All About Auto Insurance: 2009

Saturday, June 6, 2009

Car Insurance Glossary - Terms Like Passive Alarm, Waiver, Gap, Rental Coverage & More

Welcome to our insurance glossary of car insurance terms. If you have any questions about terms that are not included on this page please contact us.

Additional Interest: A person or other entity (i.e. a corporation) that has an insurable interest in your vehicle, and may be named as such in your insurance policy. For example, when you finance a car through a bank, the bank is considered to have an “additional interest” in the car.

Anti-Theft Device: Any device designed to reduce the chance of a vehicle being stolen, or aid in the recovery of a vehicle if it is stolen. Examples include car alarms, keyless entry, starter disablers, “The Club”; etc.

Bodily Injury Liability: Legal liability for causing injury or death to another person.

Car Insurance Coverage: There are many "coverages." Liability, medical payments, uninsured motorists, collision, and comprehensive are the five major types of car insurance coverage.

Claim: The request for reimbursement that you make to the insurance company when you’ve been injured or your car has been damaged.

Collision Coverage: This is the coverage that provides protection for your car in the event of damage by an inanimate object, such as another car, a tree, or the side of a building.

Collision Deductible Waiver: If you have this type of coverage with your car insurance policy, your insurance company will pay your deductible if you are in an accident that is the fault of an uninsured motorist. This is not available in all states or with all policies.

Comprehensive Coverage: This coverage provides protection in the event of damage not caused by a collision (that kind of damage would be covered by your collision coverage). These other kinds of damage can include theft, fire, damage by extreme weather, etc.

Continuous Coverage: The length of time that you have maintained the legally required insurance on your vehicle. Lapses in coverage can result in higher rates.

Continuously Insured: The amount of time that you’ve been insured, without gaps. You can switch companies as many times as you want, but if you’ve let your coverage lapse, you could end up with higher premiums.

Credit Rating: Each individual consumer has a credit file with each of the three major credit bureaus - Equifax, Experian, and TransUnion. Each company uses a formula developed by Fair Issac’s; Co. (FICO) to determine the consumer’s credit rating. Insurers consider your credit rating when determining your insurance rates, since their own advanced statistical models have determined that consumers with good credit are better insurance risks, and vice versa.

Deductible: This is the amount that you are required to pay towards any damages. Your car insurance will cover any costs above this amount. The size of your deductible can greatly affect your car insurance costs.

Declarations Page (Dec Page): This is a one or two page document that details all the facts about your car insurance, such as your name and address, the vehicles covered, the deductible, the types of coverage, etc.

Defensive Driver Course: Classes offered or approved by the DMV designed to enhance defensive driving skills. Most car insurance companies offer discounts to customers who successfully complete these courses.

Depreciation: Age and wear can cause your car’s value to depreciate, or go down, over time.

Drive-Other-Car Endorsement: An endorsement or "rider" that broadens the definition of "covered auto" to include vehicles owned by others that are operated by the insured.

Earned Premium: The portion of the premium that is "consumed" during a partial policy term. If you terminate your policy early, you are only responsible for the earned premium portion (plus expenses), regardless of what you may have paid.

Effective Date: The date your coverage begins. You can find this on your dec page.

Emergency Road Service: This is optional coverage that provides services like tire changing, lock-out help, gas delivery, or towing.

Endorsements: These are also known as riders. They are changes to your coverage that are made after the effective date, like adding another car or raising your deductible.

Exclusions: Situations that are not covered by your car insurance. Your policy will show your specific exclusions.

Extraordinary Medical: This is optional coverage that protects you above and beyond your standard medical benefit coverage. Usually this would cover you if you were hospitalized long-term or permanently disabled.

Expiration Date: The date and time that your coverage ceases. Normally, the time is 12:01 AM - meaning one minute after midnight.

Extended Non-Owner Liability: An endorsement or "rider" that extends liability coverage for specifically named people operating any non-owned vehicle.

