Car Insurance is a necessary expenditure for Americans; 48 of the 50 states, plus the District of Columbia have compulsory car insurance liability laws. You are required to be financially responsible for your actions when driving a vehicle in all states. Drivers will drive up to 13 miles to save 3 cents on a gallon gasoline, but they rarely shop or compare car insurance rates. Each state regulates, allows, justifies, and/or determines car insurance rates through State Insurance Regulators.
Car insurance companies vary substantially both in price and service for consumers, so it pays to shop and compare different insurance companies. It is important to be knowledgeable about car insurance, and it is important to trust and find an agency that will help you get the combination of price and service best suited to your needs.
This comprehensive guide is provided by CarInsurance.com; it provides information on how to shop for coverage and how insurance premiums are determined. You will learn that the easiest guide to auto insurance is to get an auto insurance quote for your specific state. You can learn and compare premium prices among CarInsurance.com insurance providers.
Both underwriting and rating determine the price you must pay for car insurance. An insurance agent typically tries to determine if you qualify for the underwriting criteria of a company. The purpose of the process of underwriting is to determine whether the risk presented will be accepted, denied, accepted with exclusions, or limited. In other words, the underwriter decides whether the insurance company will write a car insurance policy for an applicant based on the facts presented. CarInsurance.com does this using their online quoting and rating technology.
When applying for insurance, you are asked a series of questions to assess the likelihood of presenting a claim or having a loss (claim). The answers to these questions during your car insurance quote make up your rating factors. Your rating factors determine your rate and this guide will explain how they affect your rates.
You are asked about your driving record and certain personal characteristics that will affect the rate you will be charged. Some of these characteristics, such as age and gender, are beyond your control. Others can be controlled, but since they relate directly to lifestyle, location, and/or income, you may find it difficult to change them in order to change your insurance rates. Insurance is complex, it is not as simple as asking how much will a 16-year-old pay for insurance or how much does a Ford Mustang cost to insure?
It is important to understand that State Insurance Regulators are responsible to review the rates filed by an insurance company for each of the rating factors that determine premiums. The rating factors tell an insurance underwriter based on statistical data how much will insurance cost them. For example, married persons tend to have fewer claims than those who are unmarried, people who drive their car to work have more claims than people who drive only for pleasure, and drivers that have driven for 3 or more years are less likely to have incidents than drivers that have driven less than three years.
When submitting an application, all facts about the insured must be revealed. If insurance company learns later that pertinent information was withheld then the company has the right to deny a claim, change the premiums, or cancel the policy.
Once the underwriter determines that the risk as presented is acceptable, the next step is to determine what rate should be charged. There are no special deals for individuals when you apply for insurance. Insurance agents and companies cannot modify rates for specific individuals. When you apply for insurance, you are grouped with others who have similar risk characteristics and the entire group pays the same premium. That is how rates are filed with a State Insurance Regulator. For example, as you review your rating factors (there are typically 5 to 10 of them) you will be in a different group from someone who has different rating factors. A policy with two cars will be in a different group than a policy with one car. Drivers that are 16 to 20 will be in a different group than drivers that are 21 to 25. Those drivers whose combined rating factors present the least risk will be charged the lowest premium while those that present the higher risk will be charged more premiums.
Rating Factors
The rating factors differ greatly, but there are many similarities in that they are all based upon historic facts (claims histories). New companies are starting to use new single rating factors like mileage or driving habits (range and driving styles determined by GPS systems that read speeds, range, and frequencies of stops). All companies will need to know about all members of the household who have a driver’s license and are likely to drive the car. Even if the other drivers have insurance, the insurance company will need to know about them. Most insurance companies still use these standard rating factors:
TerritoryThe place where you garage your vehicle and, therefore, do most of your driving is important in the rating process. Some states (like California) cannot use this as a rating factor because of laws. Experience shows that more losses and accidents happen in urban areas than in rural ones. Therefore, urban areas or areas with higher claim frequencies logically pay more for insurance.
Driving RecordAccidents, traffic violations and claims (comprehensive or liability claims). Some companies look at 3 years, some look at 5 years and others look at 7 years. Most only look at incidents incurred by any driver that is covered by the policy during the preceding three (3) years. Claim frequency measures how often claims occur within a group, per policy or persons reviewed in that group. Persons sharing characteristics with a group having high claims experience are charged more than if associated with a group having lower claim experience. The data used to show claim experience is gathered from the actual claims, which took place and an insurance company paid out claims.
