Consumer's Guide to Purchasing Auto
Insurance
Welcome to the Auto Insurance
Compendium's Guide to auto
insurance. You'll find a step by
step walkthrough of everything you
need to purchase auto insurance on
this page.
Introduction
Auto insurance is one of those necessities that we all must
contend with in our
lives when we choose to
own and drive a vehicle.
There are a number of
different options
available in auto
insurance coverage and
depending on your
situation there may also
be a myriad of different
factors that will affect
the amount and type of
insurance you purchase
as well as the price you
ultimately pay for that
insurance.
So, what is auto insurance? Simply put, it’s a legal contract
between you and your
insurance agent that is
in place to assist you
in paying for financial
obligations or losses
that may occur during
the use or ownership of
a vehicle. You pay a
specified amount of
money in exchange for
the assurance that the
insurance agent will in
turn pay up to a
specified amount, under
specified conditions.
Almost all States require that vehicle owners obtain a minimum
of auto insurance;
usually referred to as
liability insurance. The
consequences for failing
to adhere to this
regulation can result in
substantial fines and
the revocation of your
driver license.
Types of Insurance
Coverage
Liability
This is the most basic auto insurance coverage and it is in
fact; required by most
States. Each state
requires their own
minimum amount of
liability coverage. A
listing for each state
is provided below. In
essence, liability
insurance is intended to
only pay for damage or
injury that is for
others in the event that
you cause an accident.
In the event that you
are sued because of such
an accident, it will
also cover your legal
fees. Keep in mind that
liability insurance does
not cover your medical
costs; only the cost of
the other party in the
even that you are
liable. In order for
your medical costs to be
covered you will need
medical payment
insurance.
Each state’s minimum coverage listing:
• Alabama 20/40/10
• Alaska
50/100/25
(Alaska’s requirements
are the highest in the
nation)
• Arizona 15/30/10
• Arkansas 25/50/15
• California 15/30/5
• Colorado 25/50/15
• Connecticut 20/40/10
• Delaware 15/30/10
• D.C. 25/50/10
• Florida 10/20/10
• Georgia 22/50/25
• Hawaii 15/35/10
• Idaho 25/50/15
• Illinois 20/40/15
• Indiana 25/50/10
• Iowa 20/40/15
• Kansas 25/50/10
• Kentucky 25/50/10
• Louisiana 10/20/10
• Maine 20/40/10
• Maryland 20/40/10
• Massachusetts 20/40/8
• Michigan 20/40/10
• Minnesota 30/60/10
• Mississippi 10/20/5
• Missouri 25/50/10
• Montana 25/50/10
• Nebraska 25/50/25
• Nevada 15/30/10
• New Hampshire 25/50/25
• New Jersey 15/30/5
• New Mexico 25/50/10
• New York 25/50/10
• North Carolina 30/60/25
• North Dakota 25/50/25
• Ohio 12.5/25/7.5
• Oklahoma 10/20/10
• Oregon 25/50/10
• Pennsylvania 15/30/5
• Rhode Island 25/50/25
• South Carolina 15/30/5
• South Dakota 25/50/25
• Tennessee 20/50/10
• Texas 20/40/15
• Utah 25/50/10
• Vermont 20/40/10
• Virginia 25/50/20
• Washington 25/50/10
• West Virginia 20/40/10
• Wisconsin 25/50/10
• Wyoming 25/50/10
Understanding Auto
Insurance Numbers
The formulas used to describe minimum amounts of insurance
required can be
confusing. They are
usually described in a
set of three numbers
referred to as split
limits. For example; a
common minimum required
by many states is
25/50/10. In this
example 25 refers to
$25,000 in liability for
bodily injury insurance
per person.
This is the maximum amount of money that the insurance
provider will pay out to
someone if they or a
family member or injured
in an accident that was
your fault. In
situations where the
amount that you are
liable for is less than
$25,000; the insurance
company will pay for the
entire amount. If the
amount for medical
bills, lost wages and
pain and suffering
should exceed $25,000;
you will need to cover
the difference.