Financial Ratings: This term refers to the credit-worthiness and financial stability of insurance companies. AM Best, Standard & Poor's, and Moody's are the three agencies that assign financial ratings to insurance companies.

Financial Responsibility Laws: Each state requires motorists to be financially able to compensate the victims of bodily or property damage for which they are liable. Liability insurance is the easiest way to meet these requirements, however, those who can afford to do so may opt to post bonds instead.

Full Coverage Car Insurance: This is a confusing term. Many people think that having "full coverage" means that they will be covered no matter what happens to them. In reality, it only means that you have the full legal requirements needed in your state. Depending on your home state, it could be very little coverage in reality.

Funeral Benefits: This is optional coverage. If you were to die in a car-related accident, the insurance company would pay for a portion of your funeral costs.

Gap Insurance: Optional coverage for the difference in the amount owed on a vehicle and its replacement value. For example, if your car's replacement value is $4,000, but you still owe $5,000 on it and it’s totaled, your insurance company will only pay you $4,000 (unless you have gap insurance). The company that lent you the money for your car will require an immediate payment of $5,000. Gap insurance makes up this difference.

Garaging Location: It is assumed by car insurance companies that you keep your car at your home address. However, if you primarily keep your car in a different location, make sure your insurance company knows. It can affect your rates.

Good Student Discount: Most insurers provide discounts to high school students who receive good grades. The reasoning behind this discount is that insurers have found that students who are responsible enough to get good grades are generally more responsible drivers, and thus they pose less risk for the insurers.

HEV: Hybrid Electric Vehicle. If you drive an HEV, your rates may differ from those for a standard car. Make sure your car insurance company knows if you drive an HEV.

Hit and Run: An accident caused by someone who flees the scene before police arrive and without leaving insurance information.

Income Loss: This is optional coverage that protects you if you are in an accident that leaves you unable to work. Your insurance company can help compensate you for lost wages.

Indemnity: Restoration to the financial place you were prior to the accident. Insurance is designed to make you "whole again," but not to "enrich" you. Thus, it gives you indemnity - making you "whole" again.

Independent Agent: An agent who does not work for just one insurance company. Instead, he or she searches the market for the best place for his/her client's business.

Insurance Premium: Rates charged to an insured, reflecting the insurer's expectations for loss and adding in an element of profit. Premiums are typically paid monthly, but discounts are often offered for paying in advance, either quarterly, semiannually, or yearly.

Insurance Score: Score given to each insurance customer, based on complex statistical models, in order to determine his or her insurance risk. The better your insurance score, the lower car insurance rates you can expect to pay.

Insured: The person/people covered by an insurance contract. Insurance agreements commonly refer to the "insured" or "insureds."

Judgment: A decision by a court of law, typically ordering one party to pay another party a sum of money. Additional legal action is normally required in order to ensure that judgments are enforced. Many judgments go unenforced. When enforced, a the winner of a judgment can potentially garnish the wages and "attach" the bank accounts of the person or entity at fault.

Liability: A legal obligation to perform or not perform certain acts. Most commonly, this refers to monetary sums that must be paid in order to compensate for damages to people and/or property. The term can also be used to assign "responsibility" or "fault."

Liability Coverage: Insurance to cover damages that the insured is ordered to pay as a result of a court's decision holding the insured liable for injuries caused to people and/or property.

Lien Holder: A person or other entity (i.e. a corporation - usually a bank) with a legally securable interest in your vehicle. For example, a lending institution that loans you money for the purchase of your car has a lien on it.

Limits: The maximum amount an insurance company will pay. For example, if your collision coverage limit is $10,000, but your car sustains $15,000 worth of damage, you are liable to pay for the $5,000 worth of damage that goes beyond your insurer's limit.

Medical Payments Coverage: Insurance coverage that pays for damages sustained to the insured and his or her passengers without regard to fault. Also pays for damages suffered by the insured and covered family members for injuries sustained as a pedestrian at the hands of non-exempt vehicles.

MVR (Motor Vehicle Record): Also known as a "DL Printout," your MVR contains information about your driving record - tickets, accidents, convictions, etc.