GenderStatistics show males have more incidents than females so companies distinguish this as a rating factor (grouping).
AgeThere are a higher number of incidents that arise from some age groups than from others. It is a bell curve with the highest occurrences of claims at ages between 16 and 25 than ages 26 to 73. Seventy-four and older drivers have more occurrences than those drivers aged 26 to 73 do.
Marital StatusClaim statistics indicate a lower rate of car insurance claims among married policyholders than those claims among single policyholders.
Prior Insurance CoverageYour new insurance company wants to know how long you have had continuous insurance, how long you were with your prior carriers, what limits you had with the prior carrier and the reason you left or are leaving that carrier.
Credit HistoryInsurance companies use credit information because they know from statistical data that there is a direct correlation between consumer's credit history and expected claims that may occur. Since they have started using credit as an indicator, they have found no better indicator to help them predict risk.
Vehicle UseCompanies need to know how the vehicle is used on the road. How often is the vehicle driven, how far are you driving, where is it driven, and for what purpose do you drive? Is there any liability exposure to the company for use in a business function? All of these items are important because each of them exposes the company and the vehicle or drivers to become involved in an accident.
Coverage and limitsThe limits or exposure, clearly affect the cost. The more coverage you purchase, the higher the premium will be.
Vehicle Make, Model, and StyleThe type and value of the car you drive directly affects the premium you pay for physical damage coverage and some property damage (liability or uninsured motorist) coverages. Every make and/or model of cars has a history, so you are placed into a similar rating group for this item. If a car has more theft or vandalism history or high repair costs due to body construction, it will carry a higher premium.
Dividends
Dividends are not discounts, but they do lower premiums. Some insurers offer dividends to policyholders if the sale of car insurance is profitable for them. These are declared by the company and paid after the policy period has expired, in some cases they may be applied directly to the premium. Sometimes the company will send a separate check to the policyholders. Mutual companies typically pay dividends; State Farm Insurance Company is a large company that is known for paying dividends to its policyholders.
Surcharges and Discounts
Companies charge surcharges for risks that they do not want and they offer premium discounts so they can attract certain risks. Surcharges can also be charged in addition to normal rating factors. Here is a broad list of surcharges and discounts:
Defensive Driver Training DiscountsIn the past 5 years, have you both voluntarily taken and successfully completed a defensive driver-training course approved by the state’s Department of Transportation. In some cases, drivers must be a certain age (25, 50, 53, 55, and 62) to be eligible for this discount. Courses required because you received a ticket or summons for an infraction do not apply for this discount. In some case, defensive driver training course from the United States Armed Forces (must be an active member of the military) can apply for this discount.
Good Student DiscountsIf a driver is under a certain age (21, 23, or 25 years), maintains a 3.0 (B) grade point average or better, and is enrolled full-time in high school, community college, or university.
Anti-Theft DiscountsDepending on state laws, there are many different groups or tiers of discounts allowed.
Vehicle contains a non-passive internally activated device that disables the vehicle by making the ignition or starter system inoperable.
Emits a warning sound when system is activated and disables the starter, ignition system, and/or fuel circuit device that will disable the vehicle by making the ignition or starter system inoperable.
A passive alarm system has a motion detector that automatically activates and emits a warning sound when someone attempts to open the vehicle.
Non-passive alarm is operated internally, equipped with a forced action prompter that activates the horn or flashes the headlights.
Ignition replacement lock that cannot be removed using a conventional slide hammer or lock puller equipment.
Passive alarm system with motion detector that is automatically activated and emits warning sound, resets, and is installed under locked hood.
Passive fuel cut-off switch that requires the driver to trip a switch to open fuel line when car is started.
Passive ignition cut-off system that disables one or more components so that engine cannot be started or hot-wired.
Electronic GPS recovery system is for a vehicle that is equipped with approved recovery system like Lojack, Teletrac, or OnStar.
VIN is etched onto the base of your car's windows to prevent thieves from filing it off.
Active member of the U.S. Armed Forces DiscountSome companies offer discounts for drivers that are active members of the Armed Forces.
