Monday, January 28, 2008

Coverage Levels

1.Coverage Levels

Every driver needs car insurance to avoid great material loses in an accident cases. And most states require it by law. Before you purchase an auto insurance policy you should decide what coverages to include in your personal insurance package and their limits. There are six basic and some additional coverages. Each of them defends you against different types of material losses which are concerned with auto accidents. All levels cover payments only up to the coverage limits.

1. Bodily Injury (BI) Liability
It is a compulsory coverage level in most states. This level covers all payments concerning injuries or death cases of others in an auto accident, if you or someone else, driving your car with your permission, is legally responsible. A policyholder and his/her family members listed in the policy are covered when driving someone else’s car with their permission. Your legal defense costs are also included.

2. Personal Injury Protection (PIP) or Medical Payments.
PIP is an optional coverage level in most states. This coverage pays for medical bills, lost wages, the cost of replacing services, funeral expenses and etc. And it is used in your or your passengers’ injury or death cases, not considering of who is responsible. It also covers you in any accident involving a vehicle, no matter you are on foot, on a bicycle or in someone’s car. These payments are commonly limited to 1-3 years after the accident.

3. Property Damage (PD) Liability
If you or someone driving the car with your permission, damage somebody’s vehicle or property, PD liability will cover its charges. In most states this coverage is mandatory.

4. Collision Coverage
If you have a vehicle loan this coverage is required. It covers pays for damage to your vehicle or a vehicle you are operating caused by potholes, a collision with another car, object or as a result of flipping over. Your collision coverage will give you money back for the repairing your car expenses even if you are at fault.

If your auto insurance policy doesn’t satisfy you, you may cancel it at any time by giving notice to the insurance company. But you should be ready to pay a penalty for such action.

If you are determined to cancel your auto insurance policy, first of all, notify the insurance company of your decision by the letter. In addition it will be the testimony on behalf of you when you deal with another insurer. Don’t just stop paying your premium. In such circumstances you will be considered as a defaulter and the insurance company will cancel you. It will ruin your credit report. Besides you’ll have to pay higher premiums for your auto insurance policy next time.
In most cases you’ll have to pay the penalty for premature cancellation auto insurance policy. Its amount depends on your insurer and how much time left on your policy. The more time remains, the higher the penalty will be. You can avoid these expenses, if postpone the cancellation to the expiration of the policy.
Canceling your current auto insurance policy, make sure, that your new policy will take effect as soon as the old one end. Otherwise you can go to a critical situation, having an accident and your material well-being will be under the threat.

Why the insurance company can cancel your auto insurance policy.

The insurance company can not cancel your auto insurance policy, except for reasons specifically confirmed in it. Normally the insurer may cancel your policy if you:
- fail to pay your premium on time;
- gave false information to the insurance company;
- are guilty of auto insurance fraud;
- lose your driver’s license;
- didn’t inform your insurer about change of risk (buying another type of car);
- have too many accidents or speeding tickets.

In contrast to cancellation, the insurer may use a lot of reasons to refuse to renew your auto insurance policy, except a reason that would be prohibited by law. It may be your bad driving record or a great amount of speeding tickets.
If the neighborhood has changed, accidents or crimes have become more frequent, the insurer may consider this area as a high-risk and increase its rates.
In most states, the policyholder must be notified by insurance company 30 days prior to the end of the policy term. Especially if the insurer intends to non-renew the policy.

As you can’t legally drive without auto insurance in most states, you must care of buying a new policy. First of all, find out exactly why you are being cancelled and do your best to improve the situation. In any case a new insurer will ask you about the cancellation’s cases.
If the matter of not paying your premium in time, you may try to pay the charge and avoid the penalty. If you have had an accident, take a defensive driving course. It may change your high-risk status. You can also raise your deductible and pay a large part of repair costs yourself. Or you may consider purchasing high-risk insurance. It is specially designed for those who have a bad driving record or are the credit risk.