No-Fault Insurance: Type of insurance in which the insured's own insurance company provides indemnity for damages sustained to the insured's own person and property without regard to fault. The purpose of no-fault insurance is to expedite the insurance claims process and keep cases from clogging the legal system.

No-Fault State: Any state that has at least some form of no-fault insurance as a matter of law. No state has "pure" no-fault insurance, but Michigan comes the closest.

Non-Passive Alarm: Alarm in which action on your part is required in order for it to be activated. Most insurers will offer a discount if your automobile is armed with a non-passive alarm - but a slightly greater discount if it has a passive alarm.

Passive Alarm: Alarm in which your action is not necessary in order for it to be activated. Most insurers will offer discounts for cars armed with passive alarm systems that are even greater than cars with non-passive alarms.

Personal Auto Policy (PAP): Standard car insurance policy contract that includes liability, medical payments, uninsured motorist, and physical damage protection.

Personal Injury Protection: Often called PIP, this insurance applies to no-fault states and covers the basic expenses incurred by the insured or his family in an automobile accident without regard to fault.

Physical Damage: Refers to damage to your vehicle. Such damage is normally covered by either collision or comprehensive insurance.

Pleasure Use: A vehicle that is not typically used for commuting to work or for any business purpose, but rather, primarily for enjoyment.

Policy Lapse: Any period of time in which your car is not insured. Policy lapses result in higher rates.

Policy Period: Time period in which the policy is active. Also referred to as "policy term."

Preferred Risk: Refers to an individual who is considered to present less risk to an insurer than the average motorist.

Premium: An individual's price for car insurance.

Primary Driver: The person who drives the car most frequently. If two or more people drive a car, the primary driver's record is taken into greater account than the secondary or tertiary drivers.

Primary Use: How the covered auto is most commonly used. Insurers typically classify vehicles into one of three categories - commuting (most personal autos), business use (corporate-owned or used by the self-employed for business purposes), or pleasure use.

Private Passenger Auto: A four-wheeled motor vehicle that is subject to registration and used for private (non-business) use. Examples of vehicles that would not be considered private passenger autos include dune buggies, UPS trucks, busses, ATVs, etc.

Property Damage Liability Coverage: Insurance in which the insurer pays for damages to another party's property for which the insured is held liable.

Pro-Rata Cancellation: Termination of a policy before its expiration date. In this case, policyholders are responsible only for the earned premium. Every dollar in excess of the earned premium is considered "unearned," and is to be refunded to the policyholder. Insurance companies may, however, charge small fees for fixed expenses - see "short rate cancellation," below.

Property Damage Liability Insurance: This is insurance coverage for damage caused to other people's property. Damage to one's own property is considered "physical damage" and covered by collision and comprehensive coverages.

Rental Car Reimbursement: A common rider or endorsement in which the insured is reimbursed for the cost of a rental car while his covered auto is unusable.

Secondary Driver: A driver other than the primary driver who also is insured for the particular automobile. The secondary driver's driving record is given less weight in determining the insurance rates that the insured will be charged.

Short Rate Cancellation: This term refers to the non-prorated portion of a policy that is terminated early and must be refunded. Insurance companies are allowed to allocate expenses to the front end of a policyholder's term, and therefore, the daily cost of an insurance policy goes down each day.

Split Limits: This term refers to a set of three numbers dealing with liability insurance. For example, 35/50/10 means $35,000 in bodily injury liability coverage per individual; $50,000 in bodily injury liability coverage per accident; and $10,000 of property damage liability coverage per accident.

SR-22: An official document showing proof of "financial responsibility," most commonly needed by people convicted of certain major traffic violations in order to have their driver's licenses reinstated.

tacking: Applies to underinsured motorist / uninsured motorist coverage, and allows the insured to multiply the limits of each coverage by the number of cars being insured.