Approved Retirement Community DiscountSome companies offer discounts for vehicles garaged in certain retirement communities.
Convertible or T-Tops SurchargeSome companies may charge more for this type of vehicle.
Custom, altered, used for racing, show, recreation, off-road, towing, plowing purposes, public or livery conveyance for passengers, rental or for-hire, day care, nursery, school, or hotel transportation. These may add a surcharge or cause you to be ineligible for coverage.
Rebuilt, salvaged, junk, grey market, antique, classic, historic, limited production, or conversion van surcharge. Some companies will charge a surcharge and others will not insure this risk.
Group Membership DiscountsSome companies offer additional affinity discounts for some companies, associations or groups. (Examples include AAA, NAAA, AARP, Auto Club, etc.)
Employment or Degree DiscountsIf you are employed in or hold a license or degree in one of the following areas: Education, Engineering, or Natural Science (including mathematics) you may be eligible for additional discounts in some states with limited insurance companies.
Foreign Drivers license SurchargeSome companies may surcharge if you had a foreign license in the past 12 months.
License Suspended or Revoked SurchargeSome companies may charge a surcharge if this has occurred in the last five years.
Daytime Running lights Discount.Some rates include a discount for this as a safety feature.
Education and/or OccupationSome companies use this as a rating factor and it can be considered a surcharge or a discount.
Pre-Purchase DiscountSome companies give a discount if you buy a policy seven or more days before your current policy expires.
Multiple Vehicles Discounts. This discount is offered to consumers who insure more than one car with the same insurance company. Statistics show that individuals and families that insure more than one car have fewer claims.
Low Mileage Discounts.Fewer miles, indicates less risk for claims or incidents. Some companies offer discounts for drivers who participate in car pools or drive to and from work/school on a limited basis.
Good Driver DiscountSome companies add additional discounts for no claims or incidents in the past. For this reason, any infraction can greatly change your rate because you are surcharged for the incident AND you lose this discount.
Renewal or Prior Insurance DiscountIf you have continuous insurance or renew your policy you will receive a discount from most companies.
Multiple Policy DiscountsIf a company offers products other than car insurance, you can receive a discount on that policy and your car insurance policy.
Voluntary Insurance Market
There is both voluntary insurance and involuntary insurance. Voluntary Insurance is coverage you are able to obtain an auto insurance policy by shopping around for an insurer on your own. If you are considered high risk, you may have difficulty acquiring insurance through the voluntary insurance market. Most states' insurance regulators work with the insurance industry to make it possible for high-risk drivers to acquire the required car insurance, so that the motorist does not drive around uninsured. Special insurance plans set up by various states can be known as Residual, JUA, Assigned Risk Pool, Shared, Ceded, or Involuntary markets. Rates are typically higher in the involuntary market.
Tort, No-Fault, and Choice
States are either a Tort State, a No-Fault State, or a Choice State. Under the tort system, someone must be found to be at fault for causing the accident. The at-fault party is then held responsible for the damages sustained. The details and regulations for a tort system vary from state to state. Tort by definition is an injury to another person or to property, which is compensable under law. The damage or injury can be done willfully, negligently or in other circumstances involving liability. Thus, categories of torts can include negligence, gross negligence, and intentional wrongdoing. Some states have options such as full or limited tort that you can choose when obtaining insurance. With limited tort, you normally cannot sue for pain and suffering unless you sustain a serious or permanent injury. A no-fault state describes any auto insurance system that requires drivers to carry insurance for their own protection, and limits their ability to sue other drivers for damages. When traveling between no-fault states and tort states, the no-fault system replaces the tort system so a tort system policy will revert to no-fault if you are covered in a tort state, but have an accident in a no-fault state. The primary benefit of a no-fault system is that it guarantees every driver gets immediate medical treatment in the event of an accident. Under no-fault laws, your auto insurance company will pay for your damages (up to your policy limits), regardless of whom was at fault for the accident. Any other drivers involved will be covered by their auto insurance policies. In cases of serious injury, you can still sue the at-fault driver and recover for such things as pain and suffering, disfigurement and loss of spousal companionship. For the same reason, the other person can still sue you if the accident is your fault and the other party suffers serious injury. The definition of serious injury under a no fault system will vary from state to state.Kentucky is a choice state. As such, a Kentucky motorist can choose to insure their vehicle under the tort system or the no fault system.