In the same example 40 refers to liability for bodily injury
insurance per accident.
This is the maximum
amount of money the
insurance company will
pay if individuals are
injured in an accident
you cause. In other
words, a total of
$40,000 would be paid in
medical bills for the
entire accident;
regardless of how many
people are involved. If
the total amount of
money for medical bills,
lost wages and pain and
suffering for the entire
accident exceeds
$40,000; you will need
to be responsible for
the remainder.
Finally, in this example 10 refers to liability for property
damage insurance per
accident. This is the
maximum amount of money
that the insurance
company will pay out to
other people in order
for them to repair or
replace their vehicle
and any other damaged
property; in the event
that you caused the
accident and the
damage. As with the
other examples, if the
cost to repair or
replace the vehicle and
other property is less
than $10,000; the
insurance company will
pay the entire cost. If
it exceeds $10,000;
however you will be
responsible for the
remainder of the cost.
Above and beyond liability insurance coverage, there are also
numerous other options
which you may elect to
purchase. While many
states only require that
motorists carry minimum
liability coverage; it
can be a good idea to
consider other types of
coverage because
liability does not cover
all situations.
Additional types of
coverage and additional
amounts of coverage can
help to protect you if
you are sued or in the
event that repair costs
exceed the minimum
amounts required.
Collision &
Comprehensive
This is a step up from liability insurance; this type of
insurance can help you
get back on the road in
the event that your car
is damaged.
Collision
Collision insurance will pay for damages caused to your
vehicle in the event of
an accident regardless
of whether you actually
collide with another
vehicle or simply have a
rollover. Payment will
be made no matter
whether it is you or the
other driver who is at
fault.
Comprehensive
Comprehensive coverage pays for damages caused to your vehicle
in the event of
something other than a
collision such as fire,
theft, vandalism, flood
or hail.
You should be aware that Collision & Comprehensive insurance
will only pay for the
actual value of the car
at the time of the
accident; it won’t pay
for the replacement of a
brand new car so you may
still be out some money;
but it can help you to
make a down payment on
another vehicle. The
amount of money that you
receive will depend on a
variety of factors such
as depreciation of the
vehicle.
You have different options in deductibles with Collision &
Comprehensive; usually
either $500 or $1000. A
$1000 deductible will
usually lower your
premium somewhat. You
should also be aware
that this type of
insurance, while not
required by State law,
is generally required by
the lender when you
finance your vehicle.
Medical
Medical insurance coverage can help to cover the medical costs
associated with
treatment and recover
from an automobile
accident. Medical
coverage will apply
regardless of whether it
was your fault or the
fault of the other
driver. This type of
insurance will pay for
you as well as
passengers who are in
your vehicle at the time
of an accident. In the
event that you drive
someone else’s car (with
their permission) or in
the event that you are
hit by someone else’s
vehicle when you are a
pedestrian; you will
also be covered by this
type of insurance. You
can normally obtain
Medical Payments
insurance ranging with
limits between $1,000 to
$100,000.
Personal Injury Protection
This type of insurance coverage is commonly referred to as PIP
or expanded medical
coverage. Some states
require PIP, while
others do not. One of
the features available
with some PIP coverage
is compensation for lost
wages. PIP will also pay
for medical costs for
other passengers in your
vehicle at the time of
the accident and even
unrelated drivers of
your vehicle at the time
of the accident, as long
as they had your
permission to drive your
vehicle. Funeral
expenses may also be
covered.
States Where PIP is Required
Colorado
Delaware
Florida
Hawaii
Kansas
Kentucky
Maryland
Massachusetts
Michigan
Minnesota
New Jersey
New York
North Dakota
Oregon
Utah
Uninsured/Underinsured Coverage
This type of coverage is intended for those situations when
either the other drive
has no insurance, their
insurance is not
sufficient or in the
case of hit and run
accidents. This type of
insurance covers medical
expenses, lost wages and
other injury-related
losses. In some cases,
you may also be able to
collect additional funds
for pain and suffering.
