There are many different types of coverages available for your auto insurance
needs. Some are required and some are optional. Be sure to check the
declarations page to verify that your policy includes all of the coverages that
you intended. Here are brief descriptions of the available coverages.
Liability
Covers bodily injury and damage to property that you cause to others while
operating your car.
Personal injury protection (PIP)
Covers medical and hospital costs, income continuation, funeral expenses, and
loss of services subject to the coverage limits.
Medical payments
Covers medical and funeral expenses (not all companies offer this coverage).
Uninsured/underinsured motorist bodily injury
Covers injury that an uninsured or underinsured driver causes to an insured
person.
Uninsured/underinsured motorist property damage
Covers property damage that an uninsured or underinsured driver causes to your
insured vehicle.
Collision coverage
Covers damage to your car that is caused by a collision with another vehicle or
object.
Comprehensive coverage or other than collision
This coverage pays for loss or damage to the insured vehicle that doesn't occur
in an auto accident. The types of damages comprehensive insurance covers include
loss caused by fire, wind, hail, flood, vandalism or theft.
Emergency road service
Covers towing when your car breaks down.
Car rental expense
Covers rental cost as described in your policy if you need to rent a car due to
a covered claim.
Death, dismemberment and loss of sight
Pays for death/certain injuries to persons named in the policy when due to an
auto accident.
Gap coverage
In the event that your vehicle is a total loss, it pays the gap between the
market value of the vehicle and the loan payoff amount.
Custom equipment coverage
Covers direct and accidental loss to custom furnishings or equipment.
Rental Reimbursement
This type of coverage will pay for a rental car if your car is damaged due to an
auto accident. Often this coverage has a daily allowance for a rental car.
Remember to check your declarations page to verify the coverage you have
purchased.
What Affects the Cost of Auto Insurance?
Auto insurance rates vary from company to company, driver to driver, car to car,
and coverage to coverage.
When you apply for auto insurance, companies consider a variety of factors to
determine the risk you represent and the likelihood that you will experience an
accident or loss. The company then groups you with policyholders with similar
risk characteristics (i.e., tiering), and assigns a rate based on the driving
and claims history of your risk group. Not all companies consider the same
factors when determining your premium (the amount you pay for insurance
coverage), but there are some common factors that impact rates:
Driving Record
If you (or a member of your household) have a driving record that includes motor
vehicle violations, suspensions and/or at-fault accidents, the price you pay to
obtain insurance might be higher. Insurance companies may consider you (or a
member of your household) to be a high-risk driver and charge a higher rate than
a driver with a “clean” record (free of accidents and violations). Each company
has underwriting guidelines to determine what type and how many accidents and
violations during a specific period constitute a high-risk driver. (Remember:
Insurers assign insurance eligibility points for accidents and violations, and
having seven or more may make it difficult to remain in the voluntary market.)
Vehicle Type
The make, model and value of your vehicle can affect the cost of your auto
insurance premium. Generally, an older vehicle will cost less to insure, while a
high performance or luxury car will cost more. The cost to insure different
makes and models of vehicles can vary among insurers, so be sure to check with
several insurers to get the best price
and coverage for your needs. Companies may offer discounts for vehicles with
safety features, so check with your insurer or producer for details, especially
when you are considering purchasing a vehicle.
Geographic Area
Where you keep your vehicle and where you drive may also influence your
insurance premium. The number of claims filed by policyholders in your territory
will affect the rates charged by insurance companies.
Gender and Age
Statistics show that males and young adults have a higher incidence of accidents
and claims; therefore, your gender and age can affect your rate.
Marital Status
Statistically, young married couples tend to have a lower incidence of accidents
and claims; therefore, they generally pay lower premiums than single people.
Vehicle Use
The distance you live from work or school may affect the cost of your insurance,
as it determines your daily exposure to risk. Insurers will calculate your
premium based on the average distance you drive on an annual basis or how far
you commute to work or school. Whether you use your vehicle for personal or
business use may also impact your rate.
Policy Changes
Changes to your policy can also affect your premium. Such changes may include:
Adjusting your coverage
Changing your deductibles
Moving to a new area (territory)
Adding or removing a vehicle from your policy
Adding a new driver
Any time period in which you had a car that was required to be insured but
did not have auto insurance can affect your premium as well
Credit History
Use of Credit History by insurance
companies is allowed under federal law (Fair Credit Reporting Act). Insurance
companies may use credit information to determine your level of risk before
selling or renewing auto
Insurance Score
Some, but not all, insurers will use an insurance score based on your credit
history as one of the factors in determining risk.
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