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Should I Drop Full Coverage?

Written by Michele Wilmonen. Posted in Research Last Updated: 04/26/2011

You should drop full coverage on your vehicle when the premium exceeds the amount the insurance company would pay for your vehicle or you simply cannot afford the premium of full coverage.

Woman Pondering if she Should Drop Full Coverage

Dropping full coverage from your insurance policy is something that needs to be carefully thought about.

An insurance policy that has full coverage is a policy that has comprehensive and collision coverage on the policy in addition to the mandatory liability coverage.

Having full coverage on your vehicle protects you from financial hardships if you are in an accident and your vehicle is damaged. This coverage will pay for most damages to your car and all you have to pay out of pocket is your deductible.

Before you make any changes to your policy always consult your insurance agent as there are times that keeping the full coverage on your vehicle is mandatory or will save you more money in the long run than what you would save if you dropped the coverage. But, if you feel that having full coverage on your vehicle may not be what you need right now, you need to ask your agent: “should I drop full coverage?”

Vehicle is Not Worth Much

If your vehicle is an older model and not in very good condition or the vehicle just does not have a high value the premium that you may be paying for full coverage on your older vehicle may be more than the insurance company will ever end up paying out for it. Instead it may be a good idea to cancel the full coverage on your vehicle and just put the money that you would be paying for the insurance aside to cover any damages that may happen to the vehicle.

If you are good at not spending this money, you will even have a down payment for a new vehicle if you older vehicle is totaled in an accident.

You Have the Cash to Pay for Damages

If you can afford to pay out of pocket for any damages that may happen to your car or a down payment on a new car if your vehicle is totaled, it makes no sense to pay an insurance company to do something that you can do yourself. If you never get into a car accident and the insurance company never has to pay out on any claims, you basically just wasted your money

You Cannot Afford Full Coverage

Sometimes no matter how hard you try the ends just don’t meet. To save money in your monthly budget you may want to consider dropping your full coverage on your vehicle as you only need the liability coverage to legally drive. However, if you were to get into an accident you are on your own to get your vehicle fixed and if your vehicle is declared a total loss by an adjuster you will have to find a different mode of transportation to get where you need to go until you can get the money together to get a new vehicle.

So keep in mind the consequences if you do drop full coverage on your vehicle and consider if the risk is worth the money you will be saving each month.

Who Sells Gap Insurance?

Written by Todd Clay. Posted in Related Stuff Last Updated: 04/26/2011

Gap insurance covers the difference in the value of the vehicle and the balance of the car loan; it can be purchased from car dealers, auto financing companies and your insurance agent.

Gap Insurance protects your finances if your new vehicle is a total loss.

Gap insurance is a special insurance coverage that is available for your new vehicle to protect you from financial hardship in the event of your vehicle being a total loss in an accident.

It is a coverage that is only offered in certain circumstances and can vary in price depending on who sells gap insurance. If your new vehicle qualifies for Gap coverage it is best to shop around for the coverage and not accept the first offer.

What is Gap Insurance?

If you were to get into a car accident and the damages to your vehicle exceed a certain percentage of the value of the vehicle (usually 80%) the insurance company will total out your vehicle and pay you for the value of the vehicle instead of fixing it.

Sometimes though the amount that they pay your does not meet the amount that you may still owe on your car loan. For example, the insurance company may pay you $8,000 for your vehicle, but you still owe the bank $10,000. This $2,000 dollar gap is exactly where gap insurance comes in handy.

If you purchased gap Insurance on your new vehicle, it would step in and pay for that $2,000 left over on your car loan so that you were not still paying on the loan even after you no longer had the car. Gap can only be purchased on new vehicles and certain used vehicles depending on the insurance company and the coverage always has to be purchased within a certain frame right after buying the new vehicle.

Car Dealers Sell Gap Insurance

When you purchase a vehicle from a car dealer and sign the finance papers with them, one thing that they will offer to you is gap insurance. It is part of the paperwork that they go through with you when they are trying to get you to add warranties, extra interior packages and whatever else they may be able to throw in to increase the price of the vehicle.

If you add gap coverage at this time it will be added into the total amount of your vehicle that you are going to finance. Even though the gap coverage does not seem like a lot when you break it down into your monthly car payments, the total amount that you are paying is quite high and you could possibly get gap insurance cheaper from other sources.

Finance Companies Sell Gap Insurance

Just like when the dealership sets up the financing with you and offers gap insurance so do auto loan financing companies. If you plan on getting a loan through your bank or other source and purchasing your vehicle that way, they too are going to offer you gap insurance when you sign the loan papers. Again, just like with the car dealerships the price that they offer their gap insurance for could probably be found at a lower price elsewhere.

