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Auto Insurance Facts...

What is the purpose of auto insurance?
Auto insurance is designed to insulate you from many risks you can be exposed to if you own a car. Some of these risks include theft, vandalism, accident, injury to yourself or another, or natural disaster.

How does it work?
The insurance company you choose agrees to cover you for all or some of the risks (i.e. theft, vandalism, accident, injury to yourself or another, or natural disaster) in return for your payment of premium. The details of this agreement are described in a contract known as a PAP or personal auto policy.

Why do I need auto insurance?
It is a requirement in all states that you be financially responsible when driving an automobile. In many states it is a requirement that you purchase at least a minimum amount of insurance or post a bond. However, to ensure that your future and current assets are not at risk you may find it wise to purchase additional amounts of coverage. This additional coverage will cover any legal liability, medical fees, and other driving related losses.

Explanation of specific coverages:

Bodily Injury Liability:
Bodily injury liability insurance is designed to protect members of both vehicles in the event that an accident occurs. Like other liability insurance this coverage protects your assets against potential lawsuits. Even as your car gets older and decreases in value this type of insurance should be kept at a constant level to protect any and all assets that may be subject to lawsuits.

Collision Insurance:
This coverage pays to repair and replace any damage to your car caused by a natural disaster, vandalism, theft, or accident.

Uninsured Motorist Protection:
This type of coverage will cover you if a driver that is uninsured hits you and often it will protect you in the event of a hit and run.

Comprehensive Physical Damage Insurance:
This type of insurance pays for damage to your car by theft, fire, flood, animals and/or other perils.

Property Damage Liability:
Provides coverage for damage to someone else's property by your car and also provides you with legal counsel if that is necessary.

How can I keep my auto insurance premiums as low as possible:

Does this sound familiar?

You've been a responsible driver for many years, but you notice an upsetting pattern; every year your car insurance premiums creep upward. What's going on? What are you doing wrong? Well, the answer may be "nothing." Remember that the cost of providing insurance, as it is with other products and services, may increase for various reasons. Factors that can affect car insurance premiums include the following:

Your insurance company's overall loss experience (due to a higher level of claims)

The increased value of newer model cars

Increases in judgment amounts awarded in auto lawsuits

Increased business processing and administrative expenses

What these items have in common is that they're out of your control...so don't worry about them. However, you do have some control over what happens with your premiums. It may be time to step back and take a fresh look at your car insurance.

How do I evaluate my situation?

A good first step is to gather your insurance records and any other car-related information. Next, determine if circumstances have changed since you last dealt with your coverage. Consider your cars or trucks, how they're now used, who are the drivers and your driving experience. Once this information is handy it's time to call your agent. What should you discuss? Well, here are some areas to consider:

If you have your home and auto insurance with the same company, are you getting a discount?

Does my coverage take full advantage of the discounts offered by my company?

I have more than one car; am I getting a credit?

How much premium can I save by changing deductibles? Determine the dollar amount of any loss that you can comfortably handle as an out-of-pocket expense.

Do my cars really need full coverage insurance? On an older car (over six years old) you may want to drop collision and/or comprehensive coverage and carry liability coverage only. Ask your agent what makes sense. IMPORTANT: you must maintain these coverages if you're still paying off a loan on your car or truck.

Do lifestyle choices such as drinking or smoking affect my premium?

Does it matter that my daughter made the Dean's List? Don't think this information is bragging since your company may give discounts to young drivers with good grades.

Did you know that my car has anti-lock brakes; airbag; theft alarm system? (Some companies provide discounts for safety and anti-theft features)

Did you know that my son took Driver's Education?

Does the company have accurate information on how often and how far I drive?

Am I with a standard carrier or do I qualify for any preferred program?

Is my vehicle charged an additional premium because of its type or performance?

Do I get a credit for my driving/claims history or for how long I've been covered? If applicable, find out if your company rewards a loss-free history or longevity.

Communicating with your agent
The best way to discuss your insurance needs is to be open and honest with your agent. Giving your agent accurate information puts him in the best position to make certain that you get the best available premium. Carefully answer your agent's questions and provide complete details about any tickets, accidents, or violations in your driving history. This approach also applies to information about who drives your cars and how the cars are used. Finally, your agent is a terrific resource for handling errors about your account or which may be shown in your driver records. . . so use their expertise.

