Automobile Insurance
Course Section
Do you own a car or other vehicle? Here are some basic insurance issues to consider.
What goes into the cost?
Auto insurance costs are based on many factors, such as:
- your age
- where you live (are there lots of cars on the road? Is the accident rate high in your area?)
- the number of miles you drive/commute each a year
- the type of car
- the age of the car
- your recent driving record (accidents and traffic tickets)
- your credit history
- other drivers on the policy, and their age, driving record, etc.
Cost isn't everything.
Don't simply settle for the lowest cost insurance. While cost is critical,
the cheapest coverage may not provide the proper coverage for you and your car.
Do a little research on the Internet regarding the company's financial
soundness and its reputation for paying claims (see the "Take Action"
section below for how to do this research).
Keep your credit score up.
Insurance companies may use your credit score in determining the risk you pose
as an insured motorist. This will affect the premium you pay. In other words, a
poor credit score could force you to pay more for your auto policy. So, it pays
to borrow wisely and consistently repay your debts on time.
What do policies generally cover?
Policies generally provide coverage for the following:
Liability. Most states require you to carry liability insurance that pays for property damage or physical injury to others if it's caused by you. Consider carrying enough liability insurance to safeguard your possessions from a huge lawsuit.
Collision. This covers repair costs for your vehicle after an accident when you are at fault. To lower your insurance premium, you may choose a higher deductible as a trade-off. In fact, the difference in premiums between a $500 and a $1,000 deductible policy could be substantial and well worth the $500 out-of-pocket difference.
Comprehensive. This covers most everything else that causes damage to your car, other than accidents and excluded events. Examples include damage from theft, fire, vandalism, flooding, and hail.
Uninsured and Underinsured Motorist Coverage. Uninsured motorist coverage pays expenses when the other party in your accident has no insurance or leaves the scene of the accident.
Medical or Personal Injury Protection. This covers medical expenses, no matter who's at fault. It also covers non-family members who are driving your car, and some other expenses. Personal injury protection extends medical coverage beyond medical payments, and may even cover lost wages, childcare, and other important expenses.
Take Action
- Find out the minimum auto coverage requirements for your state at www.edmunds.com/advice/insurance/articles/43773/article.html.
- Get a free report of your car accident record. The C.L.U.E. ®Auto report gives your five-year history of automobile insurance losses. Go to www.choicetrust.com.
- Look for an insurer in your state for any type of insurance, using an online service from the Insurance Information Institute. See the box titled "Individuals" at www.iii.org. (Note, the box rotates three different content messages, so wait for the one you want to appear, then click.)
- Be sure that the insurance company offering the policy will be financially
sound when, or if, it comes time to pay your claim. Use these services:
A.M. Best
908-439-2200
www.ambest.comMoody's Investors Services
212-553-0300
www.moodys.comStandard & Poor's Insurance Ratings Service
212-438-2000
www.standardandpoor.com
Additional Resources
For state insurance information, check www.naic.org/state_web_map.htm.
