The Truth About Insurance.com

Insurance Q&A: “An insurance policy with bodily injury coverage covers?”

Every year we plunk down our hard earned money to buy car insurance. In my experience, most of us aren’t completely aware of what we’re buying, rather just taking someone’s (or something’s: see the GEICO Lizard) word we’re covered.

Your auto insurance policy is broken down into a few basic types of coverage by limits. For example, you may see 100/300/100 listed on your policy. (Learn more about these liability limits.)

First is liability coverage. “Liability only” auto insurance is mandatory in many states. This ensures you have a state minimum amount of insurance in the event you injure someone or damage his or her property.

Included in liability coverage is bodily injury, or “BI” coverage. An insurance policy with bodily injury coverage covers more than you might think. In addition to bodily harm, BI covers sickness, disease and even death resulting from an accident you are found to be liable for.

This may occur if there are complications from necessary surgeries as a result of the accident, or any necessary care the injured party may require as a result of the bodily injury. Sickness and disease are mentioned to make sure to encompass damages that might result after the initial accident occurs.

Finally, expenses related to death are covered as well. These include funeral and burial expenses incurred by others. If you cause an accident and someone else is injured in any manner, your insurance is responsible for getting him or her back to health.

Also included in liability coverage is property damage. You may cause an accident in which no one is injured, but property damage has occurred. Perhaps you back into an unoccupied vehicle in a grocery store parking lot. Your liability property damage coverage would pay for the damages.

Physical damage is another basic type of coverage on your auto insurance policy. This is not to be confused with property damage discussed above. Physical damage is coverage for damage to your own vehicle. It is possible to purchase car insurance without this coverage.

You may be able to purchase personal injury protection (PIP), medical payments coverage or uninsured and underinsured motorist coverage, depending on which state you reside in.

Spoiler alert: California is not a no fault state for auto insurance.  I repeat, not a no fault state.

The state still operates under the tort system, where individuals have the right to sue one another for compensation for bodily injury and loss resulting from an auto accident.

It has been this way for many years in most states. However, now a handful of states have enacted “no fault” laws in order to free up the court systems and save time/money for insurance companies and consumers in general.

These states are FL, HI, KS, KY, MA, MI, MN, NJ, NY, ND, PA and UT.

Under no fault laws, an injured driver doesn’t have to prove another driver is “at fault” for an accident in order to receive bodily injury compensation for resulting bills.

The injured person’s own insurance company simply pays the claim. This is referred to as personal injury protection, or PIP.

However, the compensated driver does not retain the right to sue for additional damages after they have been indemnified, or paid back, for their claim.

Some states allow the victim to also file a lawsuit if a certain dollar threshold or injury severity, or “descriptive” threshold are met as a result of the accident.

Monetary threshold states currently include HI, KS, KY, MA, MN, ND and UT. The monetary threshold may be as low as $2,500.

Additionally, serious injuries also allow for lawsuits to be filed in no fault states. The injury threshold states are FL, MI, NJ and NY.

Note that property damage is not covered under “no fault” laws. In order to seek compensation for damaged property, you must deal with the insurance company of the person who caused the damage.

“Add-on” coverage is available in some states as well. This coverage allows you to purchase personal injury protection, but remains a tort system for recovery, meaning you can still sue and be sued freely. Currently, AR, DE, MD, and Washington D.C. are add-on states.

There are three unique states that allow their drivers to choose to purchase personal injury protection and waive the right to sue, or decline PIP, and stick with the good old-fashioned tort system and continue to sue each other like crazy.

Check out the complete list of no fault insurance states.

Insurance Q&A: “Should I buy collision insurance on an older car?”

Well, the choice may not be up to you. If you don’t own your car outright, whether it’s new or old, you’re usually required by contract of the loan agreement to carry full physical damage coverage, which includes collision and comprehensive coverage until the loan is paid off. Period.