Insurance Coverage
Auto insurance coverage is packaged into different coverage types. Examples include liability, physical damage, optional, or required. You purchase insurance to protect yourself (your family) in the event that you suffer a loss to your person or property and you purchase insurance to protect yourself (your family) from losses suffered by others. Coverages are different in each state, but these basic coverages that are available on an auto insurance policy:
Bodily Injury LiabilityThis covers other people's bodily injuries or death for which you are responsible. It also provides for a legal defense if another party in the accident files a lawsuit against you. Claims for bodily injury may be for such things as medical bills, loss of income or pain and suffering. In the event of a serious accident, you want enough insurance to cover a judgment against you in a lawsuit, without jeopardizing your personal assets. Bodily injury liability covers injury to people, not your vehicle. Therefore, it is a good idea (and usually a company requirement) to have the same level of coverage for all of your cars. Bodily Injury liability does NOT cover you or other people on your policy. Coverage is limited to the terms and conditions contained in the policy. It is mandatory in most states.
Property Damage LiabilityThis covers you if your car damages someone else's property. Usually it is their car, but it could be a fence, a house or any other property damaged in an accident. It also provides you with legal defense if another party files a lawsuit against you. It is a good idea to purchase enough of this insurance to cover the amount of damage your car might do to another vehicle or object. Coverage is limited to the terms and conditions contained in the policy.
ComprehensiveThis covers your vehicle and other vehicles (in limited scenarios) you may be driving for losses resulting from incidents other than collision. Comprehensive insurance covers damage to your car if it is stolen; or damaged by flood, fire, or animals. It pays to fix your vehicle less the deductible you choose.
CollisionThis covers damage to your car when your car hits, or is hit by, another vehicle, or other object. It pays to fix your vehicle less the deductible you choose. To keep your premiums low, select as large a deductible as you feel comfortable paying out of pocket
Uninsured Motorist Bodily InjuryThis covers you, the insured members of your household and your passengers for bodily/personal injuries, damages, or death caused by an at-fault uninsured or hit-and-run driver. If you are involved in an accident where the other driver is at fault but has no insurance, your policy will cover your medical expenses, up to the limit on your policy.
Underinsured Motorist Bodily InjuryThis covers you, the insured members of your household and your passengers for injuries, damages or death caused by the negligence of a person with insufficient insurance. If you have an accident with a person whose coverage cannot meet your damages, your policy will meet the difference-up to the limit of liability listed on your policy.Both UM and UNDUM coverage may be combined or sold separately depending on the state and the insurance carrier.
Uninsured Motorist Property DamageThis covers your auto when property damage is sustained by an insured and the negligent operator does not possess insurance.
Underinsured Motorist Property DamageThis covers when property damage is sustained by an insured and the negligent operator possesses insurance, but the limits of liability carried by the negligent driver are not sufficient to cover the damages.Both UMPD and UNDPD coverage may be combined or sold separately depending on the state and insurance carrier.
Personal Injury ProtectionThis covers within the specified limits, the medical, hospital and funeral expenses of the insured, others in his vehicles and pedestrians struck by him. The basic coverage for the insured's own injuries on a first-party basis, without regard to fault. It is only available in certain states. Depending on the state, the covered parties below and the amount of protection may vary.
Medical PaymentsThis covers medical expenses to you and your passengers injured in an accident. There may also be coverage if as a pedestrian a vehicle injures you. This coverage applies, regardless as to who is at fault. Medical Payments may also cover policyholders and their family members when they are injured while riding in someone else's car or when a car hits them while on foot or bicycling. Coverage is limited to the terms and conditions contained in the policy.
All coverage and descriptions are limited to the terms and conditions contained in the auto insurance policy.
Conclusion
This guide is a starting point for those trying to understand the complexity of insurance. CarInsurance.com has many more resources available inside their Learning Center, including licensed agents available to answer your specific questions. Car insurance is a system in which groups of people that has similar chances of suffering a loss transfer their risk of loss to an insurer who pools the risk of many people together. In exchange for payment of premium, the insurer promises to reimburse the person for their covered losses.
