Personal Finance Tips

What is auto insurance? Most states require the owner of a vehicle to have a certain minimum coverage. But to protect oneself from law suits and expensive repair bills, it makes sense for the customer to go for more than the minimum coverage.

What is liability insurance?

Liability insurance is the coverage that the insurance policy gives the consumer, if he/she has caused an accident that has resulted in bodily injury to another party and/or damage to the property of another person. Bodily injury coverage pays for the medical expenses and the likely loss of wages, whilst property coverage pays for the cost of repair or even replacement for the vehicle of the victim.

What is a 20/40/10?

These are the liability coverage limits. Instead of presenting in terms of thousands of dollars, limits are presented in a series of numbers. 20/40/10 stands for $ 20,000/40,000/10,000, where $20,000 is the coverage for the bodily injury per person, $40,000 is the coverage for the bodily injury per vehicle. $10,000 is the property damage coverage per accident.

Is the minimum liability coverage limit the same, wherever one lives in the US?

It is different in all the fifty states. In Texas, for example one has to purchase at least 20/40/15 liability coverage limits. In California, it is 15/30/5. In New York it is 25/50/15.

It makes sense for the owner to know the local coverage limit and have a coverage which is more than the limit.

How important is the driver?s history in getting a good offer from an insurance company?

Owners with good driving habits are generally rewarded with discounts by the auto insurance companies. These may include people with airbags and centralized locks in their vehicles, people with no tickets history or driving offences etc.

What is an SR-22?

SR-22 is a form that proves that one carries auto insurance. SR-22 status is given for people falling in category of high risk. All the states require SR-22 for people who have had a past history of serious driving violations like drunken driving and reckless driving.

What is no fault insurance?

Several legislations in the US provide coverage like the ?no fault insurance,? where the victim should only prove his/her injury to claim damages from the insurers.

How does one know which auto insurance to choose?

Owners of the vehicles would be advised to choose companies with good credit worthiness. These companies are rated as A, AA, and beyond. The above points can be the best guidelines for any auto owner in choosing the right auto insurance company.

It is important to understand the structure of auto insurance pricing when you are looking to get auto insurance. Many factors, including zip code, age, gender, marital status and driving record are taken into consideration, when deciding the premium for auto insurance coverage. Driving records may include tickets and accidents history of both the owner and the family members. Other considerations include year, model and type of insurance.

The total coverage of the policy of a car owner has to be more than the minimum liability coverage limit that is required by a particular state. This is called liability coverage limits. Instead of presenting in terms of thousands of dollars, limits are presented in a series of numbers. For example, it may be given as 20/40/10, short for $ 20,000/40,000/10,000.

For people with a history of bad driving, there is a special provision called SR-22 form. SR-22 is a form that proves that one carries auto insurance. SR-22 status is given to people falling in category of high risk. Generally, SR-22 policy coverage is costlier than a regular coverage, by about 20 percent. SR-22 is required by law and has a validity of three years. On the other hand, good drivers are rewarded with lower premium. Students with good driving history are also offered some special discounts.

To protect consumers who go for auto loans when buying vehicles, many insurance companies offer gap insurance, which is a reasonable insurance mode. Here, the insurer provides the consumer, the difference between the outstanding amount owed (the higher value) and the market price (the lower value) to the consumer. Gap loan mode provides the consumer insurance against the loan ?owed? and not the ?market value? of the vehicle in question.

Several legislations in the US provide coverage to people like the ?no fault insurance,? where the victim should only prove his/her injury to claim damages from the insurers.

In some states, people can choose ?no fault insurance.? This is called ?choice system.?

Urban sprawl never used to be an issue. Even though the latest development might be miles from where you work or the nearest shops, this was never a problem. Most families owned two vehicles. Some three or more. No-one walked. Everyone just jumped in the nearest vehicle and off they went without a second thought until the price of gas rocketed up. Now we have the credit crunch and a recession just bottoming out. Car ownership has become an expensive proposition. Too expensive for some who have been reborn as a one-car family to cut their losses. The first step in crisis management is to find out which of your vehicles is the cheapest make and model to insure. Now balance that against the likely costs of maintenance and repair over the next twelve months. And which will sell for the highest price? When you know which vehicle you are keeping, maximize the number of discounts on the policy, including bundling auto and home together with the same insurer. Except, one vehicle for a busy family may not be practical. What are the options?

Many families talk to their neighbors and work out a carpool. This is reasonably easy to organize for routine journeys. But there is one slight problem. If you are going to carry passengers, you should have insurance to pay their medical costs should they be injured in an accident. It is not safe to drive your neighbors around on the state’s minimum liability cover. Then we come to the always difficult question of sharing the costs of the gas. If the passengers always pay something towards the cost of the journey, many insurers treat this as a business arrangement and require the vehicle owner to take out a commercial policy as a taxi. Needless to say, this turns a friendly social service into an expensive excuse to argue with your neighbors over prices. Of course, you could all agree to lie about the arrangement. But the stories can change rapidly if everyone ends up in a hospital and big bills are presented.

The second option is the new rental plans which site vehicles for rent by the hour in local garages. You book what you want over the internet, travel to the garage for the pick-up and drop it off at the same garage when your time is up. The cost per hour on the standard plans are attractive and, assuming you do not want a vehicle more than an average of one hour every day, you will save money on car ownership. But you do need to look carefully at the insurance offered in the standard plans. Some have poor cover of medical expenses for you as the driver and passengers. Others do not include the loss of use charge if the vehicle is off the road being repaired. Always read the small print. Summing up, finding insurance for a single vehicle means getting multiple car insurance quotes and finding the one that works for you. If you are going to use your car to drive neighbors around, you also need to get car insurance quotes to cover the additional liabilities. If you use one of the new rental plans, consider paying extra for LDW which gives more comprehensive protection against loss.