Auto Insurance 101

Q. What is auto insurance?

Auto or automobile insurance is a contract between an insurance company and an insured (policyholder), wherein and by means of which the insurance company promises to provide bodily injury liability coverage, property damage liability coverage and uninsured motorist coverage, in exchange for a premium. The insured is the buyer and the insurer is the seller, with the auto insurance being the product and the liability coverage being the service assured by the insurer to the insured.

Q. What are the different parts of the auto policy?

Listing the coverages in force and the amount of coverage in dollars, the first part of the policy consists of the "declarations page". The following section of the policy comprises of the actual contract language, which explicitly details the rights and responsibilities of both the insurance company and the policyholder. An auto insurance policy may also include a third section called the endorsement section, for alterations or modifications of the policy. Law demands auto policies to include some general provisions. But within the circumference set by such broad parameters, policies can vary widely. You should go through any policy issued to you as soon as you get hold of it. In case you have doubts to clear, get in touch with your insurance agent or company for elucidation.

Q. Who does the auto policy cover?

The personal auto policy provides coverage to the insured named therein, spouse and other relatives residing in the address of the insured as put down in the policy, as also anyone allowed by the named insured to operate the vehicle insured.

Q. What affects the price of auto insurance?

When deciding upon the rate applicable and calculating the amount of premium payable for an auto insurance policy, insurers categorize drivers into divisions called classifications. Drivers are compartmentalized on the basis of several different aspects including, but not restricted to, age and gender, marital status, and driving record of the policyholder, and such features pertaining to the vehicle as where the vehicle is garaged, components and model of the vehicle, prior insurance coverage and yearly miles driven. Statistics show that drivers with such characteristics as below par driving record, greater likelihood of being involved in an accident, and the drivers in those classifications must shell out higher rates. While some of the categorization standards (such as age and sex) are out of the insurer?'s control, others, such as driving record and type of vehicle driven, are within your control. So, while choosing the vehicle you want to drive and when actually driving, keep in mind that these may have direct bearings upon the amount you will be required to dish out on account of auto insurance.

Q. How much will my insurance cost?

Premiums or the amount payable for insurance can vary. The type of car you drive, your driving record, your age, your sex, where you live, and how much you drive are usually the primary determinants of insurance cost.

Q. Can the driving/accident records of my child and/or spouse affect my ability to buy auto insurance?

Yes, the driving record of any licensed driver in the household of the named insurer will have impact on the decision of the insurance company to insure your vehicle(s). It can result you to be rejected for insurance coverage or to disburse higher insurance premiums.

Q. Can my insurance company lift my premium on account of an accident or traffic ticket?

Your insurer may impose an additional fee, a surcharge, if you are caught up in a punishable accident or were ticketed for a traffic rule infringement. Surcharges have to be applied in a consistent way and necessitate to be put on record at your state?'s Department of Insurance.

Used as an instrument to appropriately price the exposure the insurer is declaring for the policy, a surcharge is not a means to recover compensation made under a claim. The total dollar amount paid as the result of a claim normally does not impinge on the surcharge.

Q. If I have my car financed, do I need to purchase auto insurance?

If you finance the car, the financial institution (lender) will need that you have car insurance. On account of the lender considering your vehicle as the collateral for the loan, the terms of your loan are in all likelihood supposed to necessitate you to provide comprehensive and collision insurance. In case your policy lapses, the bank will demand you to obtain a coverage, and add it to your loan. Forced coverage endow with protection to the bank, for their interest in the car. The cost of this insurance is much higher than what you would disburse if you purchased your own policy via a standard carrier.

Q. Can I require the insurance company to replace my car?

The personal auto policy not including a clinching replacement clause, coverage for your car is based on actual cash value. The value of your car at the time of the accident decides the actual cash value (ACV) of your car, taking into account its current market value. This means that the insurance company's is committed to repair the car based upon its actual cash value not its substitution cost.

Q. What is meant by aftermarket parts?

When repairing or replacing a damaged part (i.e., bumpers, bumper covers, and associated bumper parts, etc.), auto repair shops may use aftermarket and/or used parts. Aftermarket parts are manufactured by companies other than the original equipment manufacturers, the original components being known as OEM parts.

Auto insurance contracts do not generally put down what parts are to be used for repair or replacement. So, you have the option to request that aftermarket parts should not be used to repair your vehicle. But this also means that you are responsible for any repair costs that surpass the final claim arrangement agreed with the insurance company.

Q. The insurance company is totaling my car. How can I make sure I get what its worth?

An insurance company totals a car if repairs are calculated to cost more than it is worth. An insurance company uses a number of sources to evaluate your car, including, but not limited to the National Automobile Dealers Association Used Car Guide ("Blue Book") or the CCC Information Services, Inc., guide. This means that the company's offer might not make out the state of your car, its unique attributes, if any, or its value in the local market. A company is more likely to enhance its offer if you can provide evidence to the effect that your car would sell for a higher price in your area. On your part, you should keep the lines of communication open, and get some used car dealers' to put down on pen and paper price quotes for a similar automobile. Newspaper used-car advertisements can also be of help in this regard. Keep note of the fact that these quotes and advertisements supply asking prices and the actual value or sales price could be lower.

Q. What can I do if I have a problem with my auto insurance company?

You should first mention the problem to the notice of your insurance agent and attempt to resolve the problem with him. Else, you can always directly approach the company that sold you the policy, and get things clarified. If still not satisfied, contact your state?'s Department of Insurance and file a complaint.

Ensure that you have incorporated full details about your insurance problem when you file your grievance. Take special care to note that you are including the correct name of the insurance company from which you bought the policy. This demands special attention for the fact that many companies have confusingly similar names. Filing an incorrect name may holdup the inquiry into your complaint.

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