State Minimum: Each state has minimum requirements on the insurance coverages that motorists must carry in order to legally drive on the public roads. These minimums are expressed by three numbers; the first and second referring to bodily injury liability limits per person and per accident, respectively, and the third number referring to the maximum property damage coverage per accident.

Steering Restraint: An anti-theft device that makes it difficult for potential thieves to access your car's ignition system. The most commonly known steering restraint is "The Club." Most insurers offer discounts for cars fitted with steering restraints.

Term: The period of time for which a policy is active.

Tort: A legal wrong, most commonly negligence or acts of omission. Courts provide remedy for torts in the form of suits for damages.

owing Coverage: Optional insurance coverage that provides payment for towing (but not repairs) if your car breaks down or is disabled as result of an accident.

Underinsured Motorists Coverage: Insurance that covers damages caused by motorists who meet the state's minimum insurance requirements but still do not have enough coverage to satisfy damages.

Uninsured Motorists Coverage: Insurance that covers damages caused by uninsured or unidentified (hit-and-run) motorists.

Unsatisfied Judgment Fund: Many states have funds that reimburse victims injured in automobile accidents who are unable to collect from the liable party.

Usage: Refers to the purpose for which you use your vehicle. Different rates are established for different usages. Example usages include "pleasure," "commute," and "business."

VIN: Vehicle Identification Number. Each car has a unique VIN, which consists of 17 numbers, and is necessary for receiving insurance coverage.

Friday, June 5, 2009

21st Century Insurance

At Insurance.com, you can buy with confidence, because we research and select only top companies with a proven record of customer service and financial stability.

Why Choose 21st Century Insurance?
21st Century Insurance has been serving the insurance needs of individuals since 1958. By focusing on individuals and families, they offer excellent service. In addition, 21st Century Insurance features a unique service, included free with every policy. 21st Century Security Advantage® offers 24-hour Roadside Assistance, Identity Theft Restoration Service and Emergency Medical and Travel Assistance.

Certified Outstanding Customer Service
The 21st Century Call Center is available 24/7 and is certified by J.D. Power and Associates for consistently delivering "An Outstanding Customer Service Experience." In addition, 21st Century consistently wins Achievement in Customer Excellence (ACE)™ awards.

Rated A (Excellent) by A.M. Best for Strength and Stability
21st Century receives an A (Excellent) rating from A.M. Best Company, an independent firm that rates the financial strength and performance of insurance companies. An A is one of the highest ratings and means you can trust the stability and longevity of 21st Century.

Valuable Discounts and Coverage Options
21st Century offers many discounts that reward safe drivers. Your Insurance.com agent can help you get the best rate on your 21st Century quote. You can also get the same great 21st Century discounts using our easy online quote process.

You may be eligible for these money-saving 21st Century discounts and benefits:

Safe Driver Discounts
Homeowner Discounts
Airbag Discounts
Anti-lock Brake Discounts

EFT Discounts
Paid-in-full Discounts
Senior Driving Course Discounts
Defensive Driving Course Discounts

And, your Insurance.com agent can explain the valuable, optional coverages 21st Century offers, such as:

Free 21st Century Security
Advantage®

Rental Reimbursement
Towing and Labor Coverage

21st Century Customer Service: 1-800-241-1188
Policyholders can call 21st Century for Customer Service or Claims Service, toll-free 24 hours a day, 7 days a week. Or, get secure online access to your 21st Century policy or report claims online.

Will an Accident or Ticket Increase My Car Insurance Rate?

When drivers get into an accident, their first thought is often "How much will this cost?" It depends on your insurance company and your state's laws, but part of that cost will likely be an increase in your auto insurance premium—unless the accident was very minor.

How Likely Is a Rate Increase?
The chance of an increase in premium rises along with several factors:

Accident severity.
Your degree of fault, unless you're in a "no-fault" state.
The value of the insurance claim you or the other driver files.
Type of violation, if you get a ticket at all.
Whether the violation or accident appears on your MVR or CLUE report.

