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Frequently Asked Questions


 

What is the difference between standard and basic insurance?

The Basic Policy covers only the state requirements while a standard policy covers damages to the insured vehicle and driver along with the occupants in the insured car. You should be aware that each state has its own limits as to how much coverage is required and also some stipulations regarding those coverage’s. For example in Florida if you do not carry Bodily Injury Protection the state requires that you post a bond and submit documentation showing at least $30,000 worth of savings in order to cover claims by others as a result of an accident where you are at fault.

What is no-fault car insurance?

If your state has a "no-fault" auto insurance law, your policy must pay medical bills for you and your passengers regardless of who caused the accident. No-fault laws are intended to keep insurance fraud down.

What if I get into an accident in another state and my insurance is lower than the requirement in that state?

Automobile policies most likely have an Out of State provision which provides coverage for you when you are driving outside of your home state. Your policy will conform to the requirements of the state in which the accident occurred. If your limits are below the states set requirements they will be adjusted to conform to the financial responsibility laws of that state.

What is an Umbrella policy?

Umbrella insurance is insurance to protect assets and future income, above and beyond the standard limits on your existing policy. It is called an umbrella policy because it covers liabilities to both your home and auto policies and is sold in increments of one million dollars. These policies are offered through you auto policy and generally require that a set minimum of liability coverage exist before an umbrella policy can be issued. For instance if you carry $300,000 on your auto insurance liability and $500,000 on your home liability policy with a $1,000,000 umbrella, you limits become $1,300,000 and $1,500,000 respectively.


Should I purchase rental car insurance?

Most auto policies have a provision to cover a vehicle driven but not owned by you. The question as to whether or not to purchase the additional insurance offered by a rental car company is a matter of opinion. Many believe that if you are a frequent renter that over time it can save you lot money by declining the rental car agencies insurance and just using your own. Others feel that the peace of mind offered by taking out the rental car insurance outweighs the price when you consider a future rate hike may be in order if you have to make a claim against your own insurance for the rental car damage. Another thing to consider is the insurance offered by credit cards on rental cars it is usually a fraction of the cost offered by the rental car company.

What is considered a good driving record?

Generally an insurance company will look at the last five years of your driving history to determine your rate. It will increase the premium due to accidents, moving violations and license suspensions. The information could also be used to deny a driver coverage.

At what age will my son or daughters insurance be lowered?

Since young drivers have no driving record and are generally considered riskier drivers, they are assessed at a higher rate. This rate can be lowered by taking advanced driving classes or maintaining a good GPA. Once the young driver reaches the age of 25 they are reassessed and the rate adjusted to a lower level comparable to mature driver.


Is there much difference between living in the city and living in a rural area?

Where a person lives is one of the criteria that insurance companies use to determine you rate. Living in the city generally means dealing with more traffic and narrow streets, usually with lots of pedestrian and bicycle traffic. These combinations tend to produce a higher percentage of auto accidents and bodily injury compared to rural areas. This generally results in higher premiums for drivers in congested areas.

Does the amount of miles I drive affect my insurance rate??

High miles equals’ high risk, the more you drive the higher the risk for being involved in an accident. Insurance companies put people who commute long distances to work on a daily basis to in a higher risk category than those who use their car only on weekends or simply for pleasure. Therefore simply stated yes you will generally pay more for auto insurance, if you drive less than 10,000 miles a year you could qualify for a discount. You may be tempted to underestimate your mileage, when asked by your insurance company, don’t do it. Although it is unlikely the insurance company will come to your house and check, if you are filing a claim for repairs and the mileage is drastically different than what is expected, your claim may be denied, making you financially responsible for all damages. You can also be held liable for insurance fraud, if proven guilty under the law.

If I was convicted of DUI will I have to pay more for insurance?

If you are convicted of DUI (driving under the influence) depending on the state it could tarnish your record for 7-10 years and may result in you being dropped from coverage altogether. Once a record becomes clean insurers in some states cannot use a past DUI to charge higher rates.

Do I need insurance for my motorcycle?

Motorcycles are treated the same as any other motor vehicle by all states. This means that motorcycle insurance is required in most states but not all... Most states do require medical liability insurance or some form of proof of financial responsibility. This is to pay for injuries you might incur in an accident whether or not you are at fault. There are some exceptions, however, and some confusing laws to be aware of when making your decisions. Check with a qualified agent in your state to determine what is required.

Will buying a new car increase my rate?

