What is auto insurance?
Auto insurance protects you against financial loss if you have an
accident. It is a contract between you and the insurance company. You
agree to pay the premium and the insurance company agrees to pay your
losses as defined in your policy.
Auto insurance provides property, liability and medical coverage.
Property coverage pays for damage to or theft of your car. Liability
coverage pays for your legal responsibility to others for bodily injury or
property damage. Medical coverage pays for the cost of treating injuries,
rehabilitation and sometimes lost wages and funeral expenses.
An auto insurance policy is comprised of six different kinds of
coverage. Most states require you to buy some, but not all, of these types
of coverage. If you're financing a car, your lender may also have
requirements.
Most auto policies are for six months to a year. Your insurance company
should notify you by mail when it’s time to renew the policy and to pay
your premium.
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What is in a basic automobile insurance policy?
Your auto policy may include six coverages. Each type of coverage is
priced separately.
- Bodily Injury Liability
This coverage applies to injuries that you, the designated driver or
policyholder, cause to someone else. You and family members listed on
the policy are also covered when driving someone else’s car with their
permission.
It’s very important to have enough liability insurance, because if
you are involved in a serious accident, you may be sued for a large sum
of money. Definitely consider buying more than the state-required
minimum to protect assets such as your home and savings.
- Medical Payments or Personal Injury Protection (PIP)
This coverage pays for the treatment of injuries to the driver and
passengers of the policyholder's car. At its broadest, PIP can cover
medical payments, lost wages and the cost of replacing services normally
performed by someone injured in an auto accident. It may also cover
funeral costs.
- Property Damage Liability
This coverage pays for damage you (or someone driving the car
with your permission) may cause to someone else's property. Usually,
this means damage to someone else’s car, but it also includes damage to
lamp posts, telephone poles, fences, buildings or other structures your
car hit.
- Collision
This coverage pays for damage to your car resulting from a collision
with another car, object or as a result of flipping over. It also covers
damage caused by potholes. Collision coverage is generally sold with a
deductible of $250 to $1,000—the higher your deductible, the lower your
premium. Even if you are at fault for the accident, your collision
coverage will reimburse you for the costs of repairing your car, minus
the deductible. If you're not at fault, your insurance company may try
to recover the amount they paid you from the other driver’s insurance
company. If they are successful, you'll also be reimbursed for the
deductible.
- Comprehensive
This coverage reimburses you for loss due to theft or damage caused by
something other than a collision with another car or object, such as
fire, falling objects, missiles, explosion, earthquake, windstorm, hail,
flood, vandalism, riot, or contact with animals such as birds or deer.
Comprehensive insurance is usually sold with a $100 to $300
deductible, though you may want to opt for a higher deductible as a way
of lowering your premium. Comprehensive insurance will also reimburse
you if your windshield is cracked or shattered. Some companies offer
glass coverage with or without a deductible.
States do not require that you purchase collision or comprehensive
coverage, but if you have a car loan, your lender may insist you carry
it until your loan is paid off.
- Uninsured and Under insured Motorist Coverage
This coverage will reimburse you, a member of your family, or a
designated driver if one of you is hit by an uninsured or hit-and-run
driver.
Under insured motorist coverage comes into play when an at-fault
driver has insufficient insurance to pay for your total loss. This
coverage will also protect you if you are hit as a pedestrian.
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Can I drive legally without automobile
insurance?
NO! Almost every state requires you to have auto liability insurance.
All states also have financial responsibility laws. This means that even
though a state does not require liability insurance, you need to have
sufficient assets to pay claims if you cause an accident. If you don’t
have enough assets, you must purchase at least the state minimum amount of
insurance. But insurance exists to protect your assets. Trying to see how
little you can get by with can be very shortsighted and dangerous.
If you've financed your car, your lender may require comprehensive and
collision insurance as part of the loan agreement.
Below is an example of the state minimum limits for auto liability
insurance. The first number refers to liability limits for bodily injury
for any one person, the second to limits for all persons injured, and the
third refers to property damage liability limits. For example, 20/40/10
means coverage up to $40,000 for all persons injured in an accident,
subject to a limit of $20,000 for one individual and $10,000 coverage for
property damage.
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What if I lease a car?
If you lease a car, you still need to buy your own auto insurance
policy. The auto dealer or bank that is financing the car will require you
to buy collision and comprehensive coverage. You'll need to buy this type
of coverage in addition to the others that may be mandatory in your state,
such as auto liability insurance.
Collision covers the damage to the car from an accident with another
automobile or object. Comprehensive covers a loss that is caused by
something other than a collision with another car or object, such as a
fire or theft or collision with a deer.
The leasing company may also require "gap" insurance. This refers to
the fact that if you have an accident and your leased car is damaged
beyond repair or "totaled," there's likely to be a difference between the
amount that you still owe the auto dealer and the check you'll get from
your insurance company. That's because the insurance company's check is
based on the car's actual cash value which takes into account
depreciation. The difference between the two amounts is known as the
"gap."
On a leased car, the cost of gap insurance is generally rolled into the
lease payments. You don't actually buy a gap policy. Generally, the auto
dealer buys a master policy from an insurance company to cover all the
cars it leases and charges you for a "gap waiver." This means that if your
leased car is totaled, you won't have to pay the dealer the gap amount.
Check with the auto dealer when leasing your car.
If you have an auto loan rather than a lease, you may want to buy gap
insurance to protect yourself from having to come up with the gap amount
if your car is totaled before you've finished paying for it. Ask your
insurance agent about gap insurance or search the Internet. Gap insurance
may not be available in some states.
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Do I need automobile insurance to rent a car?
