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Why is auto insurance sometimes
referred to as a packaged policy? What are the parts of the package?
I have an older car whose current
market value is very low - do I really need to purchase automobile
insurance?
Suppose I lend my car to a friend;
is that covered under my auto insurance policy?.
What does my auto insurance policy
cover when I rent a car?
What is the difference between collision
physical damage coverage and comprehensive physical damage coverage?
What should I do if I have an accident?
Why does the premium for my auto
insurance go up if I have an accident or get a ticket?
What factors affect the cost of
my auto insurance?
What should I consider when buying
auto insurance?
Why is auto insurance sometimes referred to as a packaged policy?
What are the parts of the package?
Before the 1950's, if you wanted to purchase all the coverage today's
auto insurance policy provides, you 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 parts into one all-encompassing policy.
The main advantages of combining the parts are lower expenses, and
therefore a lower cost to consumers, and the convenience of being
able to purchase property, auto liability and other types of coverage
in a single policy.
Part A of an auto policy is liability
coverage that protects you from lawsuits arising from either negligent
operation or ownership of a covered automobile. There are two
types of coverage in Part A - bodily injury liability (BIL) and
property damage liability (PDL).
- BIL covers the bodily injury claims of people you negligently
injure in an accident.
- PDL covers any third party property damage claims the courts
determine you must pay.
Part B provides medical payments to you and any
other passengers in the car in an accident.
Part C provides uninsured motorist and underinsured
motorist protection for the policy owner.
Both B and C are designed to compensate
you when the negligent driver doesn't have enough liability insurance
under his/her 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 auto liability insurance (Part A).
These laws were enacted to ensure that victims of accidents are
compensated when their losses are caused by someone else being
negligent. Except for the minimum liability you may be required
to buy, many people with older cars decide not to purchase physical
damage coverage. Often, the cost of repairing 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 coverage
because of the relatively low value of their autos.
Suppose I lend
my car to a friend; is that covered under my auto insurance policy?
Whenever you knowingly loan your car to a friend or an associate,
he or she will be covered under your policy. In fact, even if
you don't give explicit permission each time a person borrows
your car, someone is still covered under your policy as long he
or she had a reasonable belief that you would have given permission
to borrow the car.
What does my auto
insurance policy cover when I rent a car?
The answer to this question is not simple. In the not-too-distant
past, most auto insurance policies would extend coverage to rental
cars whenever you rented one. This is not quite true anymore.
In most cases, your personal auto insurance policy will cover
only vacation car rentals. Many insurance companies no longer
extend personal auto insurance coverage for business travel. Find
out what rental car coverage you have under your policy is by
calling your insurance agent/company.
What is the difference
between collision physical damage coverage and comprehensive physical
damage coverage?
Both collision and comprehensive coverage are in Part D. Collision
is defined as losses you incur when your auto collides with another
car or object. For example, if you hit a car in a parking lot,
damages to your car will be paid under your collision coverage.
Comprehensive covers most other direct physical damage losses.
For example, damage to your car from a hailstorm will be covered
under comprehensive coverage. It's important to know the differences
between collision and comprehensive coverage to make an informed
buying decision. Also keep in mind that your deductibles in these
two categories are often different.
What should I do if I have an
accident?
Your responsibilities after you have an accident are proscribed
both by state law and by your insurance contract.
- Obviously, the first thing you should do is be sure everyone
is all right and call an ambulance if needed.
- Second, for most accidents in most states, the police should
be notified.
- Third, give the other driver(s) involved your name, address,
telephone number, and the name of your insurance company and/or
your insurance agent. Get this same information from the other
driver(s).
- Fourth, as soon as possible, contact either your insurance
agent or your insurance company to notify them that you have
been in an accident.
- Finally, there are conditions in the insurance contract
you must satisfy to receive compensation from your insurer.
For example, you must cooperate with your insurer during any
investigation during the claims settlement process. Not completing
any of these actions can result in nonpayment by your insurance
company for losses that otherwise would have been covered.
Why does the
premium for my auto insurance go up if I have an accident or get
a ticket?
Actuaries and statisticians who have studied the behavior of people
involved in accidents have shown 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, but to charge them a premium that reflects
their likelihood of having an accident. People who are more likely
to have accidents should expect to pay higher premiums.
What factors
affect the cost of my auto insurance?
The type of car you drive, what you use it for, your driving
record, where you live and even your marital status can all affect
how much your policy will cost. It's all based on numbers; for
example, statistics show that married people have fewer and less
costly accidents than single people.
What should I consider when
buying auto insurance? Things you should consider when purchasing
automobile insurance include:
- Decide how much liability coverage you want to carry. This
is highly subjective. The liability levels you have on your
other policies can serve as a guideline. Consult a financial
professional if you need more advice.
- Determine which optional coverage you will need to feel
protected. For example, do you want the optional physical
damage coverage in Part D, or is the market value of your
car too low to warrant purchasing them?
- Once you have decided what you want, you can now choose
from which type of company you want to buy a policy.
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