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Auto Insurance
What is auto insurance? PDF Print E-mail
Auto insurance protects you against financial loss if you have an accident or your car is stolen. It is a contract between you and the insurance company. By agreeing to pay the premium, the insurance company agrees to pay your losses as defined by your policy.

Auto insurance usually provides property damage, liability coverage and medical coverage:
  • Property damage coverage pays for damage to or the theft of your car.
  • Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
  • Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
An auto insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages, and if you're financing a car, your lender may also requirement a certain level of coverage.

Most auto policies are for six months to a year. Your insurance company should notify you by mail when it's time to renew the policy and to pay your premium.

 
What is included in a basic auto policy? PDF Print E-mail

Your auto policy may include up to six different types of coverage, with each coverage priced separately.

  1. Bodily Injury Liability
    This coverage applies to injuries you, the designated driver or policyholder cause to someone else. You and family members listed on the policy are also covered when driving someone else's car with their permission. It's very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.
  2. Medical Payments or Personal Injury Protection (PIP)
    This coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.
  3. Property Damage Liability
    This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property. Usually, this means damage to someone else's car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hit.
  4. Collision
    This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000-the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver's insurance company. If they are successful, you'll also be reimbursed for the deductible
  5. Comprehensive
    This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer.
    • Comprehensive insurance is usually sold with a $100 to $300 deductible, though you may want to opt for a higher deductible as a way of lowering your premium.
    • Comprehensive insurance will also reimburse you if your windshield is cracked or shattered.
    • Some companies offer glass coverage with or without a deductible.States do not require that you purchase collision or comprehensive coverage, but if you have a car loan, your lender may insist you carry it until your loan is paid off
  6. Uninsured and Underinsured Motorist Coverage
    This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver.
 
Is it legal to drive without insurance? PDF Print E-mail

NO it's NOT LEGAL! In almost every state the state requires you to have auto liability insurance, and all states have financial responsibility laws. What all this means is that even in a state that does not mandate liability insurance, you need to have sufficient assets to pay claims if you are responsible for an accident. If you don't have enough assets, you must purchase at least the state minimum amount of insurance. Insurance exists to protect your assets. Trying to see how little you can get by with can be very shortsighted and dangerous.

If you've financed your car, your lender may require comprehensive and collision insurance as part of the loan agreement.

 
Do I need insurance if I lease a car? PDF Print E-mail

If you lease a car, you still need to buy your own auto insurance policy. The auto dealer or bank that is financing the car will require you to buy collision and comprehensive coverage. These coverages need to be purchased in addition to any other coverage that may be mandatory in your state, such as auto liability insurance.

If you've financed your car, your lender may require comprehensive and collision insurance as part of the loan agreement.

  • Collision covers the damage to the car from an accident with another automobile or object.
  • Comprehensive covers a loss that is caused by something other than a collision with another car or object, such as a fire or theft or collision with a deer.

On a leased car, the cost of gap insurance is generally rolled into the lease payments. You don't actually buy a gap policy. Generally, the auto dealer buys a master policy from an insurance company to cover all the cars it leases and charges you for a "gap waiver." What this means to you is that if your leased car is totaled, you won't have to pay the dealer the gap amount. Check with the auto dealer about the coverage included when leasing your car.

If you have an auto loan rather than a lease, you may want to buy gap insurance to protect yourself from having to come up with the gap amount if your car is totaled before you've finished paying for it. Ask your insurance agent about gap insurance or search the Internet. Gap insurance may not be available in some states.

 
Do I need auto insurance to rent a car? PDF Print E-mail

When renting a car, you need insurance. If you have adequate insurance on your own car, including collision and comprehensive, this may be enough.

Before you rent a car:

  1. Contact your insurance company.
    Find out how much coverage you have on your own car. In most cases, the coverage and deductibles you have on your personal auto policy would apply to a rental car, providing it's used for pleasure and not business. If you don't have comprehensive and collision coverage on your own car, you will not be covered if your rental car is stolen or if it is damaged in an accident.
  2. Call your credit card company.
    Find out what insurance your card provides. Levels of coverage vary.

If you don't have auto insurance, you will need to buy coverage at the car rental counter. The following coverages are available to you at the rental car counter:

  • Collision Damage Waiver (CDW).
    Sometimes called a Loss Damage Waiver (LDW), this coverage relieves you of financial responsibility if your rental car is damaged or stolen. The CDW may be void, however, if you cause an accident by speeding, driving on unpaved roads or driving while intoxicated. This coverage generally costs between $9 and $19 a day. If you have comprehensive and collision on your own car, you may not need to purchase this coverage.
  • Liability Insurance.
    This provides excess liability coverage of up to $1 million for the time you rent a car. Rental companies are required by law to provide the minimum level of liability insurance required by your state. Generally, this does not offer enough protection in a serious accident. If you have adequate liability coverage on your car or an umbrella policy on your home/auto, you may consider forgoing this additional insurance. It generally costs about $7 to $9 a day. If you don't own a car, and rent cars often, consider purchasing a non-owner liability policy. This costs approximately $200 - $300 per year. Frequent car renters sometimes find this more cost-effective than constantly paying for the extra liability coverage.
  • Personal Accident Insurance.
    This provides coverage to you and your passengers for medical/ambulance bills. This type of insurance, usually costs about $3 per day, but may be unnecessary if you are covered by health insurance or have adequate medical coverage under your auto policy.
  • Personal Effects Coverage.
    This provides coverage for the theft of personal items in your car. However, if you have homeowners or renters insurance, you may be covered for items stolen from the car, minus your deductible. You need to have receipts or other proof of ownership. This type of insurance usually costs about $1.25 per day. Some rental car companies combine personal accident and personal effects coverage together as one type of insurance, while others sell it individually.

The cost of insurance at the rental car counter will vary depending on the rental car company, state, and location of the dealer and the type of car you rent.

Some rental car companies may check your credit and driving history and may deny coverage. Check with the rental car company to find out its policy.

 
What's the difference between non-renewal and cancellation? PDF Print E-mail
When an insurance company cancels a policy versus when it chooses not to renew it is a big difference. Insurance companies cannot cancel a policy that has been in force for more than 60 days except:
  • If you fail to pay the premium.
  • You have committed fraud or made serious misrepresentations on your application.
  • Your driver's license has been revoked or suspended.
Non-renewal is different. Either you or your insurance company can decide not to renew the policy when it expires. Depending on the state you live in, your insurance company must give you a certain number of days notice and explain the reason for non-renewal before it drops your policy. If you think the reason is unfair or want a further explanation, call the insurance company's consumer affairs division. If you don't get an explanation, call your state insurance department.
 


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