Insurance Companies Sell Gap Insurance

The least expensive way to purchase gap insurance is to purchase it through your insurance agent. The gap coverage can be added to your current insurance policy when you add your new vehicle to the policy. The cost to do this is considerably less expensive than adding it to your car loan. For more information and to find out the requirements to have this coverage, contact your insurance agent.

Insurance Underwriters: Keeping The Company Profitable

Written by Michele Wilmonen. Posted in Definitions Last Updated: 05/02/2011

An insurance underwriter is responsible in deciding what risks the insurance company should take on that won’t result in a large claim that has to be paid out later.

An Underwriter Looking Over Numbers

Underwriters analyze data to determine if an applicant is a good insurance risk.

While agents are essential to gaining clients for an insurance company so that the company can make money, it is the insurance underwriters who keeps the insurance company from making bad insurance investments and losing money on clients.

Underwriters are a vital part of an insurance company and a larger part of peoples insurance than they realize as the only parts of the insurance company that most people have dealings with are their agent and a customer service agent. While there are underwriter’s in all fields of insurance, we are going to concentrate on what an auto insurance (personal and commercial) underwriter does.

What is an Underwriter?

An underwriter is an employee of an insurance company that decides whether the company should insure certain people and situations. First, they gather all of the information about the person applying for insurance, such as their driving record with the Department of Motor Vehicles, their CLUE report that contains their claims history with past insurance companies and also their credit report.

Next, they look at the information and statistics of the field they have their business in (for commercial insurance), the area that they live in (for weather claims, theft rates, ect) and any other pertinent information that may need.

Finally, after they have gathered all of the information that they need, an underwriter makes a decision as to the level of risk that this potential insured presents to the company. Level of risk just means how likely the applicant would end up filing a claim that the insurance company would have to pay out on and also the extent and monetary value of how much would end up being paid out for a claim.

If the risk is low, the underwriter approves the application and the premium. If the risk is too high, the underwriter denies the application and the person applying for insurance either has to make certain changes before they are approved or they move on and apply with another insurance company.

While no one can ever predict the chance of a claim being filed, it is very important that an underwriter be vigilant and make the best decisions possible in who the insurance company insures or it could cost the insurance company a lot of money in claims later down the road.

What Is Required To Be An Underwriter?

The requirements to become an underwriter all depends on the insurance company. One requirement that is usually seen with all companies though is that the applicant has at least a Bachelor’s Degree and experience working with computers. Other education that is helpful to obtain a position and also advance in the field once you are hired there are courses through the Insurance Institute of America and also The American Institute for Chartered Property and Casualty Underwriters.

Where Are Underwriters Located?

Underwriters are usually located in the main corporate and regional offices of insurance companies, but as technology continues to advance, more and more they can also work from their homes. Because everything is being stored on computers all that an underwriter now needs is a computer and a desk to be able to do their job.

For simple underwriting situations, underwriters can even be a piece of computer software that makes a decision based on the records of the person applying for insurance and also the statistics.

Insurance Agents: What They Do For You

Written by Michele Wilmonen. Posted in Definitions Last Updated: 05/01/2011

Insurance agents have the option of being an independent agent or exclusive agent and have the option of selling many different types of insurance.

Insurance Agent at her Desk

Your insurance agent is there to help you with your insurance needs.

The simple definition of an insurance agent is someone that sells insurance products. There are insurance agents in just about every city and town across the nation and they can be independent agents and sell for a number of different insurance companies or they can be agents that sell just for one company.

Agents are not bound to selling just one type of insurance either; they can also sell different insurance products just as long as they are licensed in the states that they sell in.

Independent Agents

An independent insurance agent is just what it sounds like – an insurance agent that is an independent entity not attached to any insurance company in particular. Independent agents pick and choose what insurance companies that they want to sell and can sell for a number of different companies all at the same time.

The benefit of being an independent agent is that you can offer your potential clients a number of different insurance companies to quote so that they can chose which one to go with. This option gives an independent agent the upper hand in selling to new clients and also in being able to keep clients that are already on their books, when they are not happy with the insurance company that they are currently with.

Exclusive Agents

Opposite of the independent insurance agent are the agents that exclusively sell just one insurance company’s products. They are not employees of the insurance company that they sell for, but more like independent sales agents that only have one thing to sell. These agents specialize in one company and are more familiar with the ins and outs of the single company that they sell for, more so than the independent agent that sells for multiple companies.

Agents Sell Different Insurance Lines

While we concentrate on auto insurance here at, insurance agents have a broader insurance approach. An agent that is licensed to sell auto insurance can also be licensed to sell home, commercial, crop, fleet insurance, specialty and health insurance. The more insurance lines that they are able to write for, the more money they can make.

How do You Become an Agent?

To sell insurance as an agent you have to first be licensed in the state that you are planning on selling insurance in. Each state has different rules, regulations and procedures for you to follow in order to get your insurance license. The one thing that is the same in every state is that you are required to pass a licensing test before you can be licensed to sell insurance in that state.