What is the best way to keep my new driver safe and still affordable?

The insurance impact of young drivers

Adding a new young driver to your auto policy can more than double the cost of your insurance. The actual impact on your insurance varies according to your state's regulations. Insurance premiums for new drivers may be based on driving experience, age or even gender. Young drivers add another peril since some states permit policy cancellations after such operators suffer a single accident or violation. So let's focus on ways to control a young driver's impact on your insurance premium and your peace of mind.

Reducing your insurance premiums

Have your child complete a driver training class. Classes can be expensive, but you save on premiums and develop a more competent young driver.

Seek premium discounts given by many insurers to students who maintain above-average grades.

Find an insurance company that charges premiums based on the car your new driver operates most of the time. (Many companies automatically assign young drivers to the most expensive vehicle.)

Does your child have to drive to school? If so, expect your company to charge a higher premium for the increased amount of driving.

Build a long-term relationship with your insurer. Some companies reward longevity by forgiving a driver's first accident or minor traffic violation.

Help your son or daughter understand that poor driving habits can result in higher
premiums or a canceled policy. Do everything you can to avoid the prohibitive expense (and often limited coverage) of substandard automobile insurance.

Increase your policy deductibles or, for older vehicles, consider eliminating this coverage.

If your child owns a vehicle, he or she should have a separate policy. However, if you share the cost of the car and its insurance, it may make sense to also own or co-own the vehicle. Your ownership interest lets you take advantage of a multiple-car discount.

Think carefully about giving a young driver his or her own car. Coverage for young drivers who have full-time access to a vehicle is very expensive. Make sure you balance convenience against cost.

Keeping your young driver safer

Consider preparing your child with a course in defensive driving as a tool for avoiding accidents and ask your insurer if it gives a premium credit for such classes.

Require your young driver to understand, sign and comply with the Youthful Operator Driver Safety Agreement.

Be a proper model by using seat belts and never using alcohol or drugs.

Provide your child with a well-maintained vehicle, equipped with safety devices such as air bags and anti-lock brakes. Also, avoid vehicles that are prone to being highly damaged in collisions or are vulnerable to "rolling over."

Control your child's driving privileges...don't hesitate to curtail or revoke them in response to poor behavior.

Set high driving standards and test your young driver. YOU must be certain that he or she can properly pass vehicles, maintain a correct distance, park, merge and exit, change lanes make turns, obey speed limits and be aware of pedestrians. YOU must be responsible for knowing if your child understands traffic laws and has a healthy respect for the power of the automobile. Don't let your child become licensed until he or she passes YOUR driving test. Don't forget to also test your child's ability to drive under adverse conditions (dark, fog, rain, ice, snow, rush-hour traffic, etc.).

Don't Trade Protection To Save A Few Dollars.

You must not let the pursuit of lower premiums replace the need for proper protection. It's important that your young driver is protected from the financial consequences of causing a serious accident. Further, you may need to protect yourself since you could also be sued for an accident caused by your son or daughter. You might consider getting higher limits of liability by purchasing an umbrella policy.

The best advice is to talk to an insurance expert about a strategy to keep your new driver safer and to maintain affordable coverage.

Am I covered while driving somebody else's car?

In most cases, the other person's liability coverage would provide the primary coverage for both you and your car, but your personal auto policy would provide liability coverage if costs exceeded the limits of the first policy.

What is a deductible?

Regarding damage to your own auto, collision, and comprehensive coverage may each include a deductible. A deductible is basically a risk that is self-insured. It's an amount of money that you are required to pay before your insurance kicks in. Deductibles can come in any dollar amount, but are generally $100, $250, $500, or $1000.

What is a premium?

A premium is money that you pay for insurance coverage.

What is Artisan use?

Artisan use refers to someone such as a carpenter or landscaper who travels to different locations periodically as part of their business. Tools, ladders, and other equipment, however, are not covered in this insurance.

What is business use?

Business use means that the vehicle is used for work-related purposes but is not owned by the business. Examples include when a doctor makes an emergency call or an attorney visits a client outside of the office.

COPYRIGHT: Insurance Publishing Plus, Inc. 1996, 1998, 1999 All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

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