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Special Auto Insurance Considerations for Established Families

At this life stage, your cute little kids become teenage drivers, competing with you for the car. In addition – as you enter that mid-life period – your own automotive interests may steer you towards different types of cars than you’ve previously driven.

  • When adding your teenage driver to your policy, be prepared to pay higher auto insurance rates. Although some states do not allow gender differences in auto rates, industry figures show that a teenage female driver can cause rates to increase as much as 50 percent, while a young male driver can boost costs by up to 100 percent.
  • If you plan to provide your child with an automobile to take to college, check on the need for a separate auto insurance policy.
  • At this stage of your life, you may be frantically transporting your kids – and their friends – to sports practices and other after-school activities. Given these chauffeuring responsibilities, you might want to consider increasing your liability insurance in case of an accident.
  • Hopefully, your success in the job market is causing your net worth to grow. So you may want to consider purchasing an “umbrella policy” to raise your auto liability coverage, for example to $1 million, in order to protect your assets.

Here are some tips to prudently control your auto insurance costs:

  • Ask about an “accident forgiveness” clause that promises not to raise premiums if a student gets into one minor accident. In addition, consider raising the policy’s deductible and only allowing their child to drive the family’s oldest, least expensive car. In addition, parents might consider purchasing an older car for their child and foregoing comprehensive and collision insurance on that vehicle.
  • When you add a teen driver to your policy, it’s a good time to evaluate different auto insurance companies and compare costs, as firms differ in their policies for young drivers.
  • If you’re planning to purchase a car for your young driver, keep in mind that auto insurance premiums are linked to the type of vehicle driven. If you’re buying or leasing a new car, check the insurance rates before you make your final choice. SUVs, convertibles and performance vehicles typically cost more to insure than some cars.
  • Parents of new teenage drivers should encourage their children to maintain good grades and to take a driver’s education class, as these steps may help lower your insurance rates.
  • In addition, keep in mind that if your child lives away at school (at least 100 miles) and has less access to the insured vehicle, you may be able to take advantage of insurance discounts.
  • Remember that companies often grant discounts to those who are considered “safe drivers,” so try to keep your driving record – and your children’s driving record – free from accidents and moving violations for at least three years, or consider taking a defensive driving course.
  • College Students and Auto Insurance: Parents and college students should do some homework regarding auto insurance. If a college student is going to be using the family vehicle when visiting home, parents should make sure the child is listed by name on the family’s auto insurance policy. If the student will be taking a car with them to school, parents should check the specific rates for the college’s city and state before deciding whether to keep their child on the family’s auto policy. In addition, the insurance company should be notified each semester if the student maintains good grades, as that accomplishment might lower premiums.

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Auto Insurance Considerations for All Life Situations

There are several types of insurance coverage to consider when purchasing an auto policy: Some states mandate “no fault” auto insurance, which provides coverage for medical expenses, rehabilitation, funeral expenses, lost wages and in-home assistance to the driver and his or her passengers, regardless of who is held at fault in an accident.

Auto insurance is one of the most frequently used types of personal insurance. In fact, states require that you purchase some kind of insurance coverage in order to drive legally.

There are two basic components to auto insurance coverage: liability and property damage.

Liability Coverage

Most auto insurance policies cover your liability for bodily injury, property damage and uninsured/under-insured motorists.

Bodily injury liability insurance protects you against the claims of other people who are injured in an accident for which you were at fault. Their claims for bodily injury may include medical expenses, lost wages and pain and suffering.

Property damage liability insurance pays for any damage you cause to the property of others. This includes not only damages to other vehicles, but also other property, such as walls, fences and equipment.

Uninsured motorists coverage protects you, the policyholder, in the event that you are injured by a hit-and-run driver or a driver who does not have auto insurance.

Property Damage Coverage

Property damage coverage may include both collision coverage and comprehensive coverage. Collision coverage pays for physical damage to your car as the result of your auto colliding with an object, such as a tree or another car. This coverage is optional and not required by law. However, collision insurance may be required by your lending institution or lessor.

In the case of an accident involving an older car, the cost of repairing the car can quickly exceed the worth of the car. In this case, insurers will “total” the car and pay you what the car was worth based on its current book value rather than fix it.

Comprehensive coverage pays for damage to your auto from almost all other causes, including fire, severe weather, vandalism, floods and theft. You are not required by law to carry comprehensive coverage.

