Insurance 101
Policy Options
There are many ways to tailor
your auto insurance policy coverage to your specific needs. Your state may
require minimum coverage's levels, but aside from that, you can select the
coverage's and amounts you'd like. In addition to the various coverage options,
there are also general policy options. Within certain parameters, you can make
decisions here as well.
Choosing your policy period
Your insurance coverage is only
in effect during the period specified in your policy. This period of time is
determined when you enter into the contract with the insurer. Typically, auto
policies are in effect for six months or one-year terms. You may also be able to
purchase auto insurance for longer or shorter periods of time.
Generally speaking, your
premiums should be slightly lower when you purchase a policy with a longer
period. With longer policies, the insurer can spread out the administrative
costs of writing the policy over a longer period of time.
Canceling your policy
You can cancel your insurance
policy at any time before its expiration date. However, be aware that most
insurers have specific procedures that you must follow in order to do so. When
you cancel before the end of the policy there may be a penalty, but not all auto
insurers penalize you for early cancellation. Check with your insurer for more
information.
Paying your premium
Most insurers give you three
options for paying your insurance premium:
·
Pay the entire annual or semi-annual premium up front,
· Make a down payment on the premium (often two
months worth) and then divide the remainder into monthly installments, or
· Pay an equal monthly amount for 10 or 12
months.
Each payment method has pros and cons. Paying
the entire amount up front might be financially impossible for you. A payment
plan can be good, but insurers will charge you interest or a monthly service
fee. Check with your insurer to see when and if they charge interest or fees for
a payment plan.
Towing and labor coverage
Towing and labor insurance
(also called Emergency Road Service coverage) is an option that provides
coverage for emergency road service and towing. Under this coverage, the insurer
will pay towing and labor costs incurred each time your "covered auto" or any
"non-owned auto" is disabled, up to the policy limit. This coverage is available
any time your vehicle breaks down and is not limited to accidents covered under
your physical damage coverage.
The insurer will only pay for
labor (such as changing a tire or jump-starting your car) performed at the
location where your vehicle is disabled, not the repair work done at a service
station.
· Covered auto: This term
includes all vehicles listed on the Declarations page of your policy. It also
includes any passenger vehicles that you purchase during the policy period,
assuming you give notice to your insurer within 30 days after you become the
owner.
· Non-owned auto: A non-owned
auto is a vehicle that either you borrow or use as a substitute for your
"covered auto." A borrowed vehicle is covered as long as it is not furnished or
available for your regular use. (If a vehicle is furnished for your regular use,
you should be listed on that owner's policy.) Substitute vehicles are covered
when your "covered auto" is out of normal use because of breakdown, repair,
servicing, loss, or destruction.
Transportation expense (rental) coverage
Optional rental coverage pays a
pre-set amount per day for transportation expenses (usually a rental car) when
your car is being repaired because of an accident or other damage. In order for
the rental benefit to take effect, the theft or accident has to be one that is
covered under the physical damage section of your policy. This coverage may or
may not apply to stolen vehicles. Check with your insurer.
This coverage is often limited
to $15 per day, with a maximum payout of $450. For an additional premium, the
per-day and maximum limits can be increased. The coverage kicks in only when
your vehicle is unusable for more than 24 hours. The payment is further limited
to the period reasonably required to repair your vehicle.
