Following are a few questions and answers which are often asked that we hope will be helpful. If what you are looking for is not here, please contact your agent who will be able to provide you the answers you are seeking.
What is the purpose of Deductibles in Insurance?
"Deductibles" are used by Insurance companies on all different types of coverages. They are typically used for Property Coverages that protect insureds when their property is damaged accidentally. The Insurance companies use "Deductibles" to encourage the insureds to retain a portion of the risk.
For example, if your vehicle was damaged by a fallen tree and the damages were estimated to be at approximately $ 250.00. By carrying a $ 250.00 deductible, the insurance would not pay any of the damages and you would retain the risk yourself. If the damages were $ 10,000 and you have the same $ 250.00 deductible, you would pay the first $ 250.and the insurance company would pay all of the other covered damages in excess of your $ 250.00 deductible up to the $ 10,000 Damages, or $ 9,750.
"Deductibles" are used to have the insured retain a portion of the risk. The larger the deductible, the more the risk is that the insured is retaining and less than the insurance carrier is taking.
What deductible is better for me?
Deductibles are normally used for the coverages for damages to he insured's vehicle. They are Comprehensive and Collision Coverages.
Typical deductibles are $ 500 or $ 1,000. The "Deductible" is the amount that the insured must pay first and the insurance company pays the balance of the damages. Selecting a high deductible can reduce the automobile premium, so it is suggested that the various options be researched to determine if the premium savings is worth taking the risk for the higher deductibles.
Are there various types of Deductibles?
There are several different types of "Deductibles". Some are flat dollar amounts that are applied per each loss or claim. Some are a percentage of the amount of damage that has occurred. There are other deductibles that are scaled, where the deductible increases along with the amount of the loss.
What is a flat deductible?
A flat deductible is a stated dollar amount that the insured pays on every claim. The amount of the deductible does not change because of the amount of the claim.
What impact does "Deductibles" have on premium rates?
"Deductibles" have a direct impact on Premiums as well as coverages. Increasing the deductibles from $ 500 to
$ 1,000 can result in lower premium rates being charged. Reducing the Deductibles from $ 500 to $ 250 will result in an increase in the premium rates.
The "Deductibles" are a share of the losses that are paid for by the insured. Therefore, if the insured elects to pay a higher deductible the insurance company will provide a lower premium charge as a benefit for the insured paying the higher portion of the loss. When the insured has a lower deductible, the insurance company pays a higher portion of the loss, so they do not provide any premium reductions since the lower deductibles do not benefit the insurance company.
Deductibles do not change the coverage, only modify the amount of the loss that the insurance company pays. Taking a higher deductible will not increase your coverage, while on the opposite side, by reducing your deductibles, you will not reduce your coverage.
Can I elect a zero deductible?
Some insurance companies will allow a zero deductible but not on all coverages. You will need to check with your agent to see if your company allows zero deductibles. Remember though that if the deductible is reduced, the premium rate will increase.
Can I change the deductibles after the policy is issued?
The coverage provided by automobile insurance for damage to the insured's vehicle provides for repairs to the vehicle less a "deductible" that is paid by the insured. The insured is usually obligated for a portion of
the damage repairs that is known as a deductible. The insured is required to pay the first portion of the damages with the insurer providing for the repairs over and above the insurance that provides for the actual
damage to the insured's vehicle.
Deductibles are used for the coverages for damages to the insured's vehicle. These are the Comprehensive or Other than Collision as it is sometimes referred to, and Collision Coverages.
Typical deductibles are $ 500 or $ 1,000. The deductible is the amount that the insured must pay first and the insurance company pays the balance of the damages. Selecting a high deductible can reduce the automobile premium, so it is suggested that the various options be researched to determine if the premium savings is worth taking the risk for the higher deductibles. The deductibles can be changed after the policy is issued. However when a claim has occurred, the deductible cannot be changed then to avoid paying a larger portion of the claim.
Will the deductible I pay affect how my repairs are done?
The amount of the deductible has no impact on the repairs to be done as a result of a claim. The deductible is only the financial portion of the claim that the insured pays.
My agent suggested I waive my PIP benefits. What benefit will I be giving up?
Once you waive your PIP "Personal Injury Protection" benefits, you receive a discount on your automobile premiums for that coverage. The coverage is still mandatory however, in most states, Maryland included. What you waive is the possibility of receiving any benefits from the coverage. It typically provides Loss of Income as well as Medical Benefits resulting from an automobile accident. You do not have to be legally liable to receive benefits under the coverage, so that you would be able to receive benefits if there was an automobile accident and no other vehicles were involved, as long as you do not waive your benefits.
