Insurance World

Many people think that auto insurance companies are taking advantage of the fact that drivers, no matter what, are required to carry some sort of insurance to drive, by the laws of our country. When it comes down to the wire, the truth of the matter is, we have options when it comes to how we choose to get covered. Lets face it, auto insurance companies are there to make money, however, they are also there to protect you, your family, fellow drivers and pedestrians among others. Nevertheless, that doesn’t mean you have to be paying unreasonably high prices for that protection and peacefulness of the mind. There are a few pieces of information that many people are just not aware of that may be of some assistance to some.

Companies Versus Brokers

Firstly, there is not only one way to get coverage from auto insurance companies. Lets elaborate on that a little and take a quick moment to mention insurance brokers, who can also be referred to as “middlemen”. Anytime you do business with a middle man, they have to get paid for what they do, and that is generating business for companies. You have the option of getting car insurance through a broker, or you can also deal personally with insurence companies, both of which have their advantages and disadvantages.

When you wheel and deal directly with auto insurance companies, the “middleman” is taken right out of the equation, and this helps a company keep their rates as low as they can. But as we all know, there are always two sides to a coin, and it may not always be easy to get in touch with a large company everytime you have a question or would like to change your policy. Brokers are there, on the other hand, for added convenience, and are in fierce competition with eachother to get your business. With this in mind, insurance brokers will do the shopping around for you making sure you get a policy tailored to your needs, with the best price for you. With a broker, you can simply call them if you have any questions, and deal with them on a more personal level.

Who Decides What Rate I Will Pay?

Auto insurance companies work along side underwriters, mainly “property and casualty” underwiters. There are different types, but these specialize in auto insurance, as well as homeowner’s and worker’s comp to name a few. These guys are responsible for assessing the risk you propose to auto insurance companies, and then coming up with an appropriate rate. Their purpose, or mission, is to diminish the amount of loss, and to assist in generating profits for a company. An insurance underwriter can “make or break” an insurance company, which do not always have control over the rates you are assigned in exchange for coverage. They just want to make sure they stay above water.

Reading auto insurance policies can be like trying to decipher advanced calculus. It’s really not that difficult if you understand a few basic terms. Collision, Comprehensive, Bodily Injury Liability and Property Injury Liability are the main terms you need to fully understand.

You’ll appreciate Collision Coverage in the event you need repairs or replacements if your vehicle collides with another vehicle or property. The higher the deductible you elect, the lower your premiums will cost you. If you’re at fault for something, well of course it would still be an accident, as I doubt you’d plan to run into that guard rail, but how much would you be able to afford to pay out of pocket for repairs? $250? $500? $1,000? Just like medical insurance, you’d have to pay that deductible amount first and then the insurance company would pay for the remaining charges for the repair.

Another term to become intimately familiar with is Comprehensive Coverage. This is the coverage that pays for damage caused from falling objects, fire, certain natural disasters, theft and vandalism. Deductibles work the same way as with Collision; the more out of pocket costs to you, the less your insurance premium.

In addition to knowing how much Collision and Comprehensive coverage you have, you’ll want to know about your liability coverage. Let’s say you rear-end another driver. Or your foot slips off the brake onto the gas pedal and you plow down a mailbox. Your liability coverage will kick in and pay for the damages that you caused with your insured vehicle. You liability coverage will, or could, include bodily injury (people) and property damage.

You don’t want to go without Bodily Injury Coverage. If you were at fault in an accident and others involved needed to go to the hospital and/or lost wages from missing work, those costs would come out of your pocket if you are not insured with Bodily Injury Coverage. It doesn’t take a genius to know how quickly those amounts can add up. This type of coverage can also help you in the event the other party takes legal action against you. Many states require you to carry Bodily Injury Coverage.

The other part of liability includes Property Damage coverage. Can you imagine how much it might cost should you accidentally drive into the side of someone’s home? You wouldn’t want to be caught without property damage insurance should you need to pay for repairs to another vehicle, building or anything else you might hit. As with Bodily Injury coverage, Property Damage coverage also helps protect you in the event of a related lawsuit.

Every policy will have its limits and various degrees of coverage. It’s important that you understand the basics of what you are paying for and why it is necessary. No one plans for an accident, be prepared!