This type of coverage is
now becoming mandatory
in some states.
States Where
Uninsured/Underinsured
Motorist Coverage is
Required:
CT
DC
IL
KS
ME
MD
MA
MN
MO
NH
NJ
NY
ND
OR
RI
SC
SD
VT
VA
WV
WI
No Fault
This type of insurance pays for injuries or damages that are
incurred by either you or
another individual in the
event of an accident;
regardless of who is at
fault. This insurance will
pay for medical expenses.
Add-on Features
In addition to the types of coverage mentioned above, you can
also add on features to your
auto insurance policy. While
not mandatory, these types
of features can make life a
lot easier under certain
circumstances. Of course;
they can also add to the
total cost of your auto
insurance premium.
Rental reimbursement is a common add-on which covers vehicle rentals
required in the event that
your car is damaged or
stolen.
Towing is another common add-on which can cover the cost for towing
and labor if you should have
a road breakdown.
Auto replacement coverage
is an add-on which can
guarantee your car will be
completely repaired or
replaced even if the costs
exceed the depreciated
value.
Tips for Auto Insurance
Shopping
With the wide variety of auto insurance coverage available as
well as the large number of
carriers offering policies
at competing rates it’s a
good idea to shop around for
auto insurance quotes before
you make a firm commitment
to one company. Today,
shopping around for auto
insurance is easier than
ever. Most companies have
websites that can give you a
quick estimate. There are a
few tips to keep in mind
when you are shopping
around; however, to insure
that you obtain insurance to
meet all your needs.
First, determine how much insurance you are required to have
by your State’s regulations.
This is the absolute minimum
amount of insurance that you
will need to purchase.
Second, decide whether you want or need any additional
insurance coverage beyond
the minimum. Remember that
you vehicle is new and is
financed through a lender
you will probably be
required to carry
comprehensive and collision.
If your vehicle is older you
may want to consider whether
you want or need to carry
this additional coverage.
Also consider how much you can afford to pay. As you
comparison shop, you will
find that different
companies’ rates tend to
vary quite a bit. This can
be due to a number of
reasons including
deductibles and optional
coverages.
Don’t allow yourself to sign with a company simply based on a
low price. Be sure to check
out the company’s reputation
for customer service. A low
price isn’t always a great
deal if it turns out the
insurance company is
difficult to deal with when
you need to file a claim.
Before you begin shopping around for an insurance company,
take the time to do your
research by checking out
Consumer Reports. Begin your
search with at least three
different auto insurance
providers.
As you shop for auto insurance, you may find it helpful to use
a comparison chart such as
the one below to help you
stay on track when comparing
the rates offered by each
company.
Types of Coverage Desired Coverage
Deductible
Premium Cost
#1_________ #2___________
#3_________
Bodily Injury
$_____________
$_________
$____________ $__________
Liability
$_____________
$_________
$_____________ $_________
Property Damage
$_____________
$_________
$_____________ $_________
Medical Payments $_____________
$_________
$_____________ $_________
And/Or PIP
Collision $_____________
$__________
$_________
$_____________ $_________
Comprehensive $_____________
$__________
$_________
$_____________ $_________
Uninsured/Underinsured $_____________
$__________
$_____________ $_________
Factors that Affect your
Premium
Auto insurance premiums can be volatile; shifting and changing
depending on a myriad of
circumstances and
situations.
Age can affect your auto insurance rates. Males who are under
the age of 25 typically are
charged higher rates as are
women who are under the age
of 21. Drivers who are over
the age of 50, conversely,
may be charged lower rates
or receive discounts.
Marital status can also affect your auto insurance rates. For
example, unmarried women
under the age of 21 may be
charged higher rates.
Where you live can also affect your rates. Individuals who
live in urban areas are
frequently charged higher
rates because statistics
have shown that more
accidents occur in urban
areas than in rural areas.