Why do I need Uninsured Motorist Coverage?
"Uninsured Motorist" Coverage is mandatory as required by Motor Vehicle Laws. It is part of the Liability Coverage requirement of "Financial Responsibility Laws". The coverage protects you should you be involved in an accident with a driver who causes the accident and does not have any "Liability" insurance. You can collect under your Uninsured Motorist Coverage for injuries sustained by you and damages done to your vehicle that the other driver has caused.
What liability limits do I need?
The "Financial Responsibility Laws" require minimum limits of liability. However, it is suggested that you have the limits to protect your assets. Should you be found legally liable as a result of an automobile accident where the injuries and damages amount to higher Liability limits than you carry, your assets may be attached for the balance of the injuries. It is suggested that you carry the limits that would protect all of your assets.
Why is my claim check in the name of my lienholder and me?
When there is a lien on your vehicle, the leinholder is also named on the claim check to protect the lienholder
from you taking the funds in the claim check and not repairing the vehicle.
Why does the leinholder need to be listed on my Automobile Insurance Policy?
The lienholder is named on your automobile policy, since they have a financial interest in your vehicle. Insurance is designed to protect anyone who has a financial interest in property in the event that property is damaged. Should the property be damaged, the individuals who have a financial interest in the damaged property would want to be sure that it is repaired so that it retains its' value. When there is a lien on your vehicle, the leinholder is also named as Loss Payable to protect the lienholder from you taking the funds in a claim check and not repairing the vehicle.
My son is 16 and wants to get his driver's license. What impact will that have on my Automobile Premium?
Adding a youthful driver to your automobile policy will result in additional premiums. Statistics have proved that youthful inexperienced drivers have more accidents than drivers who are more mature and more experience in actually driving on the roads. As your son gets older and obtains driving experience, your premiums will reduce each year, as long as he does not have any at fault accidents or receive moving violations.
I was hit by a driver who didn't have insurance. How do I get my vehicle repaired?
The repairs to your vehicle can be covered under your "Collision" coverage after paying your deductible. You would also be able to have the vehicle repaired under the Uninsured Motorist Coverage if the coverage includes the Property Damage Coverage. Many states now require property damage to be included in the Uninsured Motorist Coverage which would provide for repairs to your vehicle if stuck by a vehicle that has no insurance. You should talk to your agent about this coverage and ask if your policy includes the Property Damage in your Uninsured Motorist Coverage.
My insurance carrier wants to exclude my 18 year daughter because she had an accident. How can I get her covered?
In order for you to get coverage for your daughter under your policy, you would probably have to seek another insurance company to provide that coverage, however once you tell a prospective new automobile insurance carrier that your current carrier wants to exclude your daughter, you may not be successful in getting another carrier to cover her on your policy.
If you are unable to obtain coverage with another carrier, you may need to have her obtain her own policy with a substandard automobile carrier on the vehicle that she primarily operates. This will probably be at a higher premium, but may be your only solution to obtain coverage for her.
My 17 year son loaned my vehicle to a friend who ran a red light and struck another vehicle. Why is my insurance covering the accident when it wasn't my fault?
Because your Liability coverage in your Automobile policy provides coverage for you, drivers in your household and anyone that the vehicle is loaned to, your carrier is protecting you by covering the accident. As owner of the vehicle you are legally liable for damages or injuries it causes. If your carrier did not provide the coverage for you, you would still be legally liable for the injuries and damages and would have to pay for them out of pocket.
My premium keeps going up. What can I do to get the premiums reduced?
Increased automobile insurance premiums are a result of several areas. Some of those causes are increased amounts of law suits and awards, higher repair costs for vehicles, increased medical costs to treat automobile accidents victims and increasing number of vehicles on the roads with more households have two or more vehicles. There is also an increase in Automobile Insurance Fraud which has increased the costs of investigating and settling claims.
You might also consider increasing your "Deductible" which would reduce your physical damage premiums. If you have a vehicle that is over 10 years old, you might also consider dropping the "Collision" coverage on the vehicle. Often a vehicle that is over 10 years old has a lower book value and if the damages to the vehicle are more than the book value, the insurance carrier will only pay the book value of the vehicle. This may be very low in comparison to the premium you are paying for the coverage. You might also shop around with other carriers and get additional premium quotes to compare against the current policy you have.
How can I tell what limits I have on my automobile policy?
In order to understand what limits of "Liability" you have on your automobile policy, review the declarations page.
