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UFWDA Community Forum  |  UFWDA General Discussion  |  General UFWDA Topics  |  Topic: I-N-S-U-R-A-N-C-E, A simple word you need to understand. « previous next »
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Author Topic: I-N-S-U-R-A-N-C-E, A simple word you need to understand.  (Read 847 times)
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« on: February 09, 2006, 11:49:33 am »

Or WHY YOU NEED TO READ (and understand) YOUR POLICY!

Yes I have insurance.  What does it cover you ask?  Why my vehicle of course!  But are you sure?  Do you really know what is covered if you have an accident or a claim? 
 
Auto insurance is a fact in most of our daily lives… from our commuter cars to our trail rigs most of us have insurance that covers things like liability, bodily injury, comprehensive, collision, un- and under-insured motorists and even medical bills.  In fact in many states, provinces and other areas insurance is required in some form or another to license and drive a motor vehicle.  Aside from a few choice words I would bet that very few of us have ever checked to actually see what that coverage really means beyond what your agent may tell you.

In fact, I would bet the majority of people have heard this from your agent “buy more coverage if you own a home so that if you are in an accident it’s protected…” but have you checked your policy declarations page and the insuring agreement to see what is covered, what and how they will pay and what requirements are placed on you? 

For example:  I recently studied a number of polices and found some very interesting items.  Listed here are a few examples (these may be paraphrased and re-worded):

Quote
“This vehicle is covered for all liability and comprehensive claims while driving on maintained roads”

Quote
“Use of recovery equipment stemming from accident or otherwise by unlicensed individual will reduce coverage payouts and may nullify any medical coverage”

Quote
“Off highway use may limit the coverage selections on the attached declarations page”

Quote
“This vehicle is not considered a recreational vehicle and as such any damage from off highway usage will not be covered by this policy.  For recreational vehicle coverage please see your agent in regards to an additional coverage policy.”

Quote
“Alterations to the motor on this vehicle are inconsistent with the demands on this policy and are a violation of the agreement between the Company and the Insured.”

And one of the very popular auto insurance companies I called for a quote (having just moved to CO) told me flat out that they would not insure me because I had a self recovery winch attached to my vehicle and if they did insure me and found out later about the winch, they would severely limit or cancel my policy.

After reading through that, I highly advise you to dig out that stack of papers that the insurance company sent you and spend a little time reading through it. To make things easier, think of your Auto Policy as a number of smaller separate policies rolled into one document.  Below I have broken out the general parts of an auto policy, each of these is separate and in reality you pay separately for each section.  Read through the definitions and if there are parts you don’t understand contact your agent, broker or insurance company and explicitly tell them your question(s) and concern(s).

Components of an Auto Policy:

  • Bodily injury liability: In case you cause an accident in which someone is hurt or killed outside of your vehicle. Many insurers recommend carrying at least $100,000 per person and $300,000 per occurrence.
  • This is related to your Agent’s comment above, you should take into account what assets you have to protect (house, cars, savings, college funds etc) and plan accordingly to cover those assets if needed. 
  • Property liability: For when you damage someone else's property. Usually it's someone else's car, but it could apply to buildings, utility poles, garage doors, etc.
  • This is also related to your Agent’s comment – think about how much it may cost to replace a vehicle plus any other damage.  If your insurance doesn’t cover enough the rest may come out of your pocket.
[li]Collision: Covers damage to your car from a collision with another car, a brick wall, a fire hydrant, etc. [/li]
[li]Comprehensive: Is in case your car is stolen or damaged in ways that don't involve a collision. Covered risks include hail, fire, theft, flood, earthquake, explosion, and falling objects. [/li]
[li]Uninsured motorist: Is generally available in two forms - property damage coverage and medical coverage to pay your bills when you are hit by a driver without insurance. [/li]
[li]Medical payments coverage (sometimes referred to as MPC or even PIP): Pays for reasonable expenses you and your passengers incur because of injury in a motor vehicle accident, regardless of fault. Coverage amounts available vary from company to company.[/li]
[/list]

So now that you have a quick idea of what these mean what should you do next?  Well my suggestion is to read through your policy.  Your policy is a legal contract, so at first glance it will seem very wordy and most likely very confusing.  Most Auto Policies (and many homeowner policies as well) are broken down into three main parts – Declarations, Insuring Agreement, and Conditions.  To make it easier for you (along with the definitions above) here are the descriptions of each part:

  • Declarations/Declarations Page: This is where you’ll find your personal information, a statement of the policy period during which you are covered and the amount of premium you pay. The declarations page generally includes a brief description of the insurance coverage provided and gives the maximum dollar limit the insurer will pay for a claim under each type of coverage. Be sure to look at each section as separate coverage areas (use the definitions above).
  • Insuring Agreement: This is the main part of the policy. It describes what the insurance company will do in exchange for the premium that you are paying. The insuring agreement will also say who is covered: (example, your policy may be different or even include exclusions in this section) The persons named as insured on the declarations page, residents of the same household and persons using the car with the permission of the insured. Everything is spelled out specifically in an attempt to avoid misunderstanding. Read the definitions section and the list of exclusions that apply to each type of coverage. It’s vital that you know what you are covered for and what you are not covered for when you need to use your coverage! Saying I didn’t know after the fact won’t help if it is written down on these pages.
  • Conditions of the policy/Policy procedures: This section describes your responsibilities when you have a claim, for example how much time you have to report it and what documentation you must give to the insurance company. It also explains the terms for canceling your policy—both for you and the insurer. You can cancel your policy at anytime, however your insurance provider may only cancel under certain conditions and with advance notice to you.

If you find sections or items that you don’t understand for any reason – whether it be the wording or the meaning, call your agent or insurance company for clarification.  If you are concerned about what something means, ask for that clarification in writing and attach it to your policy.

If you decide or are in the process of looking for more (or new) insurance, then I would make sure to understand and answer the following questions as they will help you and your Agent (or Insurance Company) to put a policy together that fits your needs and coverage requirements.

  • What is the estimated value of my Assets?
  • Knowing this can help determine your liability coverage(s).
[li]What kind of deductibles can I afford?[/li]
  • Deductibles are sort of “self insurance” – in other words if you take some of the risk ($100, $250, $500) of whatever happens the insurance companies will lower your premiums because you are paying for the first part.
  • If you have older vehicles, don’t mind minor damage or have a little extra disposable income raising your deductibles can be a good idea; however, if you are a student or on a “fixed” income and are concerned about having to come up with extra unplanned cash a lower deductible may have greater benefit – either way know your finances before you make a decision.
[li]Do I and my family have enough Medical / Health Insurance?  What are our current Medical / Health Insurance out of pocket maximums, deductibles and co-pays?[/li]
  • This can be a big help in determining whether or not you need medical coverage. 
[li]Do I own, lease or finance my vehicle?[/li]
  • Knowing the requirements of the lease or finance company can help determine the minimums of coverage you need.
  • Also don’t forget to ask about GAP coverage, especially if you have a newer vehicle.  GAP coverage will pay off your vehicle loan or lease even if the vehicle is worth less then you owe on your note.  This varies greatly by company but can be a worthwhile expenditure.
[li]What is the estimate Blue Book or Market Value of my vehicle?[/li]
  • This of course is one that is worth knowing.  While we all want some sort of protection, comprehensive and collision coverage on a vehicle that is worth $1000 may cost you more than that per year (depending on your driving record etc).  In which case you may be better off putting the money into a savings account than paying the premiums.
[li]Has my vehicle been modified?  And if so in what ways and what items do I also want covered by my policy?[/li]
  • Do you have aftermarket bolt on parts? Custom paint?  Expensive tires or a stereo that you want to make sure is covered?
  • Have you made engine modifications?  Swapped out a 4 cyl for a V8?
  • Do you have self recovery gear?
  • Do you use your vehicle for off-highway recreation?
  • Most insurance companies don’t care, but they need to know and you need to know that the changes / bolt ons are covered.  For example; some companies will cover your bolt ons provided you keep a record of receipts and pictures, others will only cover what you have “declared” in advance and you may pay a small additional policy fee.  Your policy may vary.
[/list][/list]

Keep in mind that some companies won’t insure vehicles that are used off road, vehicles with suspension or body lifts or self recovery gear.  So make sure you ask these questions up front – knowing and being sure they are covered by your policy is much better than not telling them and finding out after the fact that the winch you had stolen wasn’t covered or that you have to take them to court to pay for that accident you caused.  And also understand that what is covered by “Company A” for Mr. Jones may not be covered by “Company A” for Mr. Smith.  Policies change, coverages change, and the only thing you have to go by is the Declarations, Policy Agreement and Conditions of your individual policy.

On a personal note and after speaking to more than 35 insurance companies, I found one that answered all my questions, would cover my vehicle for off-highway recreational use, had a reasonable fee that included a rider (additional policy) that covered my modifications, bolt on parts, suspension lift, winch, aftermarket tires, rims, stereo etc… When the Policy arrives in print my wife and I will read through it to make sure it reflects the conversations we had with our agent and has the coverage we expected.

United highly encourages you to read through your policy to make sure you are covered in the way you want to be covered.  Be informed, be involved and be knowledgeable.

Please note this information is offered for general information only. It is not a legal definition of any policy or term and is not a substitute for reading and understanding your own policy!
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