The lien holder, or any other loss payee, will want to ensure the car loan is eventually paid off in full, which becomes difficult if the car is totaled and can’t be driven anymore. Owners tend to stop making payments in such events…

In addition, gap coverage may be necessary if you owe more money on the car than it’s worth. Insurance companies aren’t in the business of insuring cars for what you owe on them, but rather for what they’re worth (actual cash value), or the cost to replace them in some instances.

However, if you own your car outright, collision coverage is entirely optional. You’ll need to ask yourself if the car is worth insuring, an answer likely based on your personal financial situation and risk appetite.

The older a car is, the less it’s generally worth (minus vintage classics). The less it’s worth, the less it costs to insure for physical damage. This alone helps the average driver maintain physical damage coverage on any vehicle, old or new.

If the car is old, but you like the shape it’s in and couldn’t afford to repair it if it’s damaged, you may want to opt for physical damage coverage.

Remember, if you don’t have collision coverage and you are at fault in an accident that renders your car inoperable, you could well be stuck taking the bus.

On the other hand, if you can afford to repair or purchase a new car in the event yours is damaged, you may want to forego the coverage and save the extra money. Especially if you’re not attached to the vehicle.

If it’s strictly a matter of money, I recommend getting an online quote or quotes from an insurance agent to determine if you’re getting the right coverage at the right price.

There are a number of companies, such as A.M. Best and Standard & Poor’s, who rate insurance providers on various financial strength aspects in order to help consumers make more informed decisions (insurance company ratings).

If you’re in the market for insurance, you should look for an organization that’s been around a while, with a proven ability to repay claims assuming you’re involved in an accident.

After all, it’s a lot more likely an insurer will pay your claim if they’re still in business…

Each state also has a department of insurance that monitors the financial status of insurance companies and regulates their practices.

That said, here are the the top insurance companies in the United States, according to TopRatedInsuranceCompanies.com:

1. Allstate Insurance Company
2. State Farm Insurance Company
3. Prudential Insurance Company
4. Travelers Insurance Company
5. Fidelity Insurance Company
6. MetLife Insurance Company
7. Farmers Insurance Company
8. AIG Insurance Company
9. MassMutual Insurance Company
10. The Hartford Insurance Company

The insurance companies listed above may offer a combination of property, casualty, life, and/or health insurance coverage, along with an array of financial products as well.

Insurance companies, much like other large corporations, don’t always specialize in just one thing. However, they do tend to stick to insurance and financial services.

There are thousands of insurance companies out there to choose from; some focus on only one type of insurance or one specific region of the United States.

It’s not necessary to purchase an insurance policy from one of the companies listed above to ensure you receive adequate coverage.

If you have questions about your coverage or rates, shop online or contact your independent agent.

A new study from researchers at the University of Utah found that texting drivers were six times more likely to be involved in a car crash than those who do not text.

The researchers used vehicle simulators and identical traffic scenarios to assess risk and study the behavior of texting and non-texting drivers.

During the study, 20 pairs of self-described “experienced text messengers” (using their own cell phones) got in seven simulated collisions, with six occurring while the drivers were texting.

The participants, aged 19 to 23, were about 20 percent slower to react to brake lights and much more likely to drift into neighboring lanes if they texted while driving.

The researchers also found that texting was significantly more dangerous than simply speaking on a cell phone; talking on the phone while driving increases the likelihood of an accident by just four times, according to University of Utah researcher Frank Drews.

The scary thing here is teenage drivers are probably the most likely to text while driving, increasing their already high risk of getting into an accident.

That could drive up teenage car insurance rates, which are astronomical to begin with (why is car insurance so high for teenagers?).

Some U.S. Lawmakers have pushed for a nationwide ban of texting while driving, but it has yet gain widespread support.

Interestingly, a recent study found that texting was actually not the biggest distraction while driving.

There were 5,800 distracted driving deaths and 515,000 injuries in 2008, according to figures released by the U.S. National Highway Traffic Safety Administration.