Your driving record can also have a big impact on your auto
insurance rates as well as
your claims history. If you
have major driving offenses,
accidents or a number of
claims on your record you
may be hit with surcharges.
In some cases, it may also
become more difficult for
you to obtain auto
insurance.
The type of car you drive will impact your auto insurance
rates as well. Luxury, high
performance and sports cars
are usually charged at
higher rates than other
vehicles. You can expect
vehicles that tend to be
damaged easily, are
difficult to repair or are
at the top of the most often
stolen list to also be hit
with higher rates.
How you use your car will also have an effect on your
insurance rates. Individuals
who drive their car to and
from work or who use their
car for business are usually
charged higher rates.
Some states also charge higher rates if you have driven
uninsured for a specified
length of time.
Finally, your credit score can impact your auto insurance
rates. A company cannot
refuse to sell you a policy
based solely on your credit
score, however; they may
charge you a higher rate.
Ways You Can Lower your Auto
Insurance Premiums
Besides maintaining a good driving record and credit score,
there are many other ways
that you can possibly lower
your insurance premiums.
Defensive driving can take as much as 10% off of your premium
for liability, collision,
medical payments and PIP.
Driver education courses can be a great way to reduce 10% of
an auto insurance premium
for young drivers.
If your vehicle is equipped with airbags and other passive
restraints you may be able
to save as much as 15% on
medical payments and drivers
side PIP.
You can also get a discount on your auto insurance premiums
with some companies when you
have two or more vehicles on
the same policy. This can
add up to 20% off liability,
medical payments and PIP as
well as 15% off collision.
There is no doubt about it; auto insurance can be expensive
and if you fall into one of
the ‘special’ categories you
can end up paying even more
for auto insurance. That’s
why it’s a good idea to
always inquire about any
applicable discounts. Many
auto insurance carriers
provide discounts for a wide
range of things.
For example, if you have taken a defensive driving course in
the last 12 months, you may
be able to receive a
discount on your annual auto
insurance premium. Some auto
insurance carriers also
issue discounts to teen
drivers who make good
grades, because statistics
have proven these students
tend to be safer drivers. If
you vehicle is equipped with
certain safety devices and
alarms, you may also be
eligible for further
discounts. Different
companies offer different
discounts; but if you are
shopping around for coverage
it’s a good idea to ask each
company about the specifics
regarding any discounts they
may offer.
Always be sure to ask each carrier about the terms of their
policy and details regarding
their payment plans. This
can greatly impact how much
money you pay and how often
you pay it. For example,
some providers offer policy
terms that range anywhere
from annual coverage to
semi-annual; which consists
of six months. It’s also
possible to obtain coverage
on a month to month basis.
When considering installment plans, be sure you consider all
the information. Some
carriers accept annual or
semi-annual premiums; which
means that you make one or
two large payments per year.
Other carriers will offer
the possibility of paying on
an installment plan each
month. The problem with the
latter; however, is that
most carriers tack on a
finance charge which can
escalate the total cost of
the insurance coverage in
the long run.
Some companies also provide discounts for the following:
·
Anti-lock brakes
·
Anti-theft devices
·
Automatic daytime running
lights
·
Students with good grades
·
A family who has a child
away at school without a
vehicle
Understanding Deductibles
and Premiums
All auto insurance policies come with deductibles. A
deductible is the amount of
out of pocket expenses you
must pay up front before the
insurance company will begin
to pay for covered costs.
Most policies have more than
one applicable deductible.
For example, if you carry
liability, collision and
comprehensive as well as
medical payments insurance;
you will typically have a
separate deductible for
collision as well as
comprehensive and medical
payments.
In many cases you may be able to choose your deductible;
however you should do so
wisely because the amount of
your deductible can affect
your premium. Premium is the
amount of money that you pay
for the cost of your auto
insurance policy. You may
pay it monthly, quarterly or
a semi-annual or annual
basis.
You must keep in mind that the deductible is an up front cost.