CarInsurance.com understands that there is much information available to help you make an informed decision about insurance. After you understand this comprehensive guide you can rely on a licensed agent at CarInsurance.com to help you get the coverage you need to be protected.
Car insurance companies vary substantially both in price and service for consumers, so it pays to shop and compare different insurance companies. It is important to be knowledgeable about car insurance, and it is important to trust and find an agency that will help you get the combination of price and service best suited to your needs.
This comprehensive guide is provided by CarInsurance.com; it provides information on how to shop for coverage and how insurance premiums are determined. You will learn that the easiest guide to auto insurance is to get an auto insurance quote for your specific state. You can learn and compare premium prices among CarInsurance.com insurance providers.
Both underwriting and rating determine the price you must pay for car insurance. An insurance agent typically tries to determine if you qualify for the underwriting criteria of a company. The purpose of the process of underwriting is to determine whether the risk presented will be accepted, denied, accepted with exclusions, or limited. In other words, the underwriter decides whether the insurance company will write a car insurance policy for an applicant based on the facts presented. CarInsurance.com does this using their online quoting and rating technology.
When applying for insurance, you are asked a series of questions to assess the likelihood of presenting a claim or having a loss (claim). The answers to these questions during your car insurance quote make up your rating factors. Your rating factors determine your rate and this guide will explain how they affect your rates.
You are asked about your driving record and certain personal characteristics that will affect the rate you will be charged. Some of these characteristics, such as age and gender, are beyond your control. Others can be controlled, but since they relate directly to lifestyle, location, and/or income, you may find it difficult to change them in order to change your insurance rates. Insurance is complex, it is not as simple as asking how much will a 16-year-old pay for insurance or how much does a Ford Mustang cost to insure?
It is important to understand that State Insurance Regulators are responsible to review the rates filed by an insurance company for each of the rating factors that determine premiums. The rating factors tell an insurance underwriter based on statistical data how much will insurance cost them. For example, married persons tend to have fewer claims than those who are unmarried, people who drive their car to work have more claims than people who drive only for pleasure, and drivers that have driven for 3 or more years are less likely to have incidents than drivers that have driven less than three years.
When submitting an application, all facts about the insured must be revealed. If insurance company learns later that pertinent information was withheld then the company has the right to deny a claim, change the premiums, or cancel the policy.
Once the underwriter determines that the risk as presented is acceptable, the next step is to determine what rate should be charged. There are no special deals for individuals when you apply for insurance. Insurance agents and companies cannot modify rates for specific individuals. When you apply for insurance, you are grouped with others who have similar risk characteristics and the entire group pays the same premium. That is how rates are filed with a State Insurance Regulator. For example, as you review your rating factors (there are typically 5 to 10 of them) you will be in a different group from someone who has different rating factors. A policy with two cars will be in a different group than a policy with one car. Drivers that are 16 to 20 will be in a different group than drivers that are 21 to 25. Those drivers whose combined rating factors present the least risk will be charged the lowest premium while those that present the higher risk will be charged more premiums.
Rating Factors
The rating factors differ greatly, but there are many similarities in that they are all based upon historic facts (claims histories). New companies are starting to use new single rating factors like mileage or driving habits (range and driving styles determined by GPS systems that read speeds, range, and frequencies of stops). All companies will need to know about all members of the household who have a driver’s license and are likely to drive the car. Even if the other drivers have insurance, the insurance company will need to know about them. Most insurance companies still use these standard rating factors:
TerritoryThe place where you garage your vehicle and, therefore, do most of your driving is important in the rating process. Some states (like California) cannot use this as a rating factor because of laws. Experience shows that more losses and accidents happen in urban areas than in rural ones. Therefore, urban areas or areas with higher claim frequencies logically pay more for insurance.
Driving RecordAccidents, traffic violations and claims (comprehensive or liability claims). Some companies look at 3 years, some look at 5 years and others look at 7 years. Most only look at incidents incurred by any driver that is covered by the policy during the preceding three (3) years. Claim frequency measures how often claims occur within a group, per policy or persons reviewed in that group. Persons sharing characteristics with a group having high claims experience are charged more than if associated with a group having lower claim experience. The data used to show claim experience is gathered from the actual claims, which took place and an insurance company paid out claims.
