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Liability Coverage

Written by Todd Clay. Posted in Definitions Last Updated: 10/05/2010

What is liability insurance, is it important, and is it required on your auto insurance policy?

Liability Coverage Is Required In Most States

Liability Coverage Is Required In Most States

Liability coverage is the main reason people purchase auto insurance. That’s because your state probably requires it. There are many coverages you can get on a car insurance policy. What exactly is “liability coverage”?

What Liability Coverage Does

Liability insurance or liability coverage is the part of your auto insurance policy that covers other people and property in case you cause an accident. In other words, if you accidentally ram another vehicle, you will be on the hook for the damages to the other car and the people in the car. If you cause an injury to someone in the other car, the other party could sue you for the damages you caused. In such an instance, liability coverage steps up to cover those damages.

Liability coverage does NOT cover damages you cause to your car or yourself. Comprehensive and collision covers the physical damage to your vehicle. When coupled with liability coverage, that’s also called “full coverage” insurance. Personal Injury Protection (PIP) or Medical Payment covers physical injury to yourself or anyone in your car. Some policies even have life insurance included. But liability coverage is completely separate.

Two Parts: Bodily Injury & Property Damage

There are two parts to liability coverage: bodily injury and property damage.

Bodily injury coverage covers the injury you cause to passengers in other vehicles in at-fault accidents. If you cause a wreck, you’re responsible to paying the other person’s medical expenses, emergency aid, loss of income, funeral expenses, legal defense fees, and more. These expenses can run into the tens of thousands of dollars – even hundreds of thousands of dollars.

Property damage coverage covers the property damage you cause in an at-fault accident to other vehicles, buildings, lamp posts, etc. Like bodily injury coverage, these damages can run into the hundreds of thousands of dollars – especially in a multi-car collisions.

The way it’s listed on your policy is three numbers separated by forward-slashes. Ex: 25/50/25 The first number relates to the bodily injury coverage for one person multiplied by 1000. In the above instance, there is $25,000 in bodily injury coverage for one person injured. The second number relates to the limit of bodily injury coverage in any one accident. Here, the coverage limit is $50,000 – no matter how many people are injured in the other vehicle. The last number relates to property damage, also $25,000.

Liability Coverage Required In Most States

Because of the potential damage one driver can cause, all states require you be financially responsible for any bodily injury or property damage you cause in an at-fault accident. Most states require drivers to carry liability coverage on your auto insurance policy to meet that financial obligation. Check with your agent to see if it’s required in your state.

Even if it’s not required, you are still responsible for paying bodily injury and property damage in at-fault accidents. You could be sued for damages if you don’t have liability coverage in place. To be safe, it’s good to at least have minimum liability coverage. In most cases, it’s the law.

What Happens if You Cancel Your Auto Insurance?

Written by Todd Clay. Posted in Research Last Updated: 09/18/2010

Consequences for canceling your car insurance – and not renewing.

If you’re still driving, canceling your car insurance can be a serious matter. Should you decide to drop coverage and NOT find a new policy, there are consequences to consider.

Not only do you have to worry about state laws and cancellation fees with your insurance company, but you should also think about how it will affect your next auto policy.

Canceling Car Insurance Against The Law?

Technically, the act of canceling your auto insurance is not against the law. However, most states require you to be listed as a driver on a policy if you are licensed and driving a car. At this time (Sept 2009), only Wisconsin and New Hampshire do not require drivers to carry liability insurance. Every other state does.

Let’s say you cancel your policy and decide not to get a new policy. You’re not listed on anyone’s policy so you’re driving uninsured. If you’re caught, penalties vary from state-to-state. Fines range from $100-1000+. In some cases, your driver’s license can be suspended and your car could be impounded. In other words, you risk legal fees, fines, penalties, and a potential suspended license for not carrying auto insurance.

In addition, if you have an accident without insurance things can get ugly. Depending on the severity of the incident and who’s at fault, you could be sued for damages. Potential losses could be in the hundreds of thousands of dollars or more. Bottom line, it’s not worth it – you should always maintain coverage if you drive.

Getting Insurance After Not Being Covered

So let’s say you’ve been driving uninsured and you decide to get another policy. At that point, you’ve been driving for over 30 days without insurance. Each insurance company decides what to do. Most likely, you would not qualify for preferred rates. Insurance companies will often give you non-standard or high-risk rates. Some companies won’t even write a policy without continuous coverage.

