Auto Insurance Overview (PDF)

# Chapter 2: Auto Insurance Overview ## What Factors impact Rates? - **Underwriting Guidelines:** The insurer will assign a rate based on your risk characteristics. - **Driving Record:** Insurers can't increase your rate for accidents or traffic violations that are more than three years old, but...

# Chapter 2: Auto Insurance Overview ## What Factors impact Rates? - **Underwriting Guidelines:** The insurer will assign a rate based on your risk characteristics. - **Driving Record:** Insurers can't increase your rate for accidents or traffic violations that are more than three years old, but they can consider recent events (within the last three years). - **Geographic Area:** The number of claims filed by policyholders in your area impacts the rates charged by insurers. - **Gender and Age:** Rates generally decrease at age 25 and may increase as you approach age 50 or 55. - **Marital Status:** Married individuals generally pay lower premiums than single people. - **Prior Insurance Coverage:** Insurers may require higher premiums if you have had a lapse in insurance coverage. - **Annual Mileage:** If your annual mileage is high, you will pay a higher premium. - **Age, Make, and Model of Vehicle:** Vehicles with high repair costs or that are more prone to accidents, will be associated with higher premiums. - **Credit History:** Insurers may consider your credit history when determining your premium. ## Discounts Available - **Many insurers offer discounts, here are some of the most common ones:** - **Good Driving Record:** Discount may be available if your record is clean. - **Safety Devices:** Anti-lock brakes, safety belts, or air bags, may qualify for a discount. - **Anti-theft Devices:** Car alarms and other theft-deterrent devices may result in a discount. - **Multiple Policies:** Discounts may be available if you have multiple policies (such as homeowners and auto) with the same insurer. - **Good Student:** A good student discount might be available if you maintain at least a B average. - **Driver Education Courses:** Completion of a driver education course may qualify you for a discount. - **Renewal Discount:** A discount might be available for maintaining continuous coverage with the insurer for a specified number of years. - **Memberships or Employment Discounts:** Discounts may be available for members of credit unions, shoppers' clubs, or if you're affiliated with an organization that provides discounts. - **Deductible:** Raising the deductible on your policy will decrease your premium. ## Basic Overview of Coverage - **Auto insurance coverage** includes several types of protection. - **State law requires** all registered vehicle owners to purchase certain minimum coverage. - **Drivers purchase more than minimum requirements** to protect themselves from high repair bills, medical expenses, and lawsuits. - **Liability Insurance:** Liability coverage protects you in case you cause an accident. There are two types of liability coverage required by state law: bodily injury liability coverage and property damage liability coverage. ## Bodily Injury Liability Insurance - If you cause an accident and an injured person makes a claim or files a lawsuit against you, bodily injury coverage will: - Pay for a lawyer to defend you if you are sued. - Pay medical expenses, lost wages, pain and suffering. - Pay to settle these claims (up to the policy limits). - This insurance will pay the claim up to the dollar limits of the coverage you purchased. ## Property Damage Liability Insurance - If you cause an accident that damages someone's property and the owner makes a claim, property damage liability coverage will: - Pay for a lawyer to defend you. - Pay for physical damage that you caused to vehicles and property. - Pay to settle these claims (up to the policy limits). - This insurance will pay the claim up to the dollar limits of the coverage you purchased. ## Uninsured Motorist (UM) Coverage - If an uninsured driver causes damage to your property or injures you or your passenger, uninsured motorist coverage will help pay for repairs and expenses. - This coverage also applies if the other driver leaves the scene of the accident. ## Personal Injury Protection (PIP) - PIP coverage will reimburse you for reasonable and necessary medical expenses resulting from an auto accident, as well as lost wages. - This coverage is available up to the specified dollar amount of the policy. - PIP coverage can be denied if claims are not filed properly and timely. - Some consumers choose to waive PIP if they feel have adequate health care coverage since PIP may duplicate existing coverage. ## Other Coverages Available - **Physical Damage Coverage** (also known as comprehensive and collision coverage) will protect you from expenses related to damage or loss of your vehicle (e.g., accidents you cause, theft, or vandalism). - **Collision Coverage** pays to repair your vehicle or pays you for the value of your vehicle if the cost to repair exceeds 75% of the value. This coverage is provided regardless of who caused the accident. - **Comprehensive Coverage** (also known as Other Than Collision) pays for damage to your vehicle resulting from causes other than an accident, vandalism, or theft. ## Additional Coverages - **Medical Payments Coverage** pays for medical expenses for you or others injured or killed while riding in your vehicle. This kind of coverage may include: - Rehabilitative - Surgical - Chiropractic - X-Ray - Dental, prosthetic, professional nursing - Funeral Expenses - **Rental Reimbursement Coverage** pays for all or part of the cost of a rental vehicle while your vehicle is repaired. - **Transportation Expense Coverage** covers additional transportation costs such as car rental, bus fare, etc. - **Towing and Labor Coverage** pays to tow your vehicle to a repair shop after an accident or a breakdown. - **Mechanical Breakdown Coverage** pays to repair your vehicle after a mechanical breakdown (e.g., engine failure). ## Difference Between Nonrenewal and Cancellation - **Nonrenewal:** The insurer decides not to renew your insurance coverage at the end of the policy term. - **Cancellation:** The insurer decides to stop your coverage during the effective period of the policy or before the policy term ends. - **An insurer may not renew your policy under the following conditions:** - if you committed fraud or misrepresented your driving record or other material facts when applying for your insurance or while making a claim. - if (within the past three years) you: - filed three or more claims where you were not responsible or “not at fault.” - filed two or more claims for accidents that you caused or that you were considered to be “at fault.” - filed any combination of three or more “at-fault” accident claims or moving violations. - were convicted of operating a motor vehicle while under the influence of alcohol, impaired or intoxicated, or while under the influence of drugs. - were convicted of homicide, assault, reckless endangerment, or criminal negligence arising out of operation of your vehicle. - were convicted of using a motor vehicle to participate in a felony act. - if you violated the insurer’s underwriting guidelines. - **An insurer may cancel a policy mid-term under the following conditions:** - if you commit fraud or misrepresent your driving record or other material facts when applying for your insurance or while making a claim. - if there exists a matter or issue related to the risk that constitutes a threat to public safety. - if there is a change in the condition of the risk that results in an increase in the hazard insured against. - if you fail to pay your premium when due. - if the driver's license or motor vehicle registration of the named insured, or any covered driver under the policy, is suspended or revoked for reasons related to the driving record of the named insured or any covered driver.