Let’s face it, every time we get an insurance premium bill in the mail we think to our selves, “Do I really need this? Am I just wasting money every month?” Think again!
Insurance, whether it’s home, health, auto, or life, is essential to secure peace of mind and a secure financial future. The Insurance Information Institute provides a wide array of tips and tools so you know exactly what kind of coverage you should be looking for.
In talking about insurance let’s begin with one of the most common types. Auto insurance.
Auto Insurance: It Can Prevent Financial Ruin
Accidents happen. In cars, they happen nearly 100,000 times a day, and insurance can be the only thing standing between you and financial catastrophe. If you drive, don’t question it, just get it. And don’t think you are covered under someone else’s policy.
Getting A Good Deal On Auto Insurance
Auto-insurance premiums have long since reached big-ticket status, so it pays to look for opportunities that will keep your costs down without sacrificing protection. iGrad recommends you look at 21st Century Auto Insurance. Through iGrad, 21st Century Auto Insurance provides a free quote. As one of the largest auto insurers in America, we think they’ll give you a great deal for your situation. However you should take a look at all your options. Here are some things you can do:
- Compare Premiums.
Survey after survey confirms that auto-insurance companies often charge greatly different premiums for the same coverage. In New York, Pennsylvania and elsewhere, premiums have been shown to vary sometimes by more than 100%. Rates may not vary as wildly in your area, but the odds are you will discover substantial differences if you take the time to get premium quotes from a number of companies. Begin with a market leader, such as Geico, 21st Century Auto Insurance, Farmers or Allstate. Then use that quote as a measure against to judge identical coverage at other companies.
Many state insurance offices distribute auto insurance pricing guides, but the categories they use may not match yours. Your best bet is to use such a guide to identify your state’s most cost effective insurers. Then get price quotes from a handful and you’ll have a truly comparative guide.
- Drive Carefully
Discounts are common for safe-driving records: Some companies give 5% off for drivers with three years of a clear record, raising the discount to 10% for drivers with six or more accident and violation-free years.
Depending on which company insures you and where you live, you may even get a discount if you’re a nonsmoker, a woman who is a household’s only driver, a senior citizen, or a member of a certain profession (such as law or medicine) that is statistically less accident-prone. All ten of the leading insurers polled by the Insurance Information Institute offered a 15% to 20% discount to commuters sharing driving responsibilities in car pools, meaning they don’t drive their cars to work every day.
When comparing policies, consider discounts but don’t fixate on them. A discount may very well be offset by a higher premium to begin with.
- Your Car Is Rated – Check it Out
Insurers charge more for cars with high claims rates, no matter how good the driving record of the owner. Some charge less for collision and comprehensive coverage on models that score well for safety and durability, but add surcharges for others. A surcharge or a discount isn’t a judgment of a car’s quality. The rate variations reflect repair costs, accident frequency, theft losses and other factors.
Before you buy your next car, it might pay to check on such differentials. The Insurance Services Office provides a rating service used by hundreds of insurance companies, and your agent should be able to tell you the new car’s rating.
- Raise Your Deductible
It might make sense to choose the highest deductible you can afford to pay without seriously disrupting your finances. The idea is to pay for affordable damage yourself and let insurance kick in for bigger losses.
Whatever your situation, you can save something by accepting a larger deductible and thus transferring part of the risk from the company to yourself. It’s not an ideal solution, but it’s one of the few cost-cutting opportunities that are readily available. By raising your collision deductible from $250 or $500 to $1,000, for instance, you might be able to lower your annual premium.
- Reduce Coverage On Older Cars
You could consider dropping comprehensive and collision coverage on an old car to reduce your insurance costs fast. That would expose you to additional risk, but remember that the insurance company won’t pay more to fix a car than it’s worth. Each year’s depreciation therefore diminishes the maximum claim you can make against your collision coverage. If your car is five or more years old, depending on its value, you may be better off dropping both collision and comprehensive coverage and banking the savings. Estimate your car’s value by studying the classified ads or by consulting used-car price guides, and consider how much protection you’re really buying for your collision and comprehensive premium.
- One-Stop Shopping Can Help You Save
You will most likely get a break for the second and successive cars covered by the same policy, so it’s usually more economical to put all your cars on one policy. Similarly, consider using the same company for other policies. Some insurers offer discounts of up to 10% if you cover both your car and your home with them.
The Lingo Of Auto Insurance
Following are explanations of the major parts of a typical policy, starting with perhaps the most important component:
- Liability Coverage
In case you’re at fault. Liability coverage protects you if you (or another person driving your car with your permission) injure or kill someone or damage property. Assume an accident for which you are clearly responsible: You run a red light, strike another car and injure the driver. Your liability coverage obliges the company to defend you — in court, if necessary — and pay claims to the other driver for vehicle damage and bodily injuries, including medical and hospital costs, rehabilitation, nursing care, and possibly lost income and money for pain and suffering. (The liability section of your policy does not compensate you for damage to your own car or any injuries to you. They are covered by other parts of the policy.)
Now assume that you’re involved in a collision at an intersection with no witnesses or evidence to pin the blame on either driver. Again, under your liability coverage, your insurer agrees to defend you against most proceedings the other driver may take against you. The company limits its liability payments to the policy limits, or the amount of coverage you select. You can be held personally accountable for any excess. Liability coverage is mandatory in nearly all states (the others have financial-responsibility laws that can be met by purchasing this coverage). But state requirements are modest — typically $20,000 to $30,000 for bodily injury suffered by one person in an accident, $50,000 for all people hurt in the same accident, and up to $25,000 for property damage resulting from that accident.
