3.Tort System vs. No-Fault System
available to you. The three basic coverages sold under the tort system are bodily injury liability insurance, property damage liability insurance and
uninsured of injuries sustained in an accident, regardless of who is at fault.
4. Check Into Optional Coverage
The most commonly recognized coverages, in addition to the basic liability package, are collision and comprehensive coverages. Collision coverage
pays for physical damage to your car as a result of your auto colliding with an object such as a tree or another car. This is relatively expensive coverage
and is not required by law. Comprehensive coverage pays for damage to your auto from almost all other causes, including fire, severe weather,
vandalism, floods and theft. This coverage will also cover broken glass and windshield damage. Comprehensive coverage is less expensive than
collision, but is also optional. Other optional coverages include medical payments coverage, rental reimbursement coverage and towing and labor
5. Where to Go for More Information
Information is available to consumers from a number of unbiased sources. These sources include public libraries, state insurance departments, online
resources, consumer groups and consumer publications. Every state insurance department has personnel available to answer questions regarding auto
insurance coverage and many departments publish premium comparisons to make shopping around easier.
6. Shop Around Before You Buy
When shopping for auto insurance, premium quotations are a useful tool for comparison of different companies’ products. When asking for price
quotations, it is crucial that you provide the same information to each agent or company. The agent will usually request the following information:
description of your vehicle, its use, your driver’s license number, the number of drivers in your household, the coverages and limits you want.
8. Read Your Policy Carefully
You should be aware that an auto insurance policy is a legal contract. It is written so your rights and responsibilities, as well as those of the insurance
company, are clearly stated. When you purchase auto insurance, you will receive a policy. You should read that policy and make certain you understand
its contents. If you have questions about your insurance policy, contact your insurance agent for clarification. If you still have questions, turn to your
state insurance department.
1. How is Your Insurance Rate Determined?
Two factors determine what you pay for auto insurance. The first factor is underwriting and the second
factor is rating.
Insurance companies underwrite to assess the risk associated with an applicant, group the applicant
with other similar risks and decide if the company will accept the application. Based on the results of
the underwriting process, the rating assigns a price based on what the insurer believes it will cost to
assume the financial responsibility for the applicant’s potential claim. Each company adopts its own
rating system, although there are general guidelines that all companies follow.
The single greatest influence on the rating process is claim frequency. This does not mean how many times you specifically have made an insurance
claim, although that will have an additional effect. Claim frequency measures how often an insured event occurs within a group relative to the number
of policies contained in that group. Persons sharing characteristics with high claims groups will be charged more for insurance coverage.
2.Specific Factors that Affect Your Rate ◦Your driving record – drivers with previous violations or accidents are considered to be higher risk
- Your geographic territory – urban areas have more claims than rural areas
- Your gender and age – males have more accidents; certain age groups have more claims
- Your marital status – married people show lower rates of claims
- Prior insurance coverage – if you have been cancelled for non-payment of premiums
- Vehicle use – higher annual mileage results in higher exposure to risk
- Make and model of your vehicle – luxury and sports cars average a higher number of claims
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10 Things You Should Know About Buying Auto Insurance
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