How much coverage do I need?
Almost every state in the U.S. requires that you
purchase a minimum amount of liability coverage. However, you will probably need much more
than the minimum liability insurance to cover the costs of an accident or disaster.
The Insurance Information Institute (I.I.I.) recommends that you have $100,000 of
bodily injury protection per person and $300,000 per accident. If your net worth is more
than $300,000, consider buying additional liability insurance.
An alternative is to consider
purchasing an umbrella or excess liability policy. These policies pay when your underlying
coverage's are exhausted. Typically, these policies cost between $200 and $300 per year
for a million dollars in coverage.
To save money on the cost of auto insurance, you may want to have your
homeowners and auto insurance with the same company. Check out the cost of coverage with
your current company first. If you have coverage with different companies, it may be
easier to buy it from your auto insurance company.
In addition to liability coverage, consider buying collision and comprehensive
coverage. You don't decide how much to buy. Your coverage reflects the market value of
your car and the cost of repairing it.
Decide on a deductible -- the amount of money you pay on a claim before the
insurance company reimburses you. Typically, deductibles are $500 or $1,000; the higher
your deductible, the lower your premium. For additional information about the cost of
insurance, read ourCosts section.
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Am I covered when I borrow a
friend's car
or allow others to drive my car?
Most policies cover occasional sharing of cars between friends, although
you should check your policy specifically to be sure.
However, keep the car-sharing to a minimum, because if somebody else
begins logging a significant fraction of your car's total miles, you need to check with
your insurance company. Primary driver variables can play a big role in determining
premium prices, and providing false information can undermine the obligation of your
insurance company to honor your policy.
As far as coverage for an accident, typically, the insurance policy that covers the car
will cover the accident, regardless of the driver. For example, if you injure somebody
while driving your friend's car, his policy will probably pay first.
If he has no insurance, however, or if you are saddled with more claims
than his policy can pay, your own policy should take up the slack. Again, you should check
your policy or ask your company representative to be sure.
If your car is stolen, don't worry. You won't be liable for
third-party damages caused by the thief, and your collision and comprehensive coverage
will still cover damages to, or the loss of, your car.
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Do I need to pay for
insurance
when I rent a car?
If you have an automobile policy that includes third-party liability,
collision, and comprehensive coverage, you generally do not need to purchase separate
insurance from the rental car company. Check your policy to be sure, however, especially
if you rent frequently.
If you get in an accident, while driving a rental car, your own comprehensive and
collision coverage should pay for the damages. You'll still be responsible for paying the
deductibles. If you aren't carrying collision and comprehensive insurance, however, you
should probably purchase the loss or collision damage waiver offered by the rental car
company. Without it, you could end up buying them a new car.
Similarly, your automobile insurance should cover you for third-party damages resulting
from your rental. If you have no liability coverage (usually this means that you have no
automobile insurance), you should consider the liability coverage offered by the rental
car company.
Aside from the loss or collision waiver and general liability coverage,
you should avoid purchasing any other insurance offers from the rental car company. Such
types of coverage are usually a rip-off.
For example, personal accident insurance is usually just a special-purpose
life insurance product, and is hardly ever a good idea. To cover loss of life, buy life
insurance. If your possessions are stolen from the rental car, your homeowner's or
renter's insurance should cover the loss.
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What information do I need to
give my insurance agent,
when I apply for insurance?
First, your agent will ask you general information about your
vehicle such as its make and model, roughly how many miles you drive each year, and what
kind of liability coverage you will need. The agent will also want to know how many people
drive the cars, how old the drivers are, where you live, and driving records of each
household member.
Then, the agent will then ask more detailed questions about your cars, such as their
Vehicle Identification Numbers (VIN), whether they have passive restraint systems or air
bags, anti-lock brakes or anti-theft devices.
If you already have another insurance policy with the company for home or
life insurance, you might receive a discount on your auto policy. You should also mention
if you or other drivers in your household have completed safe-driving courses and if
student drivers in your home are getting good grades -- both of these may qualify you for
discounts on your auto policy.
Once the agent has assembled all of the information, a premium will be quoted to
you. The premium will depend on all the factors above and on the deductibles you choose.
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If I file a claim, will my premium go up?
Many people are often reluctant to file a claim with their
respective insurance company for fear that their premium will go up drastically.
Although the practices for raising your premium will vary from
company to company, an insurer generally will increase your premium by specific
percentages for each chargeable claim made against your policy above a specific dollar
amount.
A chargeable claim is one the insurer considers primarily your
fault. The percentages and ceilings vary from company to company. These increases
generally stay on your premium for three years following the claim.
Your company may also decide not to renew your policy if your driving record gets
markedly worse or you have several accidents. Different insurers have different rules
about what constitutes an unacceptably bad driving record. But some accidents, such as
those caused by drunk driving, will probably trigger a non-renewal from most insurance
companies.
Despite fears of raised premiums or canceled policies, you should ALWAYS report an
accident, no matter how minor, to your insurance company. By failing to report, you are
taking an unnecessary risk.
If the other driver sues you weeks or months later, your failure to
report the accident might cause your insurer to refuse to honor the policy. And even if
they do honor the policy, the delay will certainly make it harder for the insurer to
gather evidence to represent you.
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