This is a continuation of multi-part series will briefly explain some of the various coverages that can or may be included in anauto insurance policy.  This will bring additional understanding to the enigma that is automobile insurance.

Physical Damage Coverage

Physical damage coverages are usually optional on an automobile insurance policy (financing or leasing a vehicle ususally obligates the customer to carry these).  These coverages are those that will pay the claims damage to YOUR vehicle.  Today, we’ll go over the two most recognized.

–> Comprehensive

Comprehensive damage coverage covers damage to your vehicle for losses not involving collision (see below).  Damages or losses caused by falling or flying objects, most glass breakage (unless occurs during a collision), contact with a life animal, water or fire damage, vandalism to the vehicle, and total theft of the vehicle are the most common.  I summarize Comprehensive coverage as “damage caused by things you could not avoid.”

–> Collision

Collision damage coverage is the other side of the coin.  This would be damage sustained to your vehicle during the course of a collision with another object, and most often the accident was caused by you.  (Had it been cause by the other party, we hope they have insurance to cover your damages).  Damages or losses include contact with another vehicle, contact with a fence, house, pole, etc.  My summary suggests that Collision coverage is “damage caused by things you that you should try to avoid hitting.”  I say ’should try to avoid’ because that is the nature of an accident - you should have, but either didn’t or couldn’t avoid the incident.

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This multi-part series will briefly explain some of the various coverages that can or may be included in an auto insurance policy.  This will bring additional understanding to the enigma that is automobile insurance.

Liability Coverage

First, let me just suggest that your in most cases insurance coverage follows the vehicle and not neccessarily the driver.  Thus, if someone else is driving your vehicle and is involved in an accident - it is your coverage that will have to pay out the damages.  During these explainations, we will not complicate the information with extenuating considerations, such as ’secondary coverage’ or ‘no-fault coverage.’

The liability portion of your auto insurance policy covers damages for which you are directly, and in some instances indirectly, involved in causing to another party. 

–> Bodily Injury
Medical injuries that your vehicle causes which are sustained by another driver, their passengers, or pedestrians.  You can be held liable for indirect damage if the accident causes the other driver to additionally injury other persons (i.e., multi-car collision injures other drivers in various vehicles involved).

–> Property Damage
Physical damages that your vehicle causes which are sustained by another vehicle, building, and possibly a privately or publicly-owned object (statue, fence, etc).  Again, you can be held liable for indirect damage if the accident causes the directly hit item to cause additional damages to other property (i.e., struck vehicle damages a house).

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How Are Car Insurance Premiums Calculated?
By Ted Brumby

Premiums are based on risk, and if there is a change in the risk, it normally results in a change in premiums. So, what are the risk factors? Well, the risk factors can vary from one insurer to another, but there are usually some common things like:

- The make, model and value of the car
- The driving history and age of the people driving the car
- Any modifications made to the car
- The policy holder’s residential address
- Whether the car is financed or owned

If your premium goes up, it’s probably because your insurer has had more claims from people in your age group, or in your suburb, or who drive the same type of car compared to the previous year - and because this experience is the best indicator of what’s likely to happen in the future, it is used to set prices. For the same reason premiums for good drivers can also go down from one year to the next.

With some car insurance companies, people who really deserve to get the best price do, not the bad drivers who push the prices up for everyone else.

BUY INSURANCE FOR DUMMIES at Amazon.com!

Tips for buying car insurance online

Virtually everything can be done online nowadays - from hotel reservations to flight bookings, and even purchasing car insurance (which is a fairly new addition). Yes, you can now get quick and comprehensive car insurance online, and the best news is that it can be much cheaper.

Aside from insuring with a credible company, there are some useful product features to look out for.

Let us take a look on some of them:

- Quality repairs with a lifetime guarantee
- Flexibility to choose your car’s insured value
- Cover for the damage your car might cause - up to $20m
- Quick and easy online quotes

Article Source: http://www.affsphere.com/Insurance/Automobile/How-are-car-insurance-premiums-calculated.html

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Technorati Tags: automobile insurance, insurance, insurance premium, my insurance policy

Premium, as most know and many can be frustrated with, is the cost of your insurance coverage during the policy term. Premium rates are calculated on a multitude of variables - too many to list all of them - which can and may include your geographical location, any history relating to the insurance (health, driving, etc.), and credit history. A few items you should know about the cost of insurance:

• Premium has to be paid to maintain coverage
• Changes to you policy will almost always constitute a change in your premium
• Cancelling an insurance policy does not mean you’re paid up; there may be remaining premium or even short-rate fees (administrative fees for cancellations mid-term) assessed.
• For a few other insurance thoughts, visit http://www.squidoo.com/myinsurancepolicy