Your auto insurance premiums are affected by a number of factors:

  • For starters, they’re linked to the type of vehicle driven. If you’re buying or leasing a new car, check the insurance rates before you make your final choice. For example, SUVs, convertibles and performance vehicles typically cost more to insure than some cars.
  • Safety devices on your car can help reduce your premiums. If you’re buying or leasing a new car, consider getting one with anti-lock brakes, side air bags, automatic seat belts and daytime running lights.
  • Anti-theft devices on your car, such as an alarm system and global positioning system – so that your car can be located if stolen – can help reduce your premiums.
  • Where you park your car can also impact premiums. If you have access to an indoor garage or locked parking lot – places that decrease the likelihood that your car will be stolen – you may qualify for lower premiums.
  • The geographic region in which you live may impact your premiums. For example, areas prone to extreme weather – hail, wind storms, hurricanes, etc. – higher traffic patterns or higher risk of theft may have higher insurance rates. If you live in an area prone to extreme weather, check whether your policy includes comprehensive coverage on your car to cover potential damage from storms.
  • Your driving record – tickets, accidents, DWIs/DUIs (driving while intoxicated/driving under the influence citations) – directly affect your premiums.
  • The number of claims you have previously filed impacts your insurance costs. You may want to consider not filing claims for smaller events to avoid premium increases.
  • The cost of your insurance is directly linked to your policy’s deductible amount. The deductible is the amount of money that you agree to pay as part of a claim, before your insurer pays the remaining amount toward that claim. For example, if your vehicle incurred $1,000 of damage in an accident and your deductible was $250, you would pay the first $250 and your insurer would pay the remaining $750. The higher the deductible, the lower the premium.
  • Maintain a good credit history. In some situations credit score can have a direct impact on auto premiums.
Auto Rental Considerations

Drivers should educate themselves before they reach the auto rental counter. Carefully review your auto insurance policy and check with your credit card issuer about auto insurance benefits. Protect yourself and save money by taking a few precautions and asking the right questions.

Car rental companies offer several different insurance options that your existing policy might already cover.

They typically offer the following products at the counter:

Collision Damage Waiver (CDW) is also referred to as a Loss Damage Waiver (LDW). If you have comprehensive and collision coverage on your own car, you will likely not need this additional protection. (Comprehensive insurance covers vehicular damages caused by accidents such as fire, theft, wind, hail or a run-in with a deer, vandalism, or theft. Collision insurance covers the cost of repairs or the actual cash value of the vehicle, if damaged in a crash or rollover.) This protection can cost an extra $10-$20 a day.

Liability Insurance covers medical expenses and damages to another person’s property as a result of a car accident caused by the insured’s negligence. If you are adequately insured on your own car, you may consider forgoing this additional liability protection. This supplemental insurance can cost $7-$14 a day.

Personal Accident Insurance offers coverage to the renter and passengers for medical bills resulting from a car crash. If you have adequate health insurance and disability income insurance, or are covered by personal injury protection under your own car insurance, you will likely not need this additional insurance. It usually costs about $1-$5 a day.

Personal Effects Coverage provides for the theft of personal items inside the rental car. If you have a homeowners or renters insurance policy, it generally covers this already. If you frequently travel with expensive jewelry or sports equipment, it may be more cost-effective to purchase a floater under your home or renters insurance policies so the items are fully protected when you travel. Generally, this coverage costs $2-$5 a day.

Car Rental Insurance Tips:
  • Review your auto insurance policy or call your insurance agent before you reach the rental car counter.
  • If your current policy doesn’t offer coverage for a rental car, see if an insurance rider can be added for a small fee.
  • Many credit cards include some level of collision and theft protection. In most cases, these benefits are secondary to your personal auto insurance or the car rental company’s insurance, meaning the credit card company will only pay claims after other insurance coverage has been exhausted. The NAIC recommends you call your credit card company and ask about benefits.
  • If you lack personal auto insurance and your credit card does not provide benefits, it might be wise to purchase the liability insurance and collision damage waiver at the car rental counter.
  • Keep in mind that if it is a longer-term rental (e.g., a week, a month or more), there might be limitations on the coverage your existing auto insurance policy provides. Check with your insurance company or agent for details.
  • If you don’t own a car, you might want to consider purchasing a non-owner auto insurance policy, because it provides benefits in addition to coverage for a rental car.
  • When traveling on business, a personal auto policy will generally not apply, so check with your employer for guidance.

Know that you are not alone if you find car rental insurance confusing. If you are unclear about the car rental insurance options, or are concerned that a rental company is misrepresenting information, check with your state insurance department.

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