So, if you are in an
accident and you have a $250
deductible and then discover
that the cost of the repairs
are less than $250; you will
be responsible for the
entire cost of the repairs
and the insurance company
will not pay anything
towards this amount. If the
repairs totaled $1500;
however you would pay the
first $250 and the insurance
company would pay the
remaining $1250.
You must also understand that even if it is determined that
the amount of money to
repair the vehicle would
exceed the value of the
vehicle at the time of the
accident (commonly referred
to as ‘totaled’) then you
will not receive funds from
the insurance company
equivalent to the cost of a
new vehicle. The insurance
company will only pay you
the amount of money
equivalent to the value of
your car at the time of the
accident. You will need to
come up the rest of the
money to purchase a new
vehicle.
Regardless of which type of insurance coverage you decide to
obtain or which company you
think may best suit your
needs, there will be some
basic information you will
need to provide in order to
obtain an insurance quote by
most agents. This
information includes:
·
The names of all drivers as
well as their age, gender
and marital status;
·
Driving records; including
accidents and moving
violations;
·
Annual mileage;
·
Full vehicle identification
number;
·
Year of the vehicle;
·
Cost of the vehicle;
·
Any special equipment on the
vehicle
How to Avoid Auto Insurance
Fraud
Look for a company that can legally do business in your State.
You can do this by checking
with your State’s insurance
board. This can be easily
accomplished by performing a
search on the Internet by
typing in your state’s name
and the term ‘insurance
board.’ All companies who
can legally do business in
that state are registered
with the State insurance
board and will be listed. If
they aren’t listed, save
yourself the hassle and
choose another company.
Checking with your State’s
insurance board is also a
great way to find out about
consumer complaints that may
have been lodged against any
company you are considering
for your auto insurance
needs.
You will also need to look for a company that has a strong
ranking with agencies such
as JD Powers or Standard and
Poors.
Also look for a company that has a long business history. Many
companies pop up overnight
with seemingly great rates
and then disappear just as
quickly, leaving the
consumer holding the bag. As
with any type of legally
binding document, you should
never sign any blank
documents or any documents
that you do not fully
understand. If you do not
receive a satisfactory
explanation, take the
document to an attorney or
someone you know and trust
and have them explain it to
you before you sign on the
dotted line.
Keep records of all conversations you have regarding your auto
insurance purchase and
policy. Be sure to write
down the name of the person
you spoke with as well as
the date of the conversation
and the pertinent details
relating to the
conversation.
Always make sure that you obtain copies of all documents you
sign and that related to
your auto insurance purchase
and policy. Keep these
copies with all your
important records and
documents.
After your auto insurance purchase is complete, take the time
to familiarize yourself with
your policy; reading through
it completely.
Purchasing Auto Insurance
Online
Like most other aspects of our lives, the Internet has made
purchasing auto insurance
much easier than it once
was. Now, all you have to do
is log on to the Information
Super Highway and you can be
on your way to receiving an
insurance quote in less time
than it once took to back
out of your driveway for the
trek down to the local
agent’s office.
While the time savings as well as the monetary savings that
have been inspired by the
spirit of much competition
can be extremely beneficial,
there are a few
disadvantages. It is much
easier to be taken advantage
of when you are shopping for
anything online and auto
insurance is certainly no
exception.
You can reduce your chances of being a victim of auto
insurance fraud online by
taking a few necessary
precautions. For example;
before you provide any
information while shopping
for auto insurance online
first make sure that the
information being collected
is really necessary in order
to provide a car insurance
quote. If you’re skeptical;
simply don’t do it.
Also make sure that only those people directly involved in
processing your information
for the purpose of a quote,
sales, customer service or
claims have access to the
information.
Special Situations
Every situation is unique; but there are some situations where
it may be advisable to
consider whether you really
need all the insurance
coverage options available.
For example, if you vehicle
is worth less than $1000 it
may not be worth it to carry
comprehensive and/or
collision coverage on the
vehicle. To know whether it
is in your best interest to
carry or drop Collision &
Comprehensive; you will need
to know the book value of
your vehicle, your
deductible for each loss,
the cost of the coverage and
the amount you would receive
from your insurance provider
in the event that your
vehicle was ‘totaled.’