Your policy term is the length of the insurance contract. Commonly, auto insurance policies are six months, property policies are twelve months as are health policies. Disability, long-term care, and life insurance policies can vary based on the type of policy and agreed contract time, i.e., a 20-year term life insurance policy is obviously 20 years. Insurance premium and policy terms should be outlined within any policy contract, so be sure to read over your information. Until next time…

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Technorati Tags: insurance, insurance definitions, insurance policy, insurance terms, my insurance policy

As we defined in our first post, an insurance policy is designed to indemnify a policyholder from a loss.  We also determined that a peril was the conditional susceptibility (exposure) to loss or damage.  So let’s take a few moments to discuss each of those terms: indemnify, loss, and peril. Because the timing of activity actually starts with peril, we’ll go over the three definitions in reverse order.

On a primary - but important note - REVIEW your policy for the PERILS and LOSSES that are covered.  Not every policy is the same and not every thing that is discussed on the website applies to you.  Read your insurance materials!

A peril is the exposure to loss or damage.  The simplest way to elaborate on this is to give some basic examples (which are NOT full listings of possible perils):

For auto insurance, perils may include: General Driving, Animals, and Weather
For a home policy, they may include: Fire, Lightning, Explosion, Windstorm, and Hail
For your life or physical-based policies (disability, long-term care), perils are: Smoking, Obesity, Workplace Hazards, Medical conditions

Please do not confuse these as the actual losses or damages - these are the conditions or elements by which damage or loss MAY occur.  Animals aren’t the damage, but they cause damage if you hit one; lightning comes with almost every storm, but your house is not necessarily struck; and the wet floor at the office doesn’t hurt anyone until someone slips on it.

This leads into the discussion of losses.  A loss is the actual physical damage or financial detriment that is experienced as a result of a peril.  Losses and perils can be easily confused, so again, we’ll make use of examples:

Dents in automobile body or broken windshield caused by hail.
Shingles ripped from your house’s roof during a windstorm.
Dislocated hip after slipping on a wet floor at work.

As you should be able to see through these examples, perils and losses are the equivalent to the classic ’cause and effect’ scenarios.  You have the causes of the damage (hail, wind, wet floor) and the effects, or actual damage or losses (denting, shingle damage, hip dislocation).

Of the terms we’ve discussed so far in this post, one of the most misunderstood terms is indemnify or indemnification.  I would like to squelch the impression that the limits of coverage established on your policy are NOT the payout amounts for each and every claim (with exception to financial products like life insurance).  To indemnify, or indemnification, means to place you back in the condition or financial status just prior to the loss - no more, no less. 

Let’s say you are involved in an automobile accident of which you are the liable driver.  If you have the coverage Medical Payments on your automobile insurance policy, this will help to pay the medical costs associated with your injuries.  However, if you carry limits of $25,000 in Medical Payments does not mean that your company will pay the full amount of your limits; instead, the insurer will pay UP TO the limits to cover the medical bills.  So if you only have $2000 in medical injuries, that’s all that they’ll pay for!

Another example, you have a home valued AND insured for $225,000 for the dwelling portion and it is totally and completely destroyed by fire (not arson).  Then your homeowner’s insurance policy will pay out or pay to rebuild a home of equal value to the loss.  So, there are instances that the payout does equal the limits, but only to bring the insured (or property) back to the status before loss occurred, or indemnification.

Granted there are endorsements, or policy additions, that can affect ACTUAL coverage, but our intent was to simplify the principles of indemnification, perils, and losses.

Hope this explains a bit more about your insurance policy.

Until next time…

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The last post here at My Insurance Policy defined what an insurer was, and provided a rating chart that gave you a good idea of financial stability and operating quality of an insurance company. Today, we’re getting a little more personal - and talking about YOU. Well, maybe not you specifically, but the policyholder and insured of an insurance policy.

Please note that although most commonly the policyholder is included as an insured (and actually, most referenced definitions indicated these terms are one in the same), it is the opinion of this writer that it does not stand that these two terms are interchangeable.

You might recall our first post that defined policyholder as the responsible party (whether an individual or group) for the policy, and this is the person who makes the contractual agreement with the insurer. The insured, on the other hand, is the persons or property that is actually covered under the policy.

As an insurance agent, I have observed instances (specifically automobile policies) where you might have a parent as the owner of the policy (policyholder) and a child as the sole listed driver (insured). This is where I make the distinction - although the legal jargon of insurance might disagree - and I believe it simplifies certain questions when concerning what or who is ‘covered’ on insurance policies.