(photo: ydhsu)

Insurance is all about measuring risk, and believe it or not, certain occupations are more prone to car accidents than others.

The reason behind it remains a mystery, but because of these stats, compiled by Quality Planning Corp. and digested by Insure.com, you may be charged a higher car insurance premium.

While occupation certainly isn’t the driving force behind your car insurance rate (how are car insurance rates determined), it may be factored in.

Keep in mind, however, that it’s not all bad; some occupations are actually eligible for discounts.

So who gets in the most car accidents?  Well, though “student” isn’t exactly a profession, this group is by far the worst, with an average of 152 accidents and 87 speeding tickets issued annually for every 1,000 drivers (why is car insurance so high for teenagers?).

Not far behind are doctors, averaging 109 accidents and 44 speeding tickets annually per 1,000 drivers; this one makes sense because they’re typically driving late at night and in a hurry.

Lawyers hold the second spot, with 106 accidents and 37 speeding tickets per 1,000 drivers, followed by architects with 105 accidents and 72 speeding tickets.

Which begs the question, “What’s the hurry Mr. Builder?”

Top 10 Crashers by Occupation

1. Doctors – 109 accidents, 44 speeding tickets
2. Lawyers – 106 accidents, 37 speeding tickets
3. Architects – 105 accidents, 72 speeding tickets
4. Real estate brokers – 102 accidents, 39 speeding tickets
5. Enlisted military personnel – 99 accidents, 78 speeding tickets
6. Social workers – 98 accidents, 33 speeding tickets
7. Manual laborers – 96 accidents, 77 speeding tickets
8. Analysts – 95 accidents, 40 speeding tickets
9. Engineers – 94 accidents, 51 speeding tickets
10. Consultants – 94 accidents, 51 speeding tickets

Nurses, librarians, insurance agents, firemen, politicians, dentists, accountants, law enforcement and salespeople also ranked high, though not in the top ten.

Wisconsin is best known for the Packers, cheese and now…for joining the ranks of states with the highest mandatory minimum liability limits on car insurance policies in the country.

So it may be a good time to get some online quotes to shop your rate; the new minimum liability requirement will become law January 1, 2010.

Insurance companies likely already began selling these limits for new policies and offering renewal policies (how to renew your car insurance), as it’s common practice for insurance companies to offer renewals 60 days in advance.

The new liability limits of 50/100/15 are slightly below those of Alaska and Maine, who currently require 50/100/25.

And you can expect the cost of your car insurance to increase if your current limits are below 50/100/15.

Pay close attention to your car insurance renewal after the January 1, 2010 cut-off.

It is possible your insurer will adjust your policy and not charge you for increased limits until your policy renews if it happens within a short time of the cut-off date, potentially up to 30 days.  Don’t expect a freebie however, as this is rare.

It is more likely your policy limits will automatically increase on January 1, 2010 and you will be charged a higher insurance premium accordingly.

Don’t bother calling your insurance company or independent agent to complain, as it’s simply state law.

So who’s to blame for your car insurance rates going up?  It depends who you ask.   Your legislators, who passed the bill, will tell you they are not at fault because they didn’t vote for an increase in insurance rates…just an increase in limits.  It’s the insurance companies that raise the rates.

The insurance companies will tell you they are selling a product and need to make a profit to stay in business.   If the government voted to force restaurants to serve bottled water versus tap water, you could probably expect to pay more for your dinner!  So that’s that…

Insurance Q&A: “Is homeowners insurance included in the mortgage?”

In order to answer this question, it’s important to point out the difference between mortgage insurance and homeowners insurance.

The purpose of mortgage insurance is to protect the bank that loaned you the money to purchase your home in the event of default.

Mortgage insurance is necessary for first mortgages in excess of 80% of the total appraised value of your home.

Homeowners insurance, on the other hand, protects homeowners in the event a home is damaged or destroyed, and also provides liability coverage.

Mortgage companies will not approve your loan unless you have a homeowners policy in place; it’s necessary to protect their interest in your home.