How Much Money?
Like everything else about insurance prices, the amount of an increase, if any, varies by company. However, based on a 2008 Insurance.com study of the effect a violation or insurance claim has on premiums, the price can be high. Drivers who had an additional ticket saw their rates increase from $157 to $248 a year while those who had an additional claim saw increases ranging from $302 to $458 annually.

($)

Average Annual Premium

Number of Claims or Violations

2800

2100

1400

700

Claims

Violations

When Will It Go Up?
These increases are typically seen at renewal time, but if you didn't notify your insurance company (please do!) and no one made a claim, it could take awhile for the company to find out. Rest assured that they will not be happy to uncover a ticket or accident you failed to report. If you're switching companies, they may not find out until they order your driving or claims history, at which time they may decide not to issue you a policy.

Accident Forgiveness
Some insurance companies offer an accident forgiveness feature. If yours does—and you qualify—your rates may not increase if you're found to be at fault in a relatively minor accident. However, there could be severe consequences if you're involved in a major accident and you're driving under the influence. Remember that there are worse things that can happen than a higher insurance premium, like license suspension and jail time.

MVR = Motor Vehicle Report. Not every traffic ticket actually appears on your MVR. In fact, in some states only 75% of all moving violations are ever recorded on an MVR.

CLUE = Comprehensive Loss Underwriting Exchange. C.L.U.E. is a claims history database created by ChoicePoint that allows insurance companies to access your claims information when they underwrite or rate a policy. The report includes claim information such as date of loss, type of loss and amounts paid, and vehicle description.

Car Insurance Rates Are Dropping

According to a new survey by Insurance.com, 44% of shoppers believed they were overpaying for car insurance. In addition, 22% said that they were shopping because their rates had recently increased with the renewal bill from their current auto insurance company.

Are you getting a good deal? March RateWatch data shows that drivers who pay too much for car insurance now have a great chance to save. "Consumers who shopped for car insurance recently saw rates that were $100 lower on average than rates quoted last fall," said Sam Belden, Vice President at Insurance.com. "Most policies renew every six months, so this decline in average quotes comes as good news for consumers whose policies were affected by rising prices in late 2008."

Insurance.com's survey also found that 32% of drivers were driving less compared to six months ago. Driving fewer miles presents another savings opportunity, because it could earn drivers a 5–15% Low Mileage discount on their auto insurance policy with most insurance companies.

Consumers are making tough decisions about how much coverage they buy, while still trying to maintain their policies. 25% of car insurance shoppers surveyed bought less auto insurance coverage than they had on a prior policy, and 26% dropped comprehensive and collision coverage. While less coverage always beats no insurance, we'd like to remind you that auto insurance provides important protection. Consider these tips:

Protect yourself with Uninsured/Underinsured Motorists coverage. The number of uninsured drivers on the road continues to rise. You can protect your family from these drivers with low-cost UM/UIM coverage.

Don't slash your policy's limits. Don't risk your assets – now and in the future – by cutting your liability limits to state minimums.

Insure your car against damage, even if you increase the deductibles. Try to keep comprehensive and collision coverage for your car, unless you can afford to pay cash to replace it. Even if your car has a low "market value," in this economy it's probably priceless to you!

Car Insurance: What Not to Do

You can save money on your car insurance. That's the good news. The bad news is that you can't safely save money by slashing your coverages dramatically and dropping damage coverage for your car. Sorry for the reality check, but if anyone tells you to improve your financial situation by calling your auto insurance company and buying a lot less coverage, they simply don't have all the facts.

What? Cheaper is better!
Sometimes, yes. However, you get what you pay for. Everyone wants to save money on their insurance premium, but no one wants to pay out of pocket when the unexpected happens. Car insurance exists because bad things happen. If you reduce your liability coverage and drop uninsured/underinsured motorist coverage, and drop comprehensive and collision or raise the deductibles, who pays when there's an accident? Most likely, you do.

Dropping and reducing auto insurance coverages is a lot like gambling. It's a decision to stake your financial future on the assumption that you are an excellent driver, that everyone you encounter is an excellent (and insured) driver, and that your car will never be damaged or stolen.