GenderStatistics show males have more incidents than females so companies distinguish this as a rating factor (grouping).
AgeThere are a higher number of incidents that arise from some age groups than from others. It is a bell curve with the highest occurrences of claims at ages between 16 and 25 than ages 26 to 73. Seventy-four and older drivers have more occurrences than those drivers aged 26 to 73 do.
Marital StatusClaim statistics indicate a lower rate of car insurance claims among married policyholders than those claims among single policyholders.
Prior Insurance CoverageYour new insurance company wants to know how long you have had continuous insurance, how long you were with your prior carriers, what limits you had with the prior carrier and the reason you left or are leaving that carrier.
Credit HistoryInsurance companies use credit information because they know from statistical data that there is a direct correlation between consumer's credit history and expected claims that may occur. Since they have started using credit as an indicator, they have found no better indicator to help them predict risk.
Vehicle UseCompanies need to know how the vehicle is used on the road. How often is the vehicle driven, how far are you driving, where is it driven, and for what purpose do you drive? Is there any liability exposure to the company for use in a business function? All of these items are important because each of them exposes the company and the vehicle or drivers to become involved in an accident.
Coverage and limitsThe limits or exposure, clearly affect the cost. The more coverage you purchase, the higher the premium will be.
Vehicle Make, Model, and StyleThe type and value of the car you drive directly affects the premium you pay for physical damage coverage and some property damage (liability or uninsured motorist) coverages. Every make and/or model of cars has a history, so you are placed into a similar rating group for this item. If a car has more theft or vandalism history or high repair costs due to body construction, it will carry a higher premium.
Dividends
Dividends are not discounts, but they do lower premiums. Some insurers offer dividends to policyholders if the sale of car insurance is profitable for them. These are declared by the company and paid after the policy period has expired, in some cases they may be applied directly to the premium. Sometimes the company will send a separate check to the policyholders. Mutual companies typically pay dividends; State Farm Insurance Company is a large company that is known for paying dividends to its policyholders.
Surcharges and Discounts
Companies charge surcharges for risks that they do not want and they offer premium discounts so they can attract certain risks. Surcharges can also be charged in addition to normal rating factors. Here is a broad list of surcharges and discounts:
Defensive Driver Training DiscountsIn the past 5 years, have you both voluntarily taken and successfully completed a defensive driver-training course approved by the state’s Department of Transportation. In some cases, drivers must be a certain age (25, 50, 53, 55, and 62) to be eligible for this discount. Courses required because you received a ticket or summons for an infraction do not apply for this discount. In some case, defensive driver training course from the United States Armed Forces (must be an active member of the military) can apply for this discount.
Good Student DiscountsIf a driver is under a certain age (21, 23, or 25 years), maintains a 3.0 (B) grade point average or better, and is enrolled full-time in high school, community college, or university.
Anti-Theft DiscountsDepending on state laws, there are many different groups or tiers of discounts allowed.
Vehicle contains a non-passive internally activated device that disables the vehicle by making the ignition or starter system inoperable.
Emits a warning sound when system is activated and disables the starter, ignition system, and/or fuel circuit device that will disable the vehicle by making the ignition or starter system inoperable.
A passive alarm system has a motion detector that automatically activates and emits a warning sound when someone attempts to open the vehicle.
Non-passive alarm is operated internally, equipped with a forced action prompter that activates the horn or flashes the headlights.
Ignition replacement lock that cannot be removed using a conventional slide hammer or lock puller equipment.
Passive alarm system with motion detector that is automatically activated and emits warning sound, resets, and is installed under locked hood.
Passive fuel cut-off switch that requires the driver to trip a switch to open fuel line when car is started.
Passive ignition cut-off system that disables one or more components so that engine cannot be started or hot-wired.
Electronic GPS recovery system is for a vehicle that is equipped with approved recovery system like Lojack, Teletrac, or OnStar.
VIN is etched onto the base of your car's windows to prevent thieves from filing it off.
Active member of the U.S. Armed Forces DiscountSome companies offer discounts for drivers that are active members of the Armed Forces.
Approved Retirement Community DiscountSome companies offer discounts for vehicles garaged in certain retirement communities.
Convertible or T-Tops SurchargeSome companies may charge more for this type of vehicle.