When renting a car, you need insurance. If you have adequate insurance
on your own car, including collision and comprehensive, this may be
enough.
Before you rent a car:
- Contact your insurance company.
Find out how much coverage you have on your own car. In most cases, the
coverage and deductibles you have on your personal auto policy would
apply to a rental car, providing it's used for pleasure and not
business. If you don't have comprehensive and collision coverage on your
own car, you will not be covered if your rental car is stolen or if it
is damaged in an accident.
- Call your credit card company.
Find out what insurance your card provides. Levels of coverage vary. If
you don't have auto insurance, you will need to buy coverage at the car
rental counter. The following types of coverage are available to you at
the rental car counter:
- Collision Damage Waiver (CDW)
Sometimes called a Loss Damage Waiver (LDW), this coverage relieves
you of financial responsibility if your rental car is damaged or
stolen. The CDW may be void, however, if you cause an accident by
speeding, driving on unpaved roads or driving while intoxicated. This
coverage generally costs between $9 and $19 a day. If you have
comprehensive and collision on your own car, you may not need to
purchase this coverage.
- Liability Insurance
This provides excess liability coverage of up to $1 million for the
time you rent a car. Rental companies are required by law to provide
the minimum level of liability insurance required by your state.
Generally, this does not offer enough protection in a serious
accident. If you have adequate liability coverage on your car or an
umbrella policy on your home/auto, you may consider forgoing this
additional insurance. It generally costs about $9 to $14 a day. If you
don't own a car and rent cars often, consider purchasing a non-owner
liability policy. This costs approximately $200 - $300 per year.
Frequent car renters sometimes find this more cost-effective than
constantly paying for the extra liability coverage.
- Personal Accident Insurance
This provides coverage to you and your passengers for
medical/ambulance bills. This type of insurance, usually costs about
$1 to $5 per day, but may be unnecessary if you are covered by health
insurance or have adequate medical coverage under your auto policy.
- Personal Effects Coverage
This provides coverage for the theft of personal items in your car.
However, if you have homeowners or renters insurance, you may be
covered for items stolen from the car, minus your deductible. You need
to have receipts or other proof of ownership. This type of insurance
usually costs about $1 to $4 per day.
Some rental car companies combine personal accident and personal
effects coverage together as one type of insurance, while others sell it
individually.
The cost of insurance at the rental car counter will vary depending on
the rental company, state, and location of the dealer and the type of car
you rent. Some rental car companies may check your credit and driving
history and may deny coverage. Check with the rental company to find out
its policy.
If you can afford it, buy rental car insurance from the rental company.
Note: If you're renting a car abroad, you may need an international
driver’s license.
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What's the difference between cancellation and
non-renewal?
There is a big difference between an insurance company canceling a
policy and choosing not to renew it. Insurance companies cannot cancel a
policy that has been in force for more than 60 days, except when:
- You fail to pay the premium.
- You have committed fraud or made serious misrepresentations on your
application.
- Your driver's license has been revoked or suspended.
Non-renewal is a different matter. Either you or your insurance company
can decide not to renew the policy when it expires. Depending on the state
you live in, your insurance company must give you a certain number of days
notice and explain the reason for not renewing before it drops your
policy. If you think the reason is unfair or want a further explanation,
call the insurance company’s consumer affairs division. If you don't get a
satisfactory explanation, call your state insurance department.
The company may have decided to drop that particular line of insurance
or to write fewer policies where you live, so the non-renewal decision may
not be because of something you did. On the other hand, if you did do
something that raised the insurance company’s risk considerably, like
driving drunk, the premium may rise or you may not have your policy
renewed.
If your insurance company did not renew your policy, you will not
necessarily be charged a higher premium at another insurance company.
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Which tort option would you choose on your Pennsylvania auto insurance
policy - Limited Tort or Full Tort? If you are confused by
Pennsylvania's auto insurance law and don't understand the difference
between Full Tort and Limited Tort, you're not alone. Let's take a look at
each option:
LIMITED TORT
With Limited Tort, you give up the right to receive compensation
for pain and suffering if you are injured in an accident. If you have
never been injured in an auto accident, you may not realize the pain and
suffering that a person goes through, sometimes for many months or even
years.
Because many people are unfamiliar with the insurance jargon, and don't
really understand what it means. They choose Limited Tort because they
believe that:
- it saves them a few dollars (approximately 15% on their premiums)
- they'll never be injured in an auto accident
Did you know that by choosing Limited Tort, you sacrifice full
protection for you and your family members who are covered under your car
insurance policy? Limited Tort not only puts you and your family at risk
in your own car, but it even applies when you or your children are injured
as passengers in someone else's car or even as a pedestrian.
There are some rare and strict exceptions to Limited Tort that would
enable you to collect money for pain and suffering under limited
circumstances such as when your injury is deemed serious. This is defined
as death, severe and permanent disfigurement or catastrophic
injuries that impair bodily function i.e.: loss of limb.
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FULL TORT
With Full Tort, you can seek money for your pain and suffering for
any injury you receive in an auto accident, provided that someone else is
at fault for the accident. You do not have to worry about whether you have
a serious injury. Choosing Full Tort on your policy instead of Limited
Tort does cost a little more on your insurance premium, but it could mean
thousands of dollars to you if you are ever injured in an auto accident.
Having additional money to help you through a difficult time in your life
is well worth the investment today.
Bottom line, if you can afford it buy Full Tort for the highest level of
protection.
This guide is NOT a complete summary of the Pennsylvania Auto
Insurance Law.
It is designed to highlight certain important features of this law and
should not be considered legal advice. Everyone has different insurance
needs. If you have any questions concerning your coverage, please contact
your insurance agent.
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