But my friend saved a lot by getting the bare minimum.
It's possible to save money if you only get what's required, just like it's possible to win the lottery or predict the stock market. That doesn't make it a good bet. Let's look at why.

Suppose you have an old car that's only worth around $2,000. Your friend tells you he saved $300 a year by dropping collision coverage. You like saving money, so you do the same, but the next week you lose control of your car and hit a utility pole. You were only going 20 MPH, but that's enough to total the car, since repair costs exceed $2,000. You did save $300 on your premium, but you have no car and no coverage. Now you have to find a car that's as reliable as your old one for as little money as possible.

What if you also tried to save money by lowering your liability limits to the state minimum? For example, in Ohio the minimum limit for property damage coverage is $7,500. If you knocked the utility pole over into a storefront, taking out power for the block at the same time, who pays? If it costs $15,000 to repair the pole and replace the store's window and display, you can bet the extra $7,500 will come out of your pocket somehow. If you have assets, those will be used to provide payment, and if you don't have assets, you'll usually be asked to work out a payment plan. Now you've actually cost yourself money instead of saving it, and this accident didn't even involve any injuries.

So how can I save money?
We did mention that there was good news. Although you don't want to eliminate the protection you have with uninsured/underinsured motorist and Comp & Collision coverages unless there's no choice, you still have options. First, make sure you're getting all of the discounts you're eligible for. Next, compare auto insurance rates from other companies to see if you're paying more than you have to for the same coverage. Rates can vary considerably from one company to the next, so investing a little time in comparing quotes might pay big dividends in savings.

What's your quick advice?
Since you asked, here are some quick tips for sorting out the good advice from the bad.

Don't slash your policy limits. If you want to protect your assets – now and in the future – it's too risky to cut your limits to state minimums.
Insure your car against damage, even if you have to increase the deductibles. Unless you can afford to pay cash to replace your car, try to keep it insured for comprehensive and collision. Comprehensive in particular isrelatively inexpensive, especially if you have an older car model. No matter how much someone else would pay for your car, in this economy it's probablypriceless to you!
Always buy Uninsured/Underinsured Motorists coverage. With more uninsured drivers on the road, UM/UIM coverage gives you low-cost protection from unnecessary risk.

How Much You Pay for Insurance Can Depend on the Type of Vehicle

A sneak peak at one of the questions that might appear on your next quiz in Auto Insurance 101 -- Will the type of car you drive help determine how much you pay for auto insurance? Go to the head of the class if your answer was "yes."

The vehicle you drive absolutely is part of the equation on auto insurance cost, acknowledges American Insurance Association executive Dave Snyder. "The make and model of your car is an insurance factor, and how the make and model performs in terms of crash and theft costs will alter the premium over time," says Snyder, AIA vice president and assistant general counsel in Washington, D.C.

Snyder says that "when a car model first comes out, it's given a symbol by insurance rating organizations that predict its expected costs to insure compared to other vehicle makes and models. As experience accumulates for that make and model, the car may be moved up or down in the ratings and that would affect the cost you pay for comp and collision coverage," In addition to your type of car, auto insurers factor in your driving record, claims history, credit history, age, gender, amount and type of auto insurance purchased, where you live, just to name a few key pricing variables.

Sports cars and sport utility vehicles (SUVs) are among the type of vehicles that probably will cost you more in liability premiums. Some auto insurers rate SUVs differently based on the vehicles' histories of causing more damage to other vehicles when involved in collisions.

Russ Rader of the Insurance Institute for Highway Safety says crash experience and loss experience for the make and model of your vehicle help determine your insurance premium. "When you're buying a vehicle, you should check crash test rating but also you should select a vehicle that has low insurance losses in real crashes because that can help lower your insurance premium, and the Highway Loss Data Institute (HLDI) publishes a brochure that shows such losses for vehicles by make and model (http://www.hldi.org/)."

All About Auto Insurance

Saturday, June 6, 2009

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