If you can get coverage after being uninsured, you’re likely to pay twice as much (or more) to get a non-standard policy. That’s yet another reason to keep your auto insurance if you’re driving a car.

One more thing: even if you don’t own a car, you should be listed as a driver on a policy in your household. If you have accident in the insured vehicle, the company could deny the claim if you live in the household. However, if you don’t own a car but are still driving, you can get a “named non-owner” liability policy. Non-owner policies are more affordable than regular liability policies. Getting a non-owner policy is an affordable way to maintain continuous coverage.

Switching Insurance Agents

Written by Todd Clay. Posted in Research Last Updated: 09/07/2009

Three Steps To Switching Agents & Reasons Why You Should

How to switch insurance agents.

How to switch insurance agents.

What happens when you’re ready to switch insurance agents? If something happens at your local insurance office and you’re no longer comfortable dealing with the same people, it may be time to look somewhere else.

Many companies still use the agency-model for selling and servicing policies. State Farm, Allstate, Nationwide, & Farmers are major auto insurers that still use local agents. That means if you want to get insurance from these companies, you are usually dealing with a local agent. There are now exceptions to that rule, but that’s still the norm.

Reasons to Switch Agents

There are a couple of good reasons you might want to look for another agent. For one, you have a bad experience with the agency. For instance, the agency staff may speak to you in condescending tones any time you have a problem. Or it may take awhile for you to get new insurance cards if you lose them.

Bad service on a consistent basis is a good reason to leave your current insurance agent. Agents are paid a commission on every policy they sell and service. If your agent doesn’t respect the person who pays their bills (you), it’s probably time to take your business elsewhere.

Another reason to switch agents is after a move. If you’ve moved out-of-state, state insurance laws usually require you to update your policy within 30-days after relocating. Contact a local agent in your new town, preferably one close to your home or place of business. You may also want to get quotes from other companies – auto insurance prices vary state-to-state and your current insurer may be higher in your new state.

In-State moves are different. If you move somewhere else in the same state, you can usually keep your same insurance agent. However, many people like the convenience factor of a local agency. If you like having someone close-by, then contact a local agency and initiate the process.

Three Steps To Switching Insurance Agents

It’s easy to switch insurance agents while staying with the same insurance company. If you’re ready to switch agents or transfer your policies, there are three steps to follow…

1) Contact Your Current Insurance Agency

I know this may be an uncomfortable step, especially if it’s a bad service issue. But your current agent should know why you want to leave. Other agencies sometimes encourage customers to leave their current agencies – and you want to reassure them that is not the case.

You can contact your current agent by phone or email. After you let them know, ask them what you need to do to transfer your policies to another agent. They may want to discuss it – that’s why it may be easier to just send an email.

2) Contact Your New Insurance Agency

As you might imagine, your current agent is usually not in a hurry to release your policies – especially if it’s for a bad service issue. That’s why you should contact your new insurance agency on the same day. That way you have two parties involved in the process. If your current agent doesn’t handle it, your new agent will usually make it happen.

3) Check On the Progress

The last thing you want to do is check on the transfer. Companies vary on how long it takes to transfer policies – from a few days to a few weeks. But it should not take longer than a month. Contact your new agent after a few weeks just to make sure it’s complete. If it’s finished, it may be a good time for a quick review to make sure everything is in order.

Lost Car Insurance Card?

Written by Todd Clay. Posted in Related Stuff Last Updated: 08/21/2012

Coping with a lost car insurance card, things to consider, and how to get a new insurance ID card. Get the skinny from a non-agent now.

What to do when you lose your insurance ID card.

When you lose your insurance ID card…

Ever dealt with a lost car insurance card?

It’s the one you get in the mail every 6 months or so with your policy. Most of us have misplaced our insurance ID card – also known as ‘proof of insurance.’ It’s not uncommon. Reality is, most of us don’t think about our ID card until a police officer stops us and we’re thumbing through the glove box.

Getting A Replacement for a Lost Insurance Card

It’s not the end of the world if you lose your insurance ID card. You get it directly from your insurance company and there’s usually no hassle. It’s easy to get a new ID cards.

First off, call your insurance company. You can get their phone number online or on your policy. Some companies provide this service on the internet. However, you will need your policy information to login to their online system.

Second, once you get a customer service representative on the phone, just ask them for it. Since it is a service request, you don’t even need a licensed agent to send you your ID card. These days, cards can be emailed, faxed, or snail-mailed to customers.

