FAQ

What kinds of questions should I be expected to answer when I am applying for an insurance policy? Why do insurers ask all of these questions?

When you apply for an insurance policy, you will be asked a number of questions. For example, your name, age, sex, address, etc. In addition, you will be asked a number of other questions which will be used to determine what type of risk you are.

For example, when an insurance company is deciding whether or not to supply automobile insurance to a potential policy owner, it will want to know about the person's previous driving record, whether there have been any recent accidents or tickets and what type of car is to be insured.

All of this information will be used for two purposes.

Based upon the responses to these questions, the insurance company will decide whether the profile of the applicant is consistent with the type of risks the insurer is trying to attract. Some insurers specialize in offering insurance to only very safe drivers and therefore will only accept applications from people who fit the profile of a safe driver. While others may base their policies on those who are considered a higher risk, and charge accordingly.
Once the insurer has decided that your risk profile is consistent with the types of risks it accepts, the answers to the questions will be used to determine which rate category should be applied. For example, the insurance company will decide whether you should be offered insurance at the high risk driver rate or the low risk driver rate.

Collectively, this entire process is known as the underwriting process and every Insurance company has one. The primary function of the underwriting department is to decide whether or not to offer insurance to a person who has completed an application. If the answer is yes, then the underwriting department seeks to determine the "quality" of that risk so that the proper premium can be charged. That is, high risk people should pay more than low risk people because of the greater possibility of experiencing a loss.

I want to leave my kids off of my auto insurance to save money. If they wreck will the insurance company pay? Technically if I lend my car to someone they are covered in my car under my insurance, aren't they?

If you have licensed drivers in your home and they are driving your car, you have to pay the extra premiums. If you don't claim them on your insurance, the insurance can charge you with fraud, and you would not have coverage at all, plus you might be held criminally liable.

My child is heading off to college this fall. What insurance issues will this raise?

As you send your children off to college, you probably have a lot of things on your mind - whether they'll eat right and get enough sleep, how to pay the tuition bills, what to do with that empty bedroom, etc. For most people, insurance concerns are pretty low on the priority list. But there are some important issues you should consider.

Issue #1: Health insurance - make sure your child is covered.
Your medical plan probably covers your children until they're somewhere between 20 and 24 years of age, regardless of whether or not they live at home. But if the plan is an HMO and your child's college is far from home, accessing an approved provider may prove difficult. As an alternative, consider purchasing health insurance coverage through your child's college. Many colleges and universities offer low-cost health insurance for students. Cost and level of coverage vary greatly from one school to the next, but school-subsidized health insurance is often less expensive than continuing coverage through your existing health plan. And since health care is typically provided on-campus, it may be easier for the student to access.

Issue #2: Homeowner's/Renters insurance - make sure your child's possessions are covered.
If your child lives in a dorm or other university housing, their personal property is typically covered under your homeowners insurance policy. Check your policy for coverage limitations on computers and stereos, if your child can't live without these. Once a student moves out of the dorms and into an apartment, they are usually no longer covered under your policy. Off-campus students should purchase a renters insurance policy to cover their possessions.

Issue #3: Auto insurance - make sure the car is covered.
If your child will be taking a car to school, make sure the car is properly insured. If the child owns the car, then the insurance policy must be in the child's name as well. If the child is "borrowing" a car from Mom and Dad, the child must be listed on the insurance policy. Some insurance companies may require the child to be listed as the primary operator, since the car is in the child's possession and not the parents'.

My car is financed through a bank. I could not afford to pay comprehensive and collision coverage. The bank secured coverage on my vehicle without my knowledge. Can the bank do this?

Yes, a lender has the right to require a borrower to protect the lender's interest in the collateral. A collateralized loan agreement typically includes a provision requiring the borrower to keep the collateral insured, and allowing the lending institution to secure coverage and charge for it; if the borrower fails to obtain the required insurance. These charges are subject to interest, and the premiums are often much higher than if you purchased insurance yourself.

How can I save money on car insurance while maintaining safe levels of coverage?
Choose the right car: Before you buy a car, check with your agent to see how much the rate for the car you have chosen will be, and if the premium and the car payment fit your budget. Choose a higher deductible: Your insurance premium can be decreased if you increase your portion of the risk. Raising your deductible from $250 to $500 or even higher can save you money. You do need to be aware that you will have to pay the higher deductible any time you use the coverage. Take advantage of special discounts: Ask each company what special discounts it offers. Discounts are available to young drivers who are good students or have taken a drivers' education course. Any variety of other discounts may be available. Eliminate duplicate coverage: You may have an overlap in coverage, such as medical coverage and health care, or collision and uninsured motorist property damage. Ask your agent to explain what each coverage offers. Shop around: Since insurance companies are all separate businesses with unique financial goals and costs, it isn't unusual to find rate variances between companies for the exact same coverage.

Can I take my car wherever I want to have it fixed?

You are free to choose the shop you want to do the work. If you choose to take your vehicle to a repair facility in which the overall cost for a satisfactory repair is higher than the insurer’s estimate, you may be liable for any additional amount above their estimate.

What are the best liability policy limits?

It is generally accepted among insurance agents that the state minimum policy limits are not enough. Most insurance professionals would agree for the average driver the best liability limits to have are 100/300/100. This means: $100,000 per person for bodily injury, $300,000 per accident for bodily injury and $100,000 per accident for property damage. Since in most areas medical treatment is in fairly the same range, the last limit, per accident for property damage, is the one you may want to take into account if you are not the average driver. If you live in an area where you feel that if there was an accident, that was your fault, and property damage may exceed 100,000, you may want to consider higher limits. Remember, property damage is the other person's car and any other property damaged during the accident if you are at fault. In some areas one's landscaping can cost over 100,000.

Is anyone who drives my car covered?
In most cases yes, as long as they have the oermissions or reasonable belief from the insured that they can use the vehicle.
There are certain exclusions as well as "named driver only" policies that does not provide coverage for anyone not listed by name on the policy as an authorized driver. Therefore, it is always best to check your particular insurance policy to make sure.
Also remember that you are required to list all licensed household members on your policy even if they will be excluded and even if they are not related to you. If your girlfriend lives with you, she may not be covered if she isn't listed by name on your policy.

What is the difference between comprehensive and collision?
Collision coverage is when you have a collision with something like another car. Comprehensive coverage is when it is anything else other than a collision such as fire or theft. Most people would have coverage for both when using the car on a regular basis. Sometimes when one is just storing a car they may only keep comprehensive coverage since they are not using it on the road therefore, it is unlikely to be in a collision.

What is an SR22 Form?

SR-22 insurance varies state to state. An SR-22 isn't a type of insurance, but rather proof that you have certain types of insurance (based upon the financial responsibility laws of your state). Simply, it is a form which must be filed by the insurance company to the state Department of Motor Vehicles stating that auto liability insurance is in effect for a particular individual. Typically it is required when insurance is provided to an individual who was in an accident or was convicted of a traffic offense and was unable to show financial responsibility or if a judge has ordered an SR22 for other reasons (in some states).