falls below a certain
threshold.
Two types of thresholds are typically used: verbal thresholds
and dollar thresholds. A dollar threshold
prescribes a dollar limit that a claim must reach before the injured
party regains his or her tort rights, and therefore the ability to
sue.
A verbal threshold uses a written description to
determine when the injured person regains his or her tort rights.
For example, a person might regain his or her tort rights when the
accident caused a serious handicap, such as permanent loss of a
bodily function.
What do I gain and what do I lose by giving up my tort rights?
Proponents of no-fault insurance argue policyowners gain a number of
things by giving up their right to sue in minor accidents. For
example, under no-fault insurance you typically pay lower automobile
insurance premiums, collect claims payments faster, and spend less
time in court. The biggest thing you lose by giving up your right to
sue is the ability to collect payments for pain and suffering.
No-fault insurance only pays your direct economic losses, such as
hospital bills, lost wages, etc. It does not compensate you for any
pain and suffering damages that you may incur as a result of an
accident.
However, in most serious accidents, where the likelihood of
incurring these non-economic losses is greatest, you regain your
tort rights and therefore the ability to sue the negligent party for
pain and suffering.
I live in a state where I can elect either no-fault coverage or
traditional tort coverage. Which one should I choose?
A number of states allow policyowners to choose whether they would
like no-fault insurance or traditional tort coverage. Which one you
choose depends upon your tolerance towards the risk that you may not
be able to sue for pain and suffering damages in all accidents.
However, since the thresholds where you regain your tort rights are
usually low, many policyowners choose the no-fault coverage because
the premium can be substantially reduced by doing so.
What factors can affect the cost of my automobile insurance?
A number of factors can affect the cost of your automobile insurance
- some of which you can control and some which are beyond your
control. The type of car you drive, the purpose the car serves, your
driving record, and where you live can all affect how much your
automobile insurance will cost you.
Even your marital status can affect your cost of insurance.
Statistics show that married people tend to have fewer and less
costly accidents than do single people.
What should I consider when purchasing automobile insurance?
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.
-
First, purchase the amount of liability coverage which makes
sense for you.
-
Second, you should decide which optional coverages you want. For
example, do you want the optional physical damage coverages in
Part D 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.
How can I lower my automobile insurance rates?
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. Many insurers use the ISO policy forms,
but this is not always the case.
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.
Please use our on-line
Auto Insurance Quote Form to
receive a fast, free quote.
