Life Events Affect Your Insurance Needs

Buying a New Car

In virtually every state, you are required by law to carry auto insurance if you have a car on the road.

If financing the vehicle, the lender may require that you have full coverage. You should also be certain that you have sufficient liability coverage to protect your assets from personal injury or property damage claims that may arise from an auto accident.

If leasing the vehicle, be sure to check your lease contract for any minimum coverage limits. Most leases require that you carry a minimum liability coverage limit or else you’ll be in violation of the lease.

If you are thinking about buying a car, you'll need to start thinking about auto insurance coverage. Auto insurance can protect you against risks such as accidents, theft and vandalism.

State law (and/ or your lender) probably requires you to purchase at least a minimum amount of auto insurance coverage. You may find it prudent to purchase more.

Evaluating and comparing insurance policies
Compare various companies to make sure you get the coverage you need at the right price. It’s important to compare policies in terms of price, coverage, exclusions, and reputation of insurer. Because your personal situation and financial obligations change over time, review your auto policy occasionally to make sure it meets your needs. Some points to consider:

• Shop around for different quotes, but make sure you are comparing similar policies
• Weigh the policy cost against both coverage and quality of service provided
• Consider the strength and reputation of the insurance company
• Shop when a life event occurs – you now may be a better fit for a different company

Auto insurance policies: what's covered?
A personal auto policy (PAP) is a contract between you and your insurer. Essentially, your insurer promises to provide coverage up to a specified limit in return for your payment of a premium. The PAP is broken into several sections. The first four sections of the policy (Part A through Part D) explain the four main categories of coverage (the other sections cover additional provisions and duties).

Part A: Liability coverage
Liability coverage insures you against injuries you cause to other people (bodily injury coverage) and other property (property damage coverage) in an auto accident, up to a specified limit. Since liability claims for pain and suffering can be very costly, this is one area in which you do not want to be underinsured.

Part B: Medical payments coverage
Medical payments coverage pays medical expenses up to a specified limit resulting from an auto accident, without regard to fault. This coverage is required in some states and optional in others.

Part C: Uninsured/underinsured motorist coverage
Uninsured motorist coverage insures you against losses caused by a driver who is uninsured or has less than adequate insurance to cover the loss.

Part D: Coverage for damage to your auto
This coverage consists of two parts, collision and comprehensive. You can purchase either or both. Collision insures the value of your car in the event of an accident, while comprehensive protects you against other types of damage to your car (such as theft, fire and vandalism). These coverages include a deductible, which is the amount of a claim you agree to pay per incident.

Most policies contain additional sections that describe your responsibilities after an accident or loss, various provisions that limit and qualify your coverage (e.g., what's not covered), towing and labor coverage, loss of income protection, and rental reimbursement insurance. Please note that this description is intended only as a guideline. Some policies may vary.

Coverage vs. cost
Choosing the appropriate level of coverage depends on a number of factors, including the value of your vehicle, the value of the assets you must protect and the amount of premiums you can afford. Keep in mind that your insurer may not always pay the full amount of a claim. If a claim against you exceeds the stated limit of liability, you will be personally responsible for the amount that exceeds the coverage. It's crucial, therefore, to purchase enough liability coverage to protect you and your assets. An insurance agent can recommend adequate coverage limits and tailor a policy to your needs.

Determining the cost of auto insurance premiums is a complicated process. In addition to the coverage levels that you select, your insurer will use statistical information about you and the car to arrive at a premium. Several factors will be considered, including your age, driving record, credit history, marital status, and place of residence. In addition, your insurer will consider the make, model, and age of your car, the adequacy of its safety features, the likelihood it will be stolen, and the amount of the deductible.

You need to balance coverage against cost. To lower the cost of your premium, you can lower (or drop) certain coverages (be very careful here), raise your deductibles, install safety features in your car, and/or buy multiple insurance policies through the same company.

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