The most common form of property insurance purchased by Americans is personal automobile insurance. Certain basic coverage is mandatory in most s, but insurance companies offer options to extend protection beyond the legal minimum levels. Types of Coverage: Insurers offer the following types of auto insurance: Type of Insurance Items or events covered Liability Injuries to others and damage to their property Medical Payments Medical and/or funeral expenses incurred because of an auto accident, regardless of who is at fault Uninsured and Underinsured Motorist Expenses (liability and/or physical damage) incurred when the insured is the victim of an accident involving an uninsured vehicle, or a vehicle that has insufficient coverage Physical Damage Damage to the insured vehicle from an accident (collision) or causes such as theft, fire, or vandalism (comprehensive) Other options are often available as endorsements or "add-ons," such as coverage for glass breakage, temporary replacement vehicles, and towing expenses. Adequate Protection: Review your auto policies at least annually to determine if you are adequately insured. Some of the above coverages are appropriate for almost everyone. Others may not be necessary depending on your circumstances. Liability insurance is the most important coverage. One should coordinate this coverage with other policies (e.g., an umbrella policy). Consider purchasing more than the legal minimum, since the cost of additional coverage generally is not a great deal more than the basic premium. Medical payments insurance is not as essential as liability. Most health insurance plans will cover members of your household in case of an accident. If you do not have health insurance, or if your health insurance policy includes a large deductible, it may be a good idea to adjust the medical payments coverage. Uninsured and underinsured motorist liability coverage is mandatory in many s. This coverage is essential in densely populated areas where there tends to be more uninsured and underinsured drivers. Ideally, the limits on this coverage will mirror the limits on the liability and medical components of your auto insurance. Uninsured and underinsured motorist physical damage coverage is optional, but may be advisable for drivers in urban areas. Physical damage coverage should be carefully reviewed, and in some cases may be expendable, depending on the age and value of the car, and the financial capability of the owner. Also, investigate the effect on the premium of raising the deductible. Physical damage insurance coverage is usually required if the vehicle is financed. Endorsements should be purchased only if the coverage is needed, and unavailable from other sources at a better price. For example, many believe joining an auto club is a better value than a towing expense endorsement. Factors That Affect Premiums: The cost of auto insurance depends in part on whether the insured is considered to have a relatively high or low probability of being involved in an accident. Factors considered by insurers when categorizing drivers and determining premiums include age, gender, and marital status. Individuals over age 25 are less likely to be involved in an accident than younger drivers. Women have fewer accidents than men, and married drivers have fewer accidents than single drivers. Insurers also consider: Personal Driving Record: Drivers with a history of accidents and/or traffic violations (especially driving under the influence offenses) are more likely to incur losses than those with clean records. Some insurers give discounts for completing defensive driver or driver education courses. Type of Vehicle: High-performance vehicles and sports cars are considered higher risk. Insurers may offer preferential rates for vehicles that have certain safety features (e.g., anti-lock brakes, air bags). Cost to Repair Vehicle: Repair expenses can vary widely, even among vehicles that have comparable original purchase prices. Vehicle Use and Location: Daily commuters in densely populated urban areas pose a higher risk than occasional drivers in rural areas. Other Insurance Purchased: Those who purchase their homeowners and auto policies through the same company generally receive preferred rates. Review Checklist: Following is a checklist of points to consider when reviewing the adequacy of your automobile insurance: Available coverages, for gaps in current coverage. Current coverages, for excess or overlapping coverage. Maximum limits on current coverages, for appropriateness. Drivers covered under the policy, for additions or deletions. Vehicles covered under the policy, for additions or deletions. Need for collision and/or comprehensive coverage. Appropriateness of increasing deductibles for physical damage coverage. Factors that affect premiums. Your financial advisor and insurance agent can provide additional information and should be consulted before any action is taken.
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