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Auto
Insurance FAQ:
šWhat
are the different types of policies and what do they cover?
šWhy
and how are policies priced for different drivers?
šWhat
happens if I have an accident with an uninsured driver?
šWhat
happens when I loan my car to someone..
Is that person covered by my policy?
Am I still covered?
Homeowners
Insuranc
FAQ:
šWhat
kinds of perils am I protected against?
šWhat
about floods, earthquakes and other catastrophes?
šIs
there anything I can do to lower my premiums?
šI
am a renter, not a homeowner. Do I need insurance?
My
homeowners insurance is part of the payment I make each month to the mortgage
company. Who decides what insurance to get?
You do - it is your home and your insurance policy. As a means
of protecting their investment, the mortgage company collects a set amount
from you each month, puts it in escrow, and then pays your insurance and taxes
when they fall due. However, the policy is still yours and you may select the
insurance you feel offers the best coverage at the best rates. In fact, if
you allow the mortgage company to choose, you might well end up paying more
for your homeowners insurance.
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What
kinds of perils am I protected against?
Remember that policies vary but homeowners insurance usually covers damage to
both structures and personal property caused by:
- Fire or lightning.
- Windstorm or hail.
- Explosions.
- Riot or civil
commotion.
- Aircraft.
- Vehicles.
- Smoke.
- Theft or vandalism
(sometimes called malicious mischief).
- Falling objects.
- Weight of ice, snow or
sleet.
- Freezing of a plumbing,
heating, air conditioning or other such household system.
In fact, your coverage is most likely
even more comprehensive than the above list. Many homeowners policies cover
damage by "just about everything," unless the coverage is
specifically excluded. In these cases, it is even more important to understand
what is not covered.
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What
about floods, earthquakes and other catastrophes?
Most catastrophes are covered; for example,
wind damage from hurricanes and tornadoes come under the windstorm peril
listed in the previous question and so are included. Flood and earthquake
damage, however, are not covered by a standard policy.
Be careful not to be lulled into a false
sense of geographic security. Flood and earthquake activity is more widespread
than many people realize. For example, almost 90 percent of the U.S.
population lives in seismically active areas. Since 1900, earthquakes have
occurred in 39 states and caused damage in all 50. And if your home is located
in a flood-prone area, you are 26 times more likely to suffer a flood loss
than a loss from fire.
You may want to check with your agent
about special catastrophic policies for normally excluded conditions like
floods and earthquakes. Of course, the cost of such extra coverage may reflect
the high risk involved. If you live along a shoreline, for example, expect to
pay a higher premium for flood coverage than someone living on a mountaintop
would pay.
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Is
there anything I can do to lower my premiums?
Because your premium is based partly on
the level of risk the insurance company must take, there are things you can do
to lower your premium. Installing deadbolt locks (to discourage theft), fire
extinguishers, smoke alarms, and burglar and fire alarms that alert your local
police and fire stations can often save you up to 15 percent on your premium.
Check with your agent before purchasing any of these items to see if your
insurance carrier has specific requirements to qualify for the discount.
We offer discounts if you insure both
your home and automobile with the same company. Another way to save may be to
increase the deductible on your homeowners policy. If your deductible is $100,
it means that you agree to pay this amount first, and your insurance company
will pay for damages that exceed this deductible. By increasing your
deductible from $100 to $250, or even $500, this decreases the insurance
company's risk, which may mean a savings in your premium.
Your insurance agent can help you
evaluate the different policies and companies to find the one most suitable
for you.
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I
am a renter, not a homeowner. Do I need insurance?
The same rule of thumb applies to renters
as to homeowners. If catastrophe struck tomorrow, could you afford to replace
everything you own? Or if you were sued, would you have enough money to pay
legal fees and possibly settle the suit? If not, chances are you would benefit
from the protection that renters insurance brings.
Renters insurance offers the same
general personal property coverage and liability protection as a homeowners
policy. Thus, your camera is insured while you are on vacation, and you are
covered if your grandfather clock crashes into the apartment lobby's wall and
leaves a gaping hole. In fact, most policies are surprisingly extensive and
may include additional living expenses (also called loss-of-use coverage) if
you are forced by fire or other damage to live elsewhere.