Here’s my ‘layman’s terms’ explanation for each of these two terms:

The policyholder, as mentioned earlier, is the party (individual or group) that is responsible for the insurance policy. They agree, sign, and are to abide by the stipulations set out in the policy contract. If damages occur and a claim is filed, claims payment goes to the policyholder. If a policy cancels and there are charges remaining, the policyholder is liable for those charges left against the policy.

The insured is the person or property covered, which may include the policyholder also. The insured(s) might include a spouse or additional driver listed on the policy, the home or dwelling listed, or the employee covered under his work’s group health plan.

As a reminder, these references are for simplicity – they are not necessarily a legal representation of the terms and definitions official used by insurance companies or insurance regulations.

Until next time…

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Technorati Tags: insurance definitons, insurance policy, insurance terms, my insurance policy

We’ve covered some basic parts, characteristics, and definitions of insurance and the insurance policy.  We’ve given you a few easy insurance definitions to give you a heads up when you discuss how insurance works; we’ve taken time to overview the parts of a insurance policy and the basic principles on which an insurance contract is designed. Review our archives to see those posts.

Today, we’ll continue down our list of basic insurance definitions and overview some things you should know about the insurer, or the insurance company.

First, the insurance company, or insurer, is the entity or business within your policy that agrees to indemnify (bring back to original status or financial condition) for losses you incur.  Most insurers provide the same or similar products as others - auto, home, life, health insurance - so what should someone look for when choosing an insurance company?

Now most will read that last statement and the common answer will be ‘cost of premium.’  As consumers, price of insurance premium does play an important part in the decision-making process of choosing an insurer.  But there is one misconception that floats around the insurance industry: all insurance companies are the same.  As stated before, insurance companies may provide the same or similar insurance products as other companies, but all insurance companies are NOT the same.

The most obvious difference in the various insurance companies is their financial ranking among others.  You wouldn’t want to purchase coverage from a company that goes belly-up when you try to collect on a claim.  The A.M. Best Company is the leading provider of ratings, news and financial data for the insurance industry worldwide and Best’s Ratings are recognized as the benchmark for assessing the financial strength of insurance related organizations and the credit quality of their obligations.

Without getting into too many details of how the A.M. Best Company determines their rankings (remember, we’re trying to de-complicate insurance!), a Best’s Financial Strength Rating is an independent opinion of an insurer’s financial strength and ability to meet is ongoing insurance policy and contract obligations.  It is based on a comprehensive evaluation of a company’s balance sheet strength (how much money they have or bring in versus how much debt and money they pay out), operating performance, and business profile.  An important component of the evaluation process requires and interactive exchange of information with the insurance company’s management.

Here is the rating scale as determined by A.M. Best:

**For the sake of post length, I have combined some of the ratings with their desciptive guides; but please understand that there are variances in the ratings, i.e., A++ is better than A+, or B - is not quite as goog as just B.

As you can see, there are lower ratings listed which should cause you to think twice before purchasing a policy with that insurance company.  If all companies were the same, there probably would be a need for ratings such as Weak, Poor, In Liquidation or Suspended!

So next time you’re looking a purchasing an insurance policy, check their A.M. Best rating.  And if they won’t tell you or don’t know, tell them to call you when they find out!

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Recently, MyInsurancePolicy gave you a brief overview of what an insurance policy, or insurance contract, sets out to define with the relationship between the insurer (insurance company) and the insured (the policyholder, you!). The previous post also went over the five basic parts of a insurance policy: Definitions, Insuring Agreement, Declarations, Exclusions, and Conditions.

Aside from the parts of the insurance policy, there are also some general features you should be aware of – outlining these features gives better perspective of the characteristics of an insurance contract, and how that might relate to you as a consumer.