In the event that you have good medical insurance; you may not
wish to also carry Medical
Payments insurance unless
you are required to carry it
by your state. You should
carefully review the limits
of your health insurance and
compare it with the limits
offered by auto insurance
providers in order to make
an educated decision.
Classic cars are an altogether different breed when it comes
to auto insurance. Many
owners of classic cars are
actually surprised to
discover that some of the
standard insurance carriers
will not even provide
coverage for their beloved
classic. This is because
most insurance providers
only provide the replacement
value of the vehicle at the
time of an accident,
according to the ‘book’
value. The ‘book’ value of a
vehicle can differ greatly
from the actual
‘collectible’ value of a
vehicle; if it is in fact a
classic. In this type of
situation, you would need to
find an auto insurance
provider that works
specifically with
collectible or classic
vehicles.
When you fall under certain situations, you may find it is
hard to obtain auto
insurance. This can be due
to one of the following
reasons:
·
A new driver
·
Poor driving record
·
Driving a hard to insure
vehicle
Even if you do fall into one of these hard to insure
categories, there are still
ways that you can obtain
auto insurance. One way is
to participate in a state
assigned risk pool. Risk
pools are set up by state
insurance commissions for
individuals who are
considered to be high risk.
Auto insurance companies
agree to insure their share
of the pool according to how
much business they do in
that State. You should be
aware that by participating
in a state assigned risk
pool, you will pay higher
insurance premiums, but this
is better than not being
able to obtain coverage at
all.
Some insurance companies specialize in covering individuals
who are considered to be
‘high-risk.’ Again; you will
most likely be subject to
higher premiums but at least
you’ll have coverage and you
can work on reducing the
factors that caused you to
be considered high-risk and
then obtain insurance at
lower premiums later.
State by State Requirements
AL
Bodily Injury and Property Damage Liability
AK Bodily Injury and Property Damage Liability
AZ Bodily Injury and Property Damage Liability
AR Bodily Injury and Property Damage Liability
CA Bodily Injury and Property Damage Liability
CO Bodily Injury and Property Damage Liability, Personal
Injury Protection
CT Bodily Injury and
Property Damage Liability;
Uninsured and Underinsured
Motorist
DE Bodily Injury and
Property Damage Liability,
Personal Injury Protection
DC Bodily Injury and
Property Damage Liability;
Uninsured Motorist
FL Bodily Injury and
Property Damage Liability,
Personal Injury Protection
GA Bodily Injury and
Property Damage Liability
HI Bodily Injury and
Property Damage Liability;
Personal Injury Protection
ID Bodily Injury and
Property Damage Liability
IL Bodily Injury and
Property Damage Liability;
Uninsured Motorist
IN Bodily Injury and
Property Damage Liability
IA Bodily Injury and
Property Damage Liability
KS Bodily Injury and
Property Damage Liability,
Personal Injury Protection,
Uninsured Motorist
KY Bodily Injury and
Property Damage Liability,
Personal Injury Protection
LA Bodily Injury and
Property Damage Liability
ME Bodily Injury and
Property Damage Liability,
Uninsured Motorist,
Underinsured Motorist
MD Bodily Injury and
Property Damage Liability,
Personal Injury Protection,
Uninsured Motorist
MA Bodily Injury and
Property Damage Liability;
Personal Injury Protection,
Uninsured Motorist
MI Bodily Injury and
Property Damage Liability,
Personal Injury Protection
MN Bodily Injury and
Property Damage Liability,
Personal Injury Protection,
Uninsured and Underinsured
Motorist
MS Bodily Injury and
Property Damage Liability
MO Bodily Injury and
Property Damage Liability,
Uninsured Motorist
MT Bodily Injury and
Property Damage Liability
NE Bodily Injury and
Property Damage Liability
NV Bodily Injury and
Property Damage Liability
NH Financial
Responsibility Only,
Underinsured Motorist
NJ Bodily Injury and
Property Damage Liability,