Generally yes, because a newer car will cost more to replace than an older car. Insurers will take into consideration the potential repair costs, buying an expensive car will usually cost more to repair than an non-luxury vehicle. Also many luxury cars are rated as performance vehicles which carry a greater risk. Safety ratings are another consideration. Look for a vehicle with a higher safety rating this help will lower your premium.

What is GAP coverage?

GAP insurance covers the gap between what you paid or owe on the car and the book value of the car. Once the car is driven off the showroom floor it is considered a used vehicle and the worth drops significantly. GAP insurance reimburses the insured for this difference in value. If a driver is involved in an accident and the car is totaled, an insurer will only cover up to the actual cash value of the car, unless GAP coverage is in place. This means that without GAP coverage you may end up paying the difference between the insured value or book value and the amount you still owe on the car.


What is an Assigned Risk Plan?

This is a type of auto insurance plan that gives the ability to obtain insurance from a pool of insurers to individuals that have previously been denied insurance coverage based on risk factors. All licensed insurers must participate in this type of plan and are allowed to determine their own rates. Individuals cannot be denied this type of plan. However the fees are usually much higher than regular auto insurance plans.

What is a Tort State?

Under a state with a Tort system, if you are involved in an accident, someone must be held liable for the cause of the accident. The person at fault is generally responsible for all damages. Compensation for claims is the responsibility of the person found to be at fault. If you are operating a motor vehicle in a Tort state, it is recommended you carry a higher limits for liability than just the states minimums requirements.

 

What is a No-Fault state?

Under no-fault automobile insurance laws, the good driver does not have to prove that the crash was somebody else’s fault before getting his money. His insurance company picks up medical bills, rehabilitation costs and lost wages up to the amount he purchased. The tradeoff is the injured person cannot sue the other driver for pain and suffering, emotional distress and inconvenience. (If you live in a no-fault state, the no-fault portion of your auto insurance policy is usually called PIP or Personal Injury Protection.)

At present, there are 12 states that have no-fault insurance:

No-Fault States:


Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah


When it comes to physical damage to your car or its contents, unlike compensation for bodily injury claims, insurance claims are still based on fault. Those claims are handled in the same way as those in a state with a fault law: by filing a lawsuit against the bad driver or looking to your own collision insurance.

Lawsuits, however, are permitted for injuries meeting a certain threshold, the definition of which varies considerably among the no-fault PIP states. An injured person can sue if the claim exceeds either a monetary or verbal (descriptive) threshold. In monetary threshold states (see below), medical expenses must be over a certain dollar amount. In verbal (descriptive) threshold PIP states (see below), injuries must be relatively “severe” (significant loss of use of body part, disfigurement, permanent disability, bone fracture) or expressed in terms of length of disability (full disability over 180 days). Some states have both, in which case an injured person can file a liability claim if he meets either one.

Because of the different hybrids in the PIP packaging, whether you can file an injury liability claim really will depend on the specifics of your state’s no-fault automobile law. Your best first step is to contact a car accident attorney to discuss how the relevant state law looks at fault and how that law affects your right to recover damages.

States with Add-On Coverage:


To complicate matters, some states have “add-on” no-fault automobile insurance laws. “Add on” allows the driver to purchase personal injury protection as an optional coverage. The plan pays benefits to the injured without regard to who caused the accident, but the driver can sue (and be sued) for accident-related injuries and pain and suffering. The following are “add-on” states:

Arkansas, Delaware, D.C. and Maryland

Thresholds:

As stated above, no-fault car insurance limits your ability to sue another driver, except under defined thresholds. The threshold–which varies widely from state to state–may be expressed in a verbal description of the seriousness of the injury or a specific dollar value. If you meet the threshold requirements, you may sue to recover damages for pain and suffering.

States with Monetary Thresholds

In the following 7 states, the injured person’s medical expenses must exceed a dollar threshold before taking their injury liability claim to court:

Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota and Utah

States with Serious Injury Thresholds

: In the following states, you can file a liability claim if you are at least relatively seriously hurt. The criteria of seriousness can be expressed in terms of a written description (e.g. permanent disfigurement, scarring, or fractured bones) or expressed in terms of length of disability (e.g. disability for more than 60 days).
Injuries that qualify as serious are defined by each state’s law. The states that use severity as a threshold are:

Florida, Michigan, New Jersey, New York

Choice States

In these 3 states, the driver chooses to have a policy based on no-fault or the tort-based system where the policyholder retains litigation rights for accident compensation.

Kentucky, New Jersey and Pennsylvania.