Imagine if your house burnt down one week after you bought it; you wouldn’t want to continue paying for it, and the bank would be out of luck.

Ultimately, your homeowners insurance is not included in your mortgage, meaning your lender will not actually insure your home or pay claims against your insurance policy.

But your mortgage lender may partner with an insurance company to offer the service (be sure to shop around though!).

However, it is possible to have your homeowners insurance premiums and property taxes included in your monthly mortgage payments through a process called impounding.

Basically, your mortgage company allows you to prepay the cost of your homeowners insurance and property taxes by collecting the money from you over the course of the year.

The lender then sends the money to your insurance company and property tax assessors.

Some homeowners may find it convenient to pay the cost of these bills in smaller increments throughout the year versus all at once annually.

Keep in mind that impounding your taxes and insurance may reduce your ability to earn interest on your money over time; instead, the lender receives all that potential interest.

Conversely, if you don’t impound your homeowners insurance and taxes, you may forget to make a payment, so choose wisely.

More insurance Q&A: “Who is insured to drive my car?”

A typical auto insurance policy will cover more people than you may think, but there are a few key definitions you need to be clear on regarding who has coverage while driving your car.

First, and most obvious, is the “named insured.”  This is the individual, corporation, partnership, or other entity listed on the declarations page of your insurance policy.

Unless otherwise specified on the policy, a spouse is entitled to all coverage provided.  However, this is not the case with a restricted or limited auto insurance policy, which provides coverage to one specific person only.

Additionally, there may be some stipulations regarding separated couples not living in the same home. In some cases, this person or entity has more rights than others with regard to coverage.  Review your specific policy for such provisions.

There are also insured parties who are identified by their relationship to the named insured.  Family members listed on your policy are included as insured on a policy based on certain restrictions.  They must be above 15 years of age and residing in the household.  This includes family members who are temporarily not living at home, like college students.

Keep in mind that if a family member has regular permissive use to drive your car, they need to be listed on your policy.  This helps the insurance company charge the appropriate amount of money for their exposure to paying claims.

For example, if there are five people regularly using a car, the insurance company will charge more than if only one person uses the car.

Individuals you allow to drive your car are also covered under your insurance policy.  If you give your friend permission to drive your car to the store, they are covered, though your policy is secondary coverage to any policy they have for themselves.

Basically, if they already have car insurance, their insurance limits will need to be exhausted from a claim before your insurance company has to step in and pay for anything.

On a commercial insurance policy, you may have the ability to add additional insureds, such as if you enlist the services of someone for your company who is not a regular employee.

Exactly who is insured under your policy can be tricky to determine.  Make sure you contact your insurance company or independent insurance agent if you are unsure about your policy language, or unclear whether a certain individual can drive you car.  After all, it’s better to be safe than sorry.

Even though talking on cell phones and text messaging while driving have become lightening rods for legislation, other more traditional distractions are apparently more significant issues.

A survey of 3,000 drivers conducted by car leasing company Leasetrader.com found that texting while driving was very low on a long list of other, seemingly more dangerous distractions.

For male drivers, road rage frustration ranked number one in the danger department with 18.3% of respondents, followed by eating/drinking at 14.7%, and checking out other drivers at 10.9%.

Meanwhile, text messaging while driving was the top distraction for just 7.6% of males, less so than other passengers’ conversations (9.5%) and reading the paper (9.3%).

For women, kids in the car was the top distraction, with 26.3% of respondents ranking it number one, followed by putting on makeup at 16.6%, and messing with the radio at 10.4%.

Only 4.2% of women felt texting while driving was the most dangerous distraction, less so than driving in inclement weather or eating and drinking while driving.

So there you have it; whether it’s true or not, drivers don’t seem to think text messaging while driving is in the issue, though they could be wrong.

The survey also points out some interesting differences between male and female driving behavior.

Patterns like these determine how car insurance rates are determined, and explain why car insurance is cheaper for women (the lack of road rage is a biggie).