Personal Injury Protection,
Uninsured Motorist
NY Bodily Injury and
Property Damage Liability,
Personal Injury Protection,
Uninsured Motorist
NC Bodily Injury and
Property Damage Liability
ND Bodily Injury and
Property Damage Liability,
Personal Injury Protection,
Uninsured Motorist
OH Bodily Injury and
Property Damage Liability
OK Bodily Injury and
Property Damage Liability
OR Bodily Injury and
Property Damage Liability,
Personal Injury Protection,
Uninsured Motorist
PA Bodily Injury and
Property Damage Liability,
Medical Payments
RI Bodily Injury and
Property Damage Liability,
Uninsured Motorist
SC Bodily Injury and
Property Damage Liability,
Uninsured Motorist
SD Bodily Injury and
Property Damage Liability,
Uninsured Motorist
TN Financial
Responsibility Only
TX Bodily Injury and
Property Damage Liability
UT Bodily Injury and
Property Damage Liability,
Personal Injury Protection
VT Bodily Injury and
Property Damage Liability,
Uninsured and Underinsured
Motorist
VA Bodily Injury and
Property Damage Liability;
Uninsured Motorist
WA Bodily Injury and
Property Damage Liability
WV Bodily Injury and
Property Damage Liability,
Uninsured Motorist
WI Financial
Responsibility only,
Uninsured Motorist
WY Bodily Injury and
Property Damage Liability
Auto Insurance Terms
Actual Cash Value-Usually
refers to fair market value;
which is the dollar amount
that a buyer is willing to
pay and a seller is willing
to accept.
Additional Equipment
Endorsement-
Coverage for certain parts
and equipment that are not
installed by the
manufacturers. Coverage is
generally subject to a
maximum limit listed on the
endorsement.
Adjuster
– Person who evaluates the
damage caused by an accident
or other covered loss and
determines the amount to be
paid under the policy terms.
Agent
– Licensed individual or
organization authorized to
sell and service insurance
policies for an insurance
company.
Assigned Risk
– Driver who is not
acceptable to a standard
insurance company due to a
poor driving record and who
is assigned to an insurance
company that participates in
the assigned risk pool.
Automobile Insurance
– Type of insurance that
protects against losses
involving automobiles.
Contains a variety of
coverages that can be
purchased depending upon the
needs and wants of the
policyholder. Liability for
bodily injury and property
damage, medical payments,
uninsured motorist,
comprehensive, and collision
are just some of the common
coverages offered under an
auto insurance policy.
Binder
– An agreement, short-term,
that provides temporary
insurance coverage until the
policy can be issued or
delivered.
Broker
– A licensed individual or
organization who sells and
services insurance policies.
Broker-Agent-
A licensed individual who
can act as an agent
representing one or more
insurance companies and who
also acts as a broker
dealing with one or more
insurance companies
representing the customer’s
interests.
Broker Fee Agreement
– The contract between the
policyholder and the broker
which also specifies the
charges for the services
rendered by the broker.
Commission
– A portion of the policy
premium that is paid to an
agent by the insurance
company as compensation for
the agent’s work.
Comparative Negligence
– The percentage of fault
shared by each driver in an
accident in which both
contribute to causing the
collision.
Comprehensive Coverage
– Pays for the damage to
your vehicle caused by
reason other than collision
such as fire, theft,
vandalism, windstorm, flood,
etc.
Claim
– Notice to an insurance
company that a loss has
occurred which may be
covered under the terms and
conditions of the policy.
Collision
– Pays for damage to your
car caused by physical
contact with another vehicle
or with another object such
as a guardrail, tree,
structure or person.
Declarations (DEC) Page
– This is usually the first
page of an insurance policy
that contains the full legal
name of the insurance
company as well as your name
and address, the policy
number, effective and
expiration dates, premium
payable, the amount and
types of coverage,
deductibles, the vehicle(s)
insured and the vehicle
identification number (VIN).
