Affiliated Insurance Managers
Auto Insurance
When the first U.S. automobile insurance policy was purchased in 1898, there were barely 100 cars nationally. Horses and carriages ruled the roads and the main concern for both insurers and auto drivers was any injury those noisy new machines might do to horses.
Today, auto insurance is the most widely purchased of all property-casualty insurance, yet few drivers are familiar with the details of their particular policy.
Though this guide does not represent the provisions of any particular policy, it should serve as a starting point on your road to finding the best policy for your needs.
Why do I need auto insurance?
Your car is likely one of the most expensive things you own. Insurance protects your investment and guarantees you a way of coping with the expense of accidents, vandalism or theft. It also secures your financial responsibility to the institution lending you money to buy your vehicle.
When you drive you are responsible for the safety of your passengers, your fellow drivers, other people's property, pedestrians and yourself. Insurance helps ensure your ability to cover the costs of potential damages or injuries.
You are also required to be financi all y responsible by state laws, which are best satisfied through your insurance coverage. In most states insurance is a prerequisite to registering your car. So if you want to drive your own vehicle, you must be insured.
What are the different types of policies and what do they cover?
Auto insurance is divided into several types of coverage:
* Auto liability covers damage you cause to other people's property and bad injury to the people themselves.
* Collision covers damage to your own vehicle in an accident.
* Comprehensive (i.e., fire, theft and other non-collision damage) covers fire damage to your vehicle, break-ins, vandalism or theft, as well as natural disasters (earthquake, hail, hurricane, flood, etc.--unless the vehicle is overturned, then it is considered a collision).
* Medical payments insurance, usu all y in the range of $5,000 to $10,000, covers medical expenses for injuries. This "good-faith" coverage guarantees immediate medical payments for you, your passengers and other parties, regardless of who is at fault. It also covers you and members of your household in any accident involving an automobile, whether you are on foot, on a bicycle, in a friend's car.
* Uninsured motorist (UM) and underinsured motorist (UIM) coverage protects you if you are injured in an accident with others who themselves carry insufficient or no liability insurance.
* Extra coverages include expenses for towing, labor, temporary replacement vehicles, etc. These are gener all y defined as add-ons or �endorsements� to your policy.
How does adding drivers to my policy affect my rates?
The more people you all ow to drive your vehicle on a regular basis, the greater the chances of your vehicle being in an accident. Teenagers are especially expensive to insure because they are the least experienced drivers.
A driver's education course can help ease the burden of insurance costs since it teaches your teenager defensive driving techniques. If your child's high school does not offer driver's education, try to find one offered by another school or a private firm in the area. After all , the cost of driver's education could be cheaper than the extra cost of your insurance. (Many insurers offer "good student" discounts as well.)
An adult's driving experience can also affect your rates significantly. Don't assume that every adult you know has been driving since age 16 or is a competent driver with a clean record. Again, taking a defensive driving course is a good way for adults to prove they are responsible drivers, thus lowering their risk and their insurance rates. (This is a great solution for new couples who are jointly insured but unmatched in their driving skills or experience.)
What happens when I loan my car to someone? Is that person covered by my policy? Am I still covered?
Yes. Liability and coverage for physical damage (i.e., comprehensive and collision) always follow your car. So, if a friend borrows your car and has an accident, you're still protected against the cost of damages or injuries. Plus, if the driver of your car is insured, his/her policy will also be available to cover the cost of damages and injuries.
The same rules apply when you borrow someone else's vehicle. Your own insurance follows you no matter whose car you are driving. But the vehicle owner's policy is the key coverage if you have an accident.
What should I make sure my policy includes? Do I really need to read all the fine print?
While you don't need a law degree or an agent's license to understand your policy, you should read it thoroughly. After all, it is a binding legal contract. If there is anything you don't understand, ask your agent to explain it to you. You have the right to know what's in your policy.
If you wish clarification beyond your agent's explanation, or if you want to be certain that the policy is completely valid, contact your state's insurance department.
Do I need special insurance for a classic car?
You should always talk to your agent about coverage of rare and valuable property. Since a classic car usually cannot be replaced, you'll probably want ample compensation if it is lost. A classic car, because it is rare or unique, may indeed require a special insurance policy.
Under what circumstance do I not need certain types of auto insurance?
While most drivers today are gener all y insured for collision and theft, this coverage may not be necessary for every vehicle. Liability insurance, as mentioned earlier, is essential and in many states required. But if you drive a clunker�an older car that isn't worth much money�you may be able to do without collision insurance. If you have an accident, repair costs could easily be higher than the value of your vehicle, thus "totaling" it. This means your insurer will pay you the total book value of your vehicle, and that could be far less than the cost of your vehicle's repair. So, collision insurance may not cover your loss adequately.
Since it depends on special circumstances, contact your agent for guidance.
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