Car Insurance
Why buy auto insurance?
Well, for one, it is the law to have at least
liability coverage in almost all states and
second, it is the responsible thing to do.
Unfortunately, too many people come to believe
insurance is a waste of money because they often
see nothing in return for the countless premiums
they have paid. As a result, they cancel their
auto insurance and risk it all. For these people,
it is important to note that insurance is not a
waste of money since it buys peace of mind while
driving and will protect you from potentially
declaring bankruptcy in the event that you are
involved in a major accident.
Further, those who don't have auto insurance often
cause those who do to pay higher premiums in the
form of "uninsured motorist" coverage. In summary,
by all means get auto insurance if you don't
already have it and, if you refuse or can't afford
it, please don't drive.
Why has auto insurance become so expensive?
One reason auto insurance premiums have soared is
due to fraud. Abuse of the system forces insurance
companies to continuously raise premiums in order
to make up for losses. The corruption can be found
amongst all of those involved in the process of
moving an insurance claim through the various
channels. For example, consumers will often
defraud the system by claiming that some existing
or "older" vehicle damage was done in the claimed
accident. Insurance companies often have a hard
time proving exactly what vehicle damage was
"there already" from the damage which actually
resulted from the accident in question. To make
matters worse, this unscrupulous tactic goes
beyond vehicle damage to include bodily
"damage"/injury. The classic example of this type
of fraud is the phony whiplash which supposedly
resulted from, say, a rear-end collision. Further,
many accident victims are easily seduced by the
various advertisements which some attorneys run to
encourage lawsuits. It's not unheard of for these
attorneys to be in cahoots with certain
unscrupulous doctors who will intentionally
falsify or at least exaggerate bodily injury
reports in order to bilk the insurance companies.
Another reason auto insurance premiums are so high
is the fact that so many people are driving
without insurance. How is this you ask? Well, it
manifests itself in two ways. First, many people
opt to get "uninsured motorist" coverage
which of course costs them extra. These people are
protecting themselves from those who do not have
insurance. So in a sense, they are paying in part
for someone else's insurance in terms of coverage
to themselves when the other party is at fault.
The extra cost of uninsured motorist insurance
would of course be unnecessary if everyone had
insurance (i.e. there would be no uninsured
motorist). Second, those drivers without insurance
do not contribute any money to the insurance
system yet they can take from the system if they
are in an accident with an insured driver who is
at fault. This is because the insured driver's
liability coverage will pay for vehicle repairs
and any medical expenses for the "victim".
Insurance companies are well aware of this fact
and make up for it by passing this cost onto those
who have insurance policies.
Types of auto insurance coverage
There are six basic types of auto insurance
coverage. They are described as follows. Property
damage liability - In the event that you cause an
accident, this will pay, up to the amount of your
coverage, the expense to repair the damage you
have done to someone's vehicle and/or any other
property which may have been damaged in the
accident. Bodily injury liability - In the event
that you cause an accident, this will pay, up to
the amount of your coverage, the
medical costs of the accident victims.
Medical payments - In the event that you are in an
accident (regardless of who is at fault), this
will pay, up to the amount of your coverage, your
medical expenses and the medical expenses of any
passengers in your vehicle.
Uninsured motorist - In the event that you are in
an accident (but not at fault) either with someone
uninsured or a hit-and-run driver, this will pay,
up to the amount of your coverage, your medical
expenses and the medical expenses of any
passengers in your vehicle.
Collision - In the event that you are in an
accident (regardless of who is at fault), this
will pay, up to the amount of your coverage, the
expense to repair your vehicle. Note that for
collision coverage there is a deductible. Also
note that if your vehicle is totaled, the
insurance company will only pay you the blue book
value of the vehicle.
Comprehensive - In the event that your vehicle is
damaged by fire, vandalism, natural disaster, or
it is stolen, this will pay, up to the amount of
your coverage, the expense to repair/replace your
vehicle. Note that for comprehensive
coverage there is a deductible. Also note that in
the event your vehicle is either totaled or not
recovered from being stolen, insurance companies
will only pay you the blue book value of the
vehicle.
If some of these coverage items are confusing or
seem to overlap, by all means consult with an
insurance agent for a thorough explanation and
discussion of various case scenarios.
What determines insurance premiums?
An insurance business is entirely risk-based. Each
time they accept a new policy, they are taking a
risk or "gamble" that the policy holder's
cumulative premiums (i.e. payments) will exceed
the total of any claims the policy holder may
file. In other words, they want to collect more
from you than they pay out to you (if you should
ever file a claim). Therefore, when an insurance
company determines what a certain premium will be
they must offset any increased risk
with a surcharge. Likewise, they will often reduce
a premium with a discount if certain "positive"
qualifications are met.
There are several factors an insurance company
takes into account when determining how much a
certain insurance premium will be. Some of these
factors are as follows. Driving record - Probably
more than any other factor, one's driving record
is weighed heaviest by an insurance company when
determining a premium. Those with spotless records
(i.e. no tickets or accidents) will be rewarded
with lower premiums. On the other hand, those with
poor records will pay a higher premium because
they are a higher risk. If
one's driving record becomes extremely poor, most
insurance companies will drop the policy holder
since the risk is too high.
Age of driver - Insurance companies charge younger
drivers the most. Specifically, those under the
age of 25 will typically pay the highest premiums.
Why? Because younger drivers tend to be "wilder"
in their lifestyles and thus
driving. As the driver gets older, he/she tends to
stabilize and consequently, their rates are
lowered. Type of vehicle - Owners of sports cars
will pay much more than owners of sedans. Why?
Because insurance companies are aware that those
who drive sports cars are more likely to get in an
accident because of the mentality that comes with
owning a sports car. In other words, they tend to
drive fast and often reckless.
Theft rating of vehicle - The more desirable a
particular vehicle is in the eyes of a car thief,
the more you will pay in the form of comprehensive
coverage.
Bumper rating of vehicle - The more effective a
vehicle's bumpers are, the less damage the vehicle
will have in the event of a low speed collision.
Some insurance companies have a slight surcharge
for vehicles with poorly designed bumpers. For
example, according to tests conducted by the
Insurance Institute for Highway Safety, a 1994
Mazda MPV had $1500.00 in damage after a 5 MPH
rear collision whereas a 1994 Nissan Quest had no
damage in a similar 5 MPH collision.
Where you drive - Those who drive mainly in the
city will most likely pay more than those who
drive in rural areas. Why? Because when driving in
the city you are "exposed" to many more potential
accidents simply because the
conditions are busier. Also, there is always a
higher chance of theft and vandalism in the city.
How much you drive - Those who drive more than the
average annual mileage for their particular area
will likely pay a higher premium. Why? Because the
more you drive, the more you will be "exposed" to
a potential accident simply because you are on the
road more.
What to do if you're in an accident worth
reporting
After an accident, most people are so agitated
that it's tough to think clearly. To help you sort
things out and deal with
the aftermath, follow these guidelines:
1. Get the other driver's name, license plate
number, driver's license number, and name of
insurance company.
2. Call the police immediately.
3. Get a copy of the police report.
4. Notify your insurance company as soon as
possible.
5. Provide the insurance company with a copy of
the police report.
6. If you feel the investigation or handling of
your case is not fair, you may then wish to
consult with an attorney. A brief
initial assessment of your case should not cost
you anything.
|
 |
|
|
|