• Insurance policies are generally considered contracts of adhesion; this basically means that the insurance company creates and defines the contract, and the customer has little or no ability to make substantial changes to it. Because of this, it also means that the customer is given “the benefit of the doubt” if there are any unclear terms within the contract.
• Insurance contracts are aleatory; this indicates that the money exchanged by you and the company are unequal – and this works from both sides. Let’s say you pay in premium and never file a claim. This obviously illustrates your payments are unequal to any claims payout because there is no payout. On the other hand, if you were to file a claim, it’s possible that the damages that are paid for might exceed what you have paid into the policy – again unequal exchange.Of course, this also leads to the fact that damages must occur under uncertain future events, so that the unequal exchange keeps the agreement fair. You can not purchase insurance – nor will a company sell you a policy – that covers for losses that have already occurred or those are almost certain to happen. Easy example: You can’t buy an insurance contract to cover gambling losses in Vegas!
• Insurance contracts are unilateral; meaning that only the insuring company makes legally enforceable promises in the contract. This concept is a bit complex, but we’ll try to explain. A standard contract is enforceable by law, forcing BOTH parties to meet their agreed obligations; however, under an insurance contract, a customer cannot be forced to pay premiums (although the policy may be cancelled if you don’t), yet the insurance company can be legally forced to pay the benefits under the contract (as long as the policyholder has paid the premiums and met certain other basic provisions).Without wanting to seem redundant, if you don’t pay the insurance premium, you just get cancelled. No court order, no one will sue. Yet, if you took care of your end and the insurance company won’t pay the claim benefit, they need to get ready to meet with your attorney!
• Lastly for today, insurance contracts are governed by the principle of utmost good faith; this requires both parties contract to deal in good faith (openly and honestly). The customer has a duty to disclose all known facts which relate to the possibility of risk being covered. In other words, you can’t leave out information which can reasonably affect the possibility of damage or loss.For example, you must inform the company if you have a young driver in the household (considered high risk) or perhaps you own a swimming pool that is unsecured (greater possibility of injury). On the other side, an insurance company uses the policy itself to disclose information necessary to the agreement of coverage.

Altogether, an insurance policy, once established, is literally there for your protection. This is not just for paying of your claims, but even the characteristics of the policy are set up in such a way to protect you from being ripped-off, but where the insuring company can stay in business!

Until next time…

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Technorati Tags: insurance, insurance companies, insurance policies, insurance policy, my insurance policy

The title of this post, “What is a Policy?” is not meant to be condescending in any way, shape, or form. But the intent of this site is to make insurance a less complicated matter, keeping terms, definitions, and principles understandable by the common consumer.

In our first post, “What is Insurance?” we gave a simple and brief explanation of this financial service product. With that, we also laid out some common terms that might be used by an insurance agent when discussing it with you. The first of those terms was: Policy - legal agreement or contract between 2 or more parties usually pertaining to insurance.

Wikipedia notes that an insurance policy, also referred to as an insurance contract, is the legal documentation and design under which the features of the policy (coverages, exclusions, premium, etc.) are enforced.

There are five primary parts of an insurance policy or contract. You might want to review the basic term definitions used in the ”What is Insurance?” post for reference.

1. Definitions - define important terms used in the policy
2. Insuring Agreement - describes the covered risks or nature of coverage, summarizes the major promises of the insurance company, as well as stating what is covered.
3. Declarations - identifies who is covered under the policy, the insured’s address, the insuring company, what risks or property are covered, the policy limits (amount of insurance), any applicable deductibles (out of pocket portion of a claim), the policy period and premium amount.
4. Exclusions - describes what property, risks, or losses which are not covered by the policy.
5. Conditions - provisions, rules of conduct, duties and obligations required for coverage. If policy conditions are not met, the insuring company can deny paying out the claim.

We’ll continue more about policies during our next post - describing the nature of insurance policies and how various portions of the policy apply to either you or the insurance company.

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Technorati Tags: insurance, insurance definitions, insurance policy, insurance terms, my insurance policy

We have all heard of it, we all know that it many scenarios it is required and/or desired, and we think we know what it is for.  But how many times have people said, what exactly is insurance and what does my insurance policy cover?

Whether it’s for a automobile accident, hail damage to our roof, offsetting medical bills, or in the event of death - insurance is one of those abstract services that many despise dealing with and paying for, but are relieved and glad they were carrying it.

An insurance policy is simply an agreement between you and an insurance company that states that they will pay for your losses or damages up to a certain amount as long as:
a) the damages are listed as covered in the policy
b) the loss occurred during the coverage dates and
c) the cost for your coverage is paid

Let’s break down just a few of the terms you’ll find when discussing insurance.  These should help you in understanding an agent when they are telling you about the product you might be purchasing.

• Policy - legal agreement or contract between 2 or more parties usually pertaining to insurance
• Insurer - the insurance company providing coverage
• Policyholder - the responsible party for the policy, whether individual or group
• Insured - the persons or property that is actually covered under the policy
• Indemnify - bring back to status or financial condition prior to loss
• Loss - damage, loss, or financial detriment
• Peril - exposure to loss or damage
• Premium - cost of coverage; usually paid monthly, semi-annually, or annually
• Policy Period - specified dates that coverage is effective

I hope this information, albeit simplistic, provides you a general grasp of the basics of insurance.  We’ll discuss various terms and coverages later in the site.

Post from: My Insurance Policy

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