Go to the section indicating Limits of Coverage and look for the Liability Coverage. The limits will be shown in one of two ways as follows:
Split Limits
$ 20,000 Bodily Injury Per Person
$ 40,000 Bodily Injury Per Occurrence
$ 15,000 Property Damage Per Occurrence
The Bodily Injury Limit per Person is the maximum that the company will pay for any one person's injuries per accident that you are found to be legally liable for.
The Bodily Injury Limit Per Occurrence is the maximum that the company will pay for all injuries per accident that
you are found to be legally liable for.
The Property Damage Limit per Occurrence is the maximum that the company will pay for all property damages per accident that you are found to be legally liable for.
The limits might be also displayed in a Combined Single Limit for all coverages such as $ 55,000 for Bodily Injury and Property Damage. This is the maximum that the company will pay for all bodily injuries and property damages as a result of any one accident that you are found to be legally liable for.
If I select higher Liability Limits, how much will my premium increase?
The higher Liability Limits will cause premium to increase, however, the amount of increase is proportional.
For example, the Financial Responsibility minimum limits are the basic limits and are also what the basic Liability premiums are based on. If the minimum Financial Responsibility Limits are $ 20,000/$ 40,000/$ 15,000, the annual premium might be $ 750. To increase those limits to $ 50,000/$ 100,000/$ 25,000 may only be an increase of 12 to 18 percent. This would develop an additional premium of $ 90 to $ 135 annually. Considering increasing your limits to $ 100,000/$ 300,000/$ 50,000 most probably would generate a 24 percent to 35 percent increase. This would generate from $ 180 to $ 263 additional annually.
When you compare the limits that you would have protecting you, the additional premium does not appear to be unreasonable. It certainly does not double or triple your premiums, but your protection does.
Can I insure my vehicle for a specific limit of coverage?
Coverage for damages to your vehicle are normally provided on an Actual Cash Value basis and claims are paid
based on the same valuation. Actual Cash Value is calculated by taking the Replacement Cost Basis of the property and deducting depreciation from the replacement cost value. The result is the Actual Cash Value of the property.
Often the claims for automobile insurance are paid on the basis Actual Cash Value. This results in the claim
checks being lower than if the vehicle were valued at the replacement cost. Providing a credit for depreciation on the value, ultimately reduces the value of the vehicle. The depreciation is used that may have occurred since the property was first acquired. The normally results in a smaller claim check than one that has been calculated on
a Replacement Cost Basis. Since Automobiles depreciate very rapidly, once they are driven off of the new automobile showroom, this can result in an individual not receiving enough funds to pay off a loan on a vehicle, if the vehicle is determined to be a total loss.
You can request that your vehicle be insured at a specific dollar limit. This coverage is called Stated Amount or
Agreed Amount. This means that no matter how much depreciate has occurred, the insurance company will pay no
more than the limit that you have requested that it be insured for. Having coverage issued on a stated amount or agreed amount, will speed up the claims process.
How do I know I have the best limits of Automobile coverage for my automobile?
Motor Vehicle Laws developed by state legislators establish the state requirements for motor vehicle owners to show Financial Responsibility with regards to ownership and use of their automobile. These laws known as Financial Responsibility Laws establish the financial limitations that the owner of an automobile needs to show prior to the state issuing tags and the privilege to use the vehicle on state and local roads. These laws indicate how much financial limits that an individual must be able to display to represent his/her financial responsibility., i.e. $ 50,000, or $ 100,000 etc. If the individual can provide the state a guarantee that he/she can demonstrate the financial availability of these limits, the state may waive the insurance requirement. When the insured does not have the financial availability, the only way for he/she can obtain the privilege to operate the vehicle on the state and local roads, is to pay an insurance premium to an insurance company so that the insurance company can guarantee the Financial Responsibility limits that are required.
Liability Limits to select should be high enough to protect your personal assets in the event you are found legally liable as a result of an automobile accident causing injuries or damages to others. The limits should be adequate to protect your assets in the event you are found legally liable for large sums of money to be paid to claimants. The
insurance company pays the limits that you are ordered to pay, to protect you and your assets from being seized as a result of a large award to a claimant.
What limits are available for Medical Payments?
Medical Payments coverage provides protection for the named insured, family and passengers for injuries received in an accident, regardless of who was at fault. It is not a form of liability coverage for injuries sustained by passengers in another auto involved in an accident with the insured. Expenses covered include reasonable
expenses incurred for necessary medical and funeral services sustained within three years of the date of the accident.
Medical Payments Coverage provides for the following medical expenses as a result of an automobile accident.
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