To find out what these requirements are contact your state insurance commissioner or visit their website for more information. If you are already working for an insurance agency, the agent that you are working for can also be a good resource for information on how to obtain your license.

Customer Service Representative (CSR)

Written by Michele Wilmonen. Posted in Definitions Last Updated: 04/26/2011

A CSR, also known as a Customer Service Representative, can be found in both your insurance agent’s office and also with your insurance company to help you with your basic insurance needs.

CSR Talking on Phone

A CSR has access to most of your policy and claim information to help you.

When you call your insurance company or insurance agent’s office the first person that you usually speak to is a Customer Service Representative or CSR.

Never heard of that term before?

CSR is just an abbreviation for a customer service representative and other than being used heavily in the fields that employ them, the term CSR is rarely heard in every day conversation.

Where You Find a CSR

Customer Service Representatives are found throughout the insurance industry. They work in your insurance agent’s office and they work directly for your insurance company. Wherever there may be contact with you, the customer, there is usually a customer service representative.

You will usually find the CSR sitting in the front part of the insurance agent’s office. With an insurance company, the CSR is the one that answers the phone to assist you first. In both cases they are there to try and assist you with what they can and re-direct you to a higher up person for the items that they can’t.

What a CSR Can Help You With

A CSR can help you with everything that does not require a license to sell insurance. This means they can answer your insurance questions, give you insurance quotes, help you file a claim, talk to you about your billing and take payments on your insurance policy. What they cannot do is actually sell you insurance or give you coverage counseling without the assistance of a licensed agent.

Some CSRs are licensed so that they can assist you with everything. Whether they are licensed or not depends on if the agency they are working with needs them to be licensed in addition to the licensed agents they already have so that the CSR can offer additional assistance to clients.

A CSR that works directly with an insurance company is only licensed when the company’s business plan includes offering insurance sales directly through them to help their independent insurance agents that sell their coverage or to forego selling through agents and just selling insurance directly.

What is a CSR Paid?

The regular pay of a CSR can be in one of two forms; hourly wages or salaried. How they are paid depends on where they work and how that insurance company or agency pays their employees. Most CSR’s are on hourly wages as their hours can vary and it is easier to figure out pay if you pay by the hour.

Also the CSR is usually the first position to have their hours decreased if the agency or the insurance company is in need of decreasing their expenses. Again it is easier to cut hours with an hourly wage earner than it is to rework the wages of a salaried employee.

If a CSR is licensed, in addition to their normal base salary, they could also earn a small commission for the insurance that they sell. The amount again depends on the insurance company and in the case of an agency, how much of the commission that the agent wishes to part with.

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Car Insurance Guidebook Unravels the Car Insurance Mystery

Unless you work in the car insurance industry, the topic is probably a mystery to you. The words deductible, comprehensive, collision, liability, premium, loss of use and bodily injury are all gibberish when they reach your ears.

Unfortunately, insurance is something that you are required to have by law if you want to drive. Because of how confusing it is many people go around in almost an insurance daze while they get car insurance quotes from the auto insurance companies that they have heard of. In reality, they are completely lost as to what they are actually buying.

Instead of looking at what each insurance company offers in the terms of protection for both themselves and their car, they are instead looking for cheap car insurance. Finding the cheapest car insurance coverage makes having to buy the required product all that much less painful, but misses the whole point of having insurance.

Learning about insurance through your insurance agent or websites like Car Insurance Guidebook will give you the upper hand when you looking for car insurance. You can take your knowledge and not only find the best price for insurance, you can use it to find really great insurance to protect you and your assets. Then you aren’t stuck settling for just average car insurance that can hurt you financially if you ever need it because there isn’t enough protection.

For example, when looking for insurance the car insurance rates are just the first of many factors that need to be taken into account when you are shopping around for car insurance. You also need to take into account the type of vehicle that you are driving. Many people don’t know this.

Are you driving around a vehicle that is a new sedan and can be protected under any blanket insurance policy? Or do you have an old car that you fixed up that needs special protection and could be better covered under classic car insurance?

Don’t just assume that when you compare car insurance that it will be a one-size-fits-all policy. This is where the insurance knowledge will come in handy; you will know what you need to protect yourself and your vehicle.

You will understand what your insurance agent is talking about when they use insurance terms and you will actually be able to make an informed decision. This is much better for you instead of the “nod and smile” approach people take in their insurance agent’s office.

Also just like your life changes your insurance needs will change. This year you may just need to learn about the best deductible to have. Next year you may need to educate yourself on car insurance for young drivers. As the years pass, motorcycle insurance may be something you will need to know.

Many wise people say that you never stop learning, so take their advice and educate yourself on the insurance that you spend a lot of money on and can’t get away with not having.