Personal Auto Insurance

What is the difference between life insurance and auto insurance risk?

The major difference between auto insurance risk and the risk associated with life insurance is that, while you can only die once, you can have many auto accident claims. And the details can be far more varied, with losses for things like liability, medical payments and physical damage.

What happens to me if I drive without auto insurance?

If you are involved in an auto accident or stopped by a police officer and found to be driving without car insurance or proof of financial responsibility, you will be subject to penalties specific to the laws of your state. For violation of the financial responsibility law, those penalties could include a fine or loss of driving privileges. If you are uninsured and in an accident that involves property damage or injuries to people, you will be required to pay out of-pocket for any damages assessed by a court.

Is automobile insurance available for everyone?

Yes. Since most states require auto insurance of all drivers, the states have assigned risk plans to assure coverage if you are unable to find an insurance company willing to accept you. The exact type of plan varies from state to state, but assigned risk policies are usually relatively expensive. Why? Because a bad driving record makes you a bad risk for any insurer – even if they must accept you.

What is assigned risk?

If your state requires you to have auto insurance in order to drive, you may be faced with a dilemma if insurance companies won’t accept you. Most states, therefore, have some sort of assigned risk plan to assure that you can get coverage. The cost of insurance under the assigned risk plan may be high, but the plan must accept you.

What is auto insurance?

Auto insurance is a contract with an insurance company that can protect you against severe financial loss if you are ever in an auto accident. Varying types of coverage act as a ?bumper? against various accident-related expenses, like liability, medical costs, damage to vehicles, and property damage.

Who is covered by my personal auto policy?

You and the family members, friends and associates that you let borrow your car are all covered by your personal auto policy. Explicit permission is not required each time they borrow your car. They are covered as long as they have a reasonable belief that you would have permitted the loan.

My state has a comparative negligence law. How does that work? Who decides how much I was at fault?

The fault for an accident is not always placed squarely on one participant; one party is not necessarily held totally at fault and the other totally blameless. After determining the percentage of fault by each party, the compensation by the insurance company is adjusted accordingly. Allocation of fault is made by negotiation between the insurance company and the claimant. There are state-by-state variations in how comparative negligence works, but the two main versions are:

1. Pure Comparative Negligence (or the 100% Type), where the claimant can collect for damages up to the amount of their damages minus the percentage of the damage that was their fault (for example, if the damage was $10,000 and the claimant was 20% at fault they would get $10,000-$2,000 or $8,000)

2. The more widely used Modified Comparative Negligence (or the 50% Type or 49% Type), which allows the claimant to collect from the other party’s insurance carrier only if he or she is determined to be at fault less than a certain percentage (usually 50% or 49%).

In respect to car insurance what is an assessable policy?

If you have an assessable policy, you can be charged (assessed) an additional amount if your insurance company has a bad year full of expensive accidents. Most policies written today are non-assessable.

Some states have a financial responsibility law. What do these laws require?

States that do not require you to have insurance require a demonstration of financial responsibility, which could include demonstration that you have sufficient assets to settle any judgments against you that may arise out of an accident. After an accident, you may be required to post a bond if you do not have insurance.

Does car insurance remove the worry of a lawsuit?

Though it helps, having car insurance does not stop anyone from suing you. It does provide the assurance that, if you are sued as the result of an automobile accident, the financial and legal resources of the insurance company will assist you in defending against the suit and paying any resulting damages.

Personal Home/Renter’s Insurance:

Why buy homeowner’s insurance?

There are two major reasons for homeowners to buy insurance:

1. as one of — if not the — most important assets that a person has, you need to protect your home from damage and destruction

2. mortgage lenders require homeowners to carry insurance to protect the lender’s investment from damage or loss

Why buy renter’s insurance?

Just like homeowner’s insurance, renters face risks of loss. Sure, since a renter does not own the dwelling unit, she does not risk the residence itself. As a renter, the greatest risk is damage to or loss of personal property. Renters can also be liable to third parties that are injured while at the residence.If you rent, insurance acts as a risk transfer device to protect you against a catastrophic loss. In exchange for payment of a premium, you transfer the risk of property loss and liability to third parties to an insurance company.

What is the connection between risk and the insurance company?

Insurance is a contract between the insured (you) and an insurance company that protects against the risk of large catastrophic loss. If a light bulb burns out in your hallway, that’s a small loss. If an electrical fire destroys a room, that’s a large catastrophic loss. Insurance companies gather groups of people that share homogeneous risks. The probability of loss is determined across the group as a whole. By spreading the risk of loss across the entire group, each member contributes a small known loss (in the form of a premium payment) in exchange for protection against a catastrophic loss. Should a covered loss occur, the insurance company pays money. In its essence, insurance is a risk transfer device — moving risk of loss from individuals to the insurance companies. Insurance companies determine the probability of loss across the entire homogenous group, add the cost of administration, and spread the estimated expected losses across the group by collecting a premium from each member of the group.Homeowners are one such homogeneous group. All homeowners face similar risks, such as loss or damage to the home, loss or damage to its contents, and liability for injury or harm to third parties who come to the home. It is insurance company actuaries who determine what it will cost to pay all the losses the group is expected to incur, factor in administrative expenses and profit, and decide how much each member of the group must pay for the insurance.

What kinds of risks does homeowner’s/renter’s insurance protect you against?

The major risks covered by homeowner’s insurance are:

1. damage or loss to the home itself, as well as other structures on the land;

2. damage or loss to the items of personal property in the home and other structures; and

3. injury or harm to third parties (typically guests and others who come to your home).

The major risks covered by renter’s insurance are damage or loss to items of personal property contained in the residence and liability to third parties who are injured while in the residence.

Who is covered by my policy?

As the insured, you and the members of your home are covered for the loss of the home and its contents. Third parties — other people who come to your home — are covered through the liability portion of the insurance policy for injuries caused by your negligence. In addition, you and the members of your household have some liability protection to others even while you are away from the premises.With renter’s insurance, it is important to note that coverage is only provided to the person named in the policy. Even if you share the premises with someone else — if it is your insurance, the property of your “roommate” is not covered.