Wednesday, March 23, 2011

What exactly am I paying for in my Auto Insurance?

What is Auto Insurance? An Auto Insurance Policy typically covers you and your spouse, relatives who live in your home and other licensed drivers to whom you give permission to drive your car. The policy provides coverage for both bodily injury and property damage liability as well as physical damage to your vehicle. This damage can include both that caused by the collision and damage cause by things "other than collision" also called comprehensive coverage, such as flood, fire, wind, hail, etc.
  • Types of Coverages available: Auto insurance typically covers personal injury (PIP), medical payments, uninsured motorist, under insured motorist, auto rental, emergency road assistance and other damages to your car not caused by a collision such as flood, fire and vandalism. Other coverage is available, too.
  • Limits of Liability:
    • Liability to others: This is the amount you are covered to pay out to anyone you might injure in an accident. California's State requires a minimum of 15/30/5. This means each person in an accident can get up to $15,000 up to $30,000 total per accident and $5,000 for property damage. Limits can go up to $1,000,000 and if you also have an umbrella policy, which we will discuss later on, that can increase your liability protection by millions, depending on what each company provides.
      • How do you know how much you need? Well as we are all aware, we live in a sue-happy society. Today the average hourly attorney fee is $150, I’ve done my research and that tends to be the lowest rate, I’ve seen it go up into the thousands! We all know that you can’t go to court and settle a case in one hour or one day, it can get stretch out for months even years. So add that to any medical costs. My sister was in an accident and her arm surgery was $170,000 by itself, that didn’t include hospital stay and medications or X-ray exams. Then there is lost wages, pain and suffering, therapy and the list can go on and on.  I am not trying to scare you with these facts, I am just trying to help make you aware of reality. If you do not have enough coverage through your insurance, and you are at fault, then you can be at risk of losing your assets. We will talk about limits of liability in more depth later on.
  • Deductible: The deductible is the amount that you will pay out of pocket when you file a claim. Typically, the higher the deductible, the lower your premiums.
  • Insurance Rates: How much you pay will depends on many factors, including your driving record, the value of your vehicle, where you drive, how much you drive, your marital status, your desired coverage, your age, sex and even your credit history. (Farmers provides affinity discounts for specific occupations which can help lower your premium if your circumstances cause you to have higher rates. These occupations range from accountants, medical professionals, military/veterans, police officers, fire fighters, engineers and many more. Ask me for more details).

Whew! I know that’s a lot of into to take in, let me know if you have any questions or comments……. stay tuned for more!

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