How much liability coverage you need? You should carry as much liability coverage as you can comfortably afford because damage claims today are sometimes settled for millions.
State minimums don’t come close to covering the cost of a serious accident. You should carry bodily-injury coverage of at least $100,000 per person, and $300,000 per accident, and property damage coverage of $50,000, or a minimum of $300,000 on a single-limit policy. Raising your limits isn’t expensive: $300,000 in coverage costs 20% more than $100,000, on average. The more coverage you buy, the less you have to pay per $1,000 of coverage. Ask your agent for precise figures. You may even want to investigate raising your liability coverage further through an umbrella policy.
Liability insurance is your main financial defense against catastrophic damage you might cause to others or their property. But it’s not always clear who’s to blame for an accident, and proving fault, when it is possible, can entail delays and expensive legal action. Meanwhile, the victims may not get paid.
- No-Fault Insurance
Enter no-fault insurance, an attempt to take the fault out of liability. The idea is to have accident victims’ medical expenses paid by their own insurance companies, regardless of who is to blame for the accident, thereby eliminating the costs and delays of legal actions. No states currently function under a pure no-fault system. Instead, 13 “no-fault” states have adopted a modified no-fault system. Some of those states have adopted “add-on” plans that increase the benefits you can obtain from your own insurance company but do not restrict your right to pursue a liability claim. No-fault laws vary greatly, but they do tend to have some elements in common. Your insurance company pays you and others covered by your policy for medical bills, lost wages, the cost of hiring people to do household tasks you are unable to perform as a result of injuries, and funeral expenses up to specified limits. No-fault plans don’t pay for property damage. This is covered by other parts of the policy. No-fault plans don’t pay for pain and suffering. For that you have to be able to sue someone.
- Collision Coverage
Collision insurance pays for damage to your car, not the other guy’s, and it’s optional. After all, you can sue someone you think is to blame for damages to your car. So why buy collision insurance, unless you have to (for instance, if you are financing a car)? Here’s a number of reasons why:
- You may be the world’s most careful driver, but it is still possible that you will cause an accident or be held responsible for one. In that case you can’t collect for damage to your car from the other driver. Collision coverage will pay for the damage, even if an accident is your fault.
- You may think an accident is the other driver’s fault, but he may disagree, casting you both into lengthy legal proceedings. With collision coverage, your company can repair the car and take over your claim against the other driver (a procedure known as subrogation). Your company is ethically, but not legally, bound to fight for enough money to pay you back part or all of the deductible.
- You could get into an accident in which the other driver is clearly at fault but has no liability insurance. Suing could be pointless. As you will see later, the auto policy’s uninsured (or underinsured) motorist coverage does not necessarily pay for damage to your car in this situation. Collision does.
- Suppose you smash your car into a tree or a telephone pole. There’s no one to sue. Collision will pay for the damage to your car.
The amount of collision coverage your policy provides, and its cost, will depend on your car and its value. Premiums are much higher for vehicles that are expensive, accident-prone, easily damaged, frequently stolen or hard to repair. Those that score well for safety and durability often cost much less to insure. You should be aware of one special restriction: The insurance company is obligated to pay only up to the car’s cash value. That means the market value of the car before the accident, minus the salvage value of the damaged vehicle.
- Medical Payments Coverage
If you have coverage for medical payments on your car policy, you and your family members are entitled to reimbursement of medical costs resulting from auto accidents while in your car or someone else’s car, or if you’re injured by a car while walking or bicycling, regardless of who is at fault. Medical-payments coverage is typically $1,000 to $10,000 for each person protected by your policy. It would cost you relatively little to raise the coverage to a higher amount.
Before you consider additional medical coverage, check to see if it would duplicate coverage you already have under other medical policies, especially comprehensive, high-limit health insurance.
- Uninsured Drivers Coverage
Despite laws requiring auto insurance in practically every state, a lot of people are driving without any — or without enough — liability insurance. The uninsured/underinsured motorist section of your policy protects you if you or family members who live with you are hurt by one of those drivers while you’re in your car, walking or, in some policies, bicycling. Your guests also qualify if they are hurt while in your car.
This coverage also applies when you are struck and injured by a hit-and-run driver and, in some cases, by a driver insured by a company that becomes insolvent.
For this coverage to kick in, the other driver has to be declared at fault. This kind of insurance usually covers only costs arising from bodily injuries. In states in which property damages are included, claims may be reduced by a deductible. Generally, companies are obligated to pay claims up to the minimum amount fixed by your state for liability insurance. But often you can purchase higher limits for an additional premium. Most states require insurance companies to offer uninsured or underinsured coverage; some companies combine them. If your company offers them separately, buy both.
Comprehensive Insurance: An Array of Coverage
A combination of liability, collision, medical payments and uninsured/underinsured motorist insurance would seem to take care of all conceivable risks. Yet none of that insurance would necessarily cover losses to your vehicle from hazards such as: theft of the car or some of its contents, collision with an animal, glass breakage, falling objects, fire, explosion, earthquake, windstorm, hail, water, flood, malicious mischief, vandalism or riots. Comprehensive insurance, which is optional, will cover those losses, usually up to the car’s cash value and sometimes subject to a deductible. In some areas, if you keep your car in a garage or off-street parking area or if the car has a good anti-theft device you can get a reduction in your comprehensive-coverage premium.
Got a horror story about your auto insurance? What has happened to you when you you’ve gotten into an accident? Tell us about it!