Custom, altered, used for racing, show, recreation, off-road, towing, plowing purposes, public or livery conveyance for passengers, rental or for-hire, day care, nursery, school, or hotel transportation. These may add a surcharge or cause you to be ineligible for coverage.
Rebuilt, salvaged, junk, grey market, antique, classic, historic, limited production, or conversion van surcharge. Some companies will charge a surcharge and others will not insure this risk.
Group Membership DiscountsSome companies offer additional affinity discounts for some companies, associations or groups. (Examples include AAA, NAAA, AARP, Auto Club, etc.)
Employment or Degree DiscountsIf you are employed in or hold a license or degree in one of the following areas: Education, Engineering, or Natural Science (including mathematics) you may be eligible for additional discounts in some states with limited insurance companies.
Foreign Drivers license SurchargeSome companies may surcharge if you had a foreign license in the past 12 months.
License Suspended or Revoked SurchargeSome companies may charge a surcharge if this has occurred in the last five years.
Daytime Running lights Discount.Some rates include a discount for this as a safety feature.
Education and/or OccupationSome companies use this as a rating factor and it can be considered a surcharge or a discount.
Pre-Purchase DiscountSome companies give a discount if you buy a policy seven or more days before your current policy expires.
Multiple Vehicles Discounts. This discount is offered to consumers who insure more than one car with the same insurance company. Statistics show that individuals and families that insure more than one car have fewer claims.
Low Mileage Discounts.Fewer miles, indicates less risk for claims or incidents. Some companies offer discounts for drivers who participate in car pools or drive to and from work/school on a limited basis.
Good Driver DiscountSome companies add additional discounts for no claims or incidents in the past. For this reason, any infraction can greatly change your rate because you are surcharged for the incident AND you lose this discount.
Renewal or Prior Insurance DiscountIf you have continuous insurance or renew your policy you will receive a discount from most companies.
Multiple Policy DiscountsIf a company offers products other than car insurance, you can receive a discount on that policy and your car insurance policy.
Voluntary Insurance Market
There is both voluntary insurance and involuntary insurance. Voluntary Insurance is coverage you are able to obtain an auto insurance policy by shopping around for an insurer on your own. If you are considered high risk, you may have difficulty acquiring insurance through the voluntary insurance market. Most states' insurance regulators work with the insurance industry to make it possible for high-risk drivers to acquire the required car insurance, so that the motorist does not drive around uninsured. Special insurance plans set up by various states can be known as Residual, JUA, Assigned Risk Pool, Shared, Ceded, or Involuntary markets. Rates are typically higher in the involuntary market.
Tort, No-Fault, and Choice
States are either a Tort State, a No-Fault State, or a Choice State. Under the tort system, someone must be found to be at fault for causing the accident. The at-fault party is then held responsible for the damages sustained. The details and regulations for a tort system vary from state to state. Tort by definition is an injury to another person or to property, which is compensable under law. The damage or injury can be done willfully, negligently or in other circumstances involving liability. Thus, categories of torts can include negligence, gross negligence, and intentional wrongdoing. Some states have options such as full or limited tort that you can choose when obtaining insurance. With limited tort, you normally cannot sue for pain and suffering unless you sustain a serious or permanent injury. A no-fault state describes any auto insurance system that requires drivers to carry insurance for their own protection, and limits their ability to sue other drivers for damages. When traveling between no-fault states and tort states, the no-fault system replaces the tort system so a tort system policy will revert to no-fault if you are covered in a tort state, but have an accident in a no-fault state. The primary benefit of a no-fault system is that it guarantees every driver gets immediate medical treatment in the event of an accident. Under no-fault laws, your auto insurance company will pay for your damages (up to your policy limits), regardless of whom was at fault for the accident. Any other drivers involved will be covered by their auto insurance policies. In cases of serious injury, you can still sue the at-fault driver and recover for such things as pain and suffering, disfigurement and loss of spousal companionship. For the same reason, the other person can still sue you if the accident is your fault and the other party suffers serious injury. The definition of serious injury under a no fault system will vary from state to state.Kentucky is a choice state. As such, a Kentucky motorist can choose to insure their vehicle under the tort system or the no fault system.