Deductible
– The amount of the loss
that the policyholder is
responsible to pay up front
before covered benefits from
the insurance company are
payable. This is applicable
to comprehensive or
collision coverage only.
Endorsement
– A written agreement that
changes the terms of an
insurance policy by adding
or taking away coverage.
First Party
– The policy holder, or
insured, in an insurance
contract.
Insured –
The policyholder(s) who are
entitled to covered benefits
in case of an accident or
loss.
Insurer-The
insurance company who issues
the insurance and agrees to
pay for losses and provide
covered benefits.
Liability insurance
– Coverage for a
policyholder’s legal ability
resulting from injuries to
other persons or damage to
their property.
License
– A certificate of authority
issued by the Department of
Insurance to an insurer,
agent, broker, or
broker-agent to transact
insurance business.
Limits
– The maximum amount of
benefits the insurance
company agrees to pay in the
event of a loss.
Loan Gap Coverage
– This coverage pays the
difference between the fair
market value of your vehicle
and the loan balance owed to
your lender. This applies to
new vehicles only.
Medical Payments Coverage
– Covers the medical costs,
up to a specified limit,
resulting from an auto
accident for you, your
family and others in your
car. This coverage pays
regardless of fault.
Non-Renewal
–The termination of an
insurance policy at its
normal expiration date.
Policy
–The contract that states
the rights and duties of the
insurance company and the
insured.
Premium
– The price of insurance
paid to the insurance
company for a policy.
Quote
– An estimate of the cost of
insurance based on the
information supplied to the
agent, broker, or the
insurance company.
Recision
– The cancellation of a
policy back to its effective
date resulting in a return
of all the premium charged.
Rental reimbursement
Coverage
– This coverage pays your
expenses to rent an auto if
you have a loss covered
under comprehensive or
collision benefits. Coverage
is sold based on a daily
amount of expense subject to
a maximum limit.
Replacement cost
– The amount that it costs
to replace lost or damaged
property with new property
of like kind or quality in
the local market.
Salvage
– Damaged policyholder
property that is legally
signed over to an insurer in
a loss settlement. Insurance
companies sell salvaged
property in order to reduce
their overall monetary loss.
Second party
– The insurance company in
an insurance contract.
Subrogation
– The process of recovering
the amount of claims damages
paid out to a policyholder
from the legally liable
party. When a company
pursues the legally liable
third party, they are
required to include the
policyholder’s deductible in
the recovery process.
Surcharge
– An extra charge applied to
the premium by an insurance
company, usually applied to
an at-fault accident or
moving violation.
Third party
– An individual other than
the policyholder or the
insurance company who has
suffered a loss and may be
able to collect compensation
under the policy due to the
negligent acts or omissions
of the policyholder.
Total Loss
– Damage or destruction to
real or personal property to
such extent that it cannot
be rebuilt or repaired to
its condition prior to the
loss or when it would be
cost prohibitive to repair
or rebuild in comparison to
the value of the property
prior to the loss.
Towing coverage
– Addition to an automobile
policy that pays a specified
amount for towing and
related labor costs.
Underinsured motorist
endorsement
– Addition to a Personal
Automobile Policy (PIP) that
covers an insured who is
involved in a collision with
a driver who does not have
sufficient liability
insurance to pay for the
damages.
Uninsured Motorist Coverage
(UMC) –
Provides coverage for a
policyholder involved in a
collision with a driver who
does not have liability
insurance or who does not
have sufficient liability
limits to pay for damages.
UMC comes in two parts;
uninsured motorist bodily
injury (UMBI) and uninsured
motorist property damage (UMPD)
UMBI coverage pays for
injuries to you or any
person in your car when
there is a collision with an
uninsured driver. UMPD
coverage pays for the
property damage to your car
when there is a collision
with an identified uninsured
driver. UMC must be offered
when you purchase liability
coverage for your auto. If
you decline UMC, you are
required to sign a
declination waiver.
|