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What
are the different types of policies and what do they cover?
Auto insurance is divided into several
different types of coverage:
- General liability
covers damage you may cause to other people's property and injuries to the
people themselves.
- Collision covers
damage to your own vehicle in an accident.
- Comprehensive
(other than collision), i.e., fire, theft and other non-collision damage,
covers fire damage to your vehicle, break-ins, vandalism or theft, as well
as natural disasters (earthquake, hail, hurricane, flood, etc.—unless
the vehicle is overturned, then it is considered a collision).
- Personal Injury
Protection (P.I.P.) insurance, usually in the range of $10,000 to
$35,000, covers medical expenses for injuries. This "good-faith"
coverage guarantees immediate medical payments for you, your passengers
and other parties, regardless of who is at fault. It also covers you and
members of your household in any accident involving an automobile, whether
you are on foot, on a bicycle, in a friend's car, etc.
- Uninsured motorist
(UM) and underinsured motorist (UIM) coverage protects you if you
are injured in an accident with others who themselves carry insufficient
or no liability insurance.
- Extra coverages
include expenses for towing, labor, temporary replacement vehicles, etc.
These are generally defined as add-ons or endorsements to your policy.
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Why
and how are policies priced for different drivers?
Drivers are grouped according to the level of risk each one poses, i.e., the
amount of loss incurred by insurers within various categories of policy
holders. For various reasons, drivers are categorized by:
- Sex—Men have
more accidents on the road than women.
- Age—Drivers
under 25 (and, for some insurers, under 30) are considered at higher risk
of having an accident.
- Marital Status—Married
drivers tend to have fewer accidents than single drivers.
- Personal Driving
Record—Years of driving experience, accidents, speeding tickets and
drunk-driving offenses are all factors in determining how much of a risk
you pose as a motorist.
- How You Use Your
Vehicle—If you commute by car during rush hours, you're at greater
risk of having an accident than if you only drive for errands and
recreation on the weekends. Drivers who use their own vehicles for
business also are considered to be at greater risk.
- Type of Vehicle—The
value, size, weight, age of your vehicle—even the cost of replacement
parts—are essential to determining the price of your insurance. Larger,
heavier vehicles are considered at lower risk than smaller, lighter ones.
Plus, more expensive cars are costlier to have repaired than economy
models.
The cost of your insurance policy is
based on the average cost of covering actual losses, spread out over your
particular "rating group" as a whole. Of course, you may never have
an accident or have your car stolen, and therefore will never need to be
compensated. But others in your category may not be so lucky. Your premium
will help to pay for their losses, just as their premiums would help to pay
for yours. In other words, you are investing a little today in case you need a
lot tomorrow; your investment is pooled with others, and the pool pays for
your loss.
For example, if you are a 23-year-old
man and you park your new sports car on a downtown street in a large city, you
will likely pay more for insurance than a 37-year-old woman who parks her
four-wheel-drive in the suburbs, simply because—based on average
losses—you have a greater chance of having an accident or being the victim
of auto theft.
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What
happens if I have an accident with an uninsured driver?
First, call the police to the scene to be sure all pertinent information is
properly recorded. Your nerves will be shaken right after an accident, and it
helps to have a calm and knowledgeable person walking you through the
necessary details.
Then, contact your agent immediately and
ask about filing a claim. If you followed all the recommended guidelines when
you bought your policy, you should be covered within the limitations of that
policy. Remember, your insurance policy is designed to protect you.
If the cost of your damages or injuries
exceed the amount your policy will pay out, it may be time to take legal
action against the other party. Even if you have no-fault insurance, sometimes
the only way to be compensated is to place blame and responsibility where it
belongs.
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What
happens when I loan my car to someone? Is that person covered by my policy? Am I
still covered?
Yes. Liability and coverage for physical damage, i.e., comprehensive and
collision, always follow your car. So, if a friend borrows your car and has an
accident, you're still protected against the cost of damages or injuries.
Plus, if the driver of your car is insured, his/her policy will also be
available to cover the cost of damages and injuries.
The same rules apply when you borrow
someone else's vehicle—your own insurance follows you no matter whose car
you are driving. But the vehicle owner's policy is the key coverage if you
have an accident.
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