One caveat to this process – some companies may charge you for replacement ID cards. It’s usually just a nominal fee. In my opinion, this is an unnecessary charge. Such nickel-and-dime operations cause the insurance company to lose more goodwill than what they gain from a $5 service charge. If you’re with one of those companies, it’s probably time to shop around. You don’t want a company that sticks it to you every chance they get.

My Experience with ID Cards

When I was an insurance agent, I took many phone calls where my customers probably threw away their policy (and ID cards) before looking in the envelope. It happens. In fact, that was the main reason people customers called our office – a lost insurance card. Whatever happened to it, it got lost in the shuffle and the customer needed a replacement.

I recently called my current insurance company, GEICO, for a new set of ID cards. The representative was very polite and said she could send them out, no problem. That’s exactly the service I expect. Don’t make me feel bad because I misplaced something – just put it in the mail and be done with it. The next time I lose my ID card, that’s the treatment I’ll expect.

Will A ‘Hit and Run’ Raise Your Rates?

Written by Todd Clay. Posted in Research Last Updated: 08/18/2012

How a Hit and Run Incident Affects Your Auto Insurance – You Might Be Surprised

What Happens To Rates After a 'Hit and Run'?

A ‘Hit and Run’ Can Affect Rates.

Unfortunately, ‘Hit and Run’ accidents are a fact of life on the road. Hit and Run incidents are car accidents where one or more parties fails to stop, provide information, and render aid when necessary. In other words, if you have an accident with another vehicle and drive off – even if the other car was parked – you were involved in a Hit and Run accident.

There are many Hit and Run incidents every year on US highways. According the National Highway Traffic Safety Administration (NHTSA) in 2003-2006, one in eight accidents were Hit and Run. It’s estimated there are over 700,000 Hit and Run incidents every year in the United States. If you haven’t been involved in one yet, chances are you will be in one in your lifetime.

There are two parties in a Hit and Run accident: the person “hitting and running” and the other driver and/or car. Hit and Run accident affects both party’s auto insurance rates differently.

Rates For the Person “Hitting & Running”

If you caused an accident and drove away, you are responsible for a hit and run – even if the other vehicle was unoccupied. If the accident is ever traced back to you, then your insurance could charge you with an at-fault incident. This will probably be a surcharged incident which would result in higher premiums.

Hit and Run incidents are more serious than regular at-fault accidents. It could stay on your driving record for 5-7 years, depending on your state. If your insurance company discovers it’s a Hit and Run, they may also cancel your coverage. This would mean even higher premiums at your next carrier.

Every driver should know a driver’s responsibility in any accident – stop your car at a nearby, safe place, check on the other driver, and give them your information. If you drive off, you could be in more trouble than just rising insurance rates. If the victim is injured or dies as a result of the accident, police will investigate. If you’re guilty of a Hit and Run traffic death, the courts could find you guilty of felony manslaughter. You should contact an attorney in that situation.

Bottom line: if you’re involved in an accident, do the right thing. Stop, provide your information to the other driver, and render aid when necessary – regardless of who’s at fault.

Rates for the Victim of a Hit and Run

If you are the victim of a Hit and Run incident, your rates should be unaffected. Hit and Run accidents are common and insurance companies usually do not fault the other driver for the incident.

However, whether the incident will be covered is a different question. There are two coverages that would cover a Hit and Run: Uninsured/Underinsured Motorist (UM) and Collision. Insurance companies offer Uninsured Motorist coverage for times like these. Hit and Run incidents are covered minus your deductible in most cases. If you do not carry UM, then your Collision coverage should pick up the tab – minus your deductible. That’s one of the reasons you should carry UM or Collision at all times.

The particular coverage that would be used to cover your damages from a hit and run accident all depends on the state that you live in and also your insurance company you have coverage with.  For example, in the state of Washington a hit and run accident is covered under the UM coverage and you are required to file a police report. If the driver that hit you is identified the damage is still covered under the UM coverage, but you are subject to a lower deductible than you would be if the other driver was never identified. In the state of Idaho some carriers do not even sell UM coverage and all hit and run accidents are covered under the collision coverage.

Regardless, if you’re involved in a Hit and Run, contact your insurance company. They will provide the best advice for handling your claim. Depending on the severity of the situation, they could also provide legal counsel.

If you have experience with a Hit and Run accident, feel free to leave a comment.

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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.