Insurance Coverage
Auto insurance coverage is packaged into different coverage types. Examples include liability, physical damage, optional, or required. You purchase insurance to protect yourself (your family) in the event that you suffer a loss to your person or property and you purchase insurance to protect yourself (your family) from losses suffered by others. Coverages are different in each state, but these basic coverages that are available on an auto insurance policy:
Bodily Injury LiabilityThis covers other people's bodily injuries or death for which you are responsible. It also provides for a legal defense if another party in the accident files a lawsuit against you. Claims for bodily injury may be for such things as medical bills, loss of income or pain and suffering. In the event of a serious accident, you want enough insurance to cover a judgment against you in a lawsuit, without jeopardizing your personal assets. Bodily injury liability covers injury to people, not your vehicle. Therefore, it is a good idea (and usually a company requirement) to have the same level of coverage for all of your cars. Bodily Injury liability does NOT cover you or other people on your policy. Coverage is limited to the terms and conditions contained in the policy. It is mandatory in most states.
Property Damage LiabilityThis covers you if your car damages someone else's property. Usually it is their car, but it could be a fence, a house or any other property damaged in an accident. It also provides you with legal defense if another party files a lawsuit against you. It is a good idea to purchase enough of this insurance to cover the amount of damage your car might do to another vehicle or object. Coverage is limited to the terms and conditions contained in the policy.
ComprehensiveThis covers your vehicle and other vehicles (in limited scenarios) you may be driving for losses resulting from incidents other than collision. Comprehensive insurance covers damage to your car if it is stolen; or damaged by flood, fire, or animals. It pays to fix your vehicle less the deductible you choose.
CollisionThis covers damage to your car when your car hits, or is hit by, another vehicle, or other object. It pays to fix your vehicle less the deductible you choose. To keep your premiums low, select as large a deductible as you feel comfortable paying out of pocket
Uninsured Motorist Bodily InjuryThis covers you, the insured members of your household and your passengers for bodily/personal injuries, damages, or death caused by an at-fault uninsured or hit-and-run driver. If you are involved in an accident where the other driver is at fault but has no insurance, your policy will cover your medical expenses, up to the limit on your policy.
Underinsured Motorist Bodily InjuryThis covers you, the insured members of your household and your passengers for injuries, damages or death caused by the negligence of a person with insufficient insurance. If you have an accident with a person whose coverage cannot meet your damages, your policy will meet the difference-up to the limit of liability listed on your policy.Both UM and UNDUM coverage may be combined or sold separately depending on the state and the insurance carrier.
Uninsured Motorist Property DamageThis covers your auto when property damage is sustained by an insured and the negligent operator does not possess insurance.
Underinsured Motorist Property DamageThis covers when property damage is sustained by an insured and the negligent operator possesses insurance, but the limits of liability carried by the negligent driver are not sufficient to cover the damages.Both UMPD and UNDPD coverage may be combined or sold separately depending on the state and insurance carrier.
Personal Injury ProtectionThis covers within the specified limits, the medical, hospital and funeral expenses of the insured, others in his vehicles and pedestrians struck by him. The basic coverage for the insured's own injuries on a first-party basis, without regard to fault. It is only available in certain states. Depending on the state, the covered parties below and the amount of protection may vary.
Medical PaymentsThis covers medical expenses to you and your passengers injured in an accident. There may also be coverage if as a pedestrian a vehicle injures you. This coverage applies, regardless as to who is at fault. Medical Payments may also cover policyholders and their family members when they are injured while riding in someone else's car or when a car hits them while on foot or bicycling. Coverage is limited to the terms and conditions contained in the policy.
All coverage and descriptions are limited to the terms and conditions contained in the auto insurance policy.
Conclusion
This guide is a starting point for those trying to understand the complexity of insurance. CarInsurance.com has many more resources available inside their Learning Center, including licensed agents available to answer your specific questions. Car insurance is a system in which groups of people that has similar chances of suffering a loss transfer their risk of loss to an insurer who pools the risk of many people together. In exchange for payment of premium, the insurer promises to reimburse the person for their covered losses.
CarInsurance.com understands that there is much information available to help you make an informed decision about insurance. After you understand this comprehensive guide you can rely on a licensed agent at CarInsurance.com to help you get the coverage you need to be protected.
Posts
No comments:
Post a Comment