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Three Common Exclusions in Auto Insurance Policies

Tuesday, May 11th, 2010

Auto insurance policies are designed to protect vehicle owners from financial loss due to an accident or claim. Without auto insurance, we would be forced to pay out of pocket and would have a hard time recovering costs if someone else was to blame for an accident. Auto insurance can cover just the basic liability coverage, which includes damage to a third party’s vehicle or property and injuries, or it can cover a multitude of additional and optional coverage. Some of these coverages include collision, which covers damage to your vehicle due to a collision or upset; comprehensive, which covers damage to your vehicle from fire, theft, vandalism, and animal collision; or under/uninsured motorist coverage, which covers expenses if you are involved in an accident with a driver who doesn’t carry adequate insurance.

Auto insurance policies also list exclusions; these are events or coverage that they will not pay for in the event of a claim. Following are three common auto insurance exclusions.

Named Driver Exclusion: In many cases, there is more than one driver living in a household. You are required to list every driver on the policy. Not every driver may have a good driving record and this can cause your premiums to skyrocket. One solution is to exclude a driver from your policy. This will help to lower your insurance premiums, but keep in mind that if this excluded driver happens to drive your vehicle and you file a claim, your insurance company may not pay for certain coverage.

Hail Damage: If you add comprehensive coverage to your insurance policy, you are covered for damages to your vehicle caused by events or acts other than a collision. This includes theft or attempted theft, animal collision, fire, or hail. However, if your vehicle sustained hail damage in the past, your insurance company will add this auto insurance exclusion onto your policy. This means that any existing damage will not be covered. If you do get the damage fixed, you can bring the invoice from the repair shop to your agent and they will remove the exclusion.

Glass Coverage: This specifically applies to the windshield. It is usually more beneficial for you to replace your windshield yourself rather than paying the deductible and possible premium increase. This may also be added if your windshield has existing damage to it. Again, if you have it replaced, you can notify your insurance company and they will remove the exclusion.

Always review your auto insurance policy with your insurance agent so that you are aware of all coverage, limitations, amounts, deductibles, and auto insurance exclusions. This way, you will not run into any surprises should you need to file a claim.

Insurance Companies Changing Terms of Auto Insurance Policies to Encourage Customers to Go Green

Wednesday, October 28th, 2009

There is a new trend in the auto insurance industry that involves insurance companies offering their clients better rates as an incentive to reduce their carbon footprints. In the car insurance market, the state of California recently approved an initiative permitting insurers to offer their customers auto insurance policies with adjusted rates, using a system known as pay-as-you-drive. This minimizes the driver’s emissions. Many insurance companies are also offering discounts to those who chose to purchase hybrid vehicles, also minimizing a driver’s effect on the environment when driving.

Why are the insurance companies offering these deals? They seem to be part of a new approach that takes into account the long-term and the big picture. Global warming means more problems for insurers. An increase in catastrophic weather events could be crippling for the companies faced with paying claims for damages property and injured individuals. Severe weather also increases the likelihood of car accidents, along with resulting injuries and property damage. Although incentives to encourage environmentally friendly behavior may be costly for a company in the short-term, if these measures actually do have some impact on consumer behavior and the level of greenhouse gases, it is likely that these auto insurance discounts and reimbursements will be a worthwhile investment in years to come.

It is also possible that auto insurers are offering incentives as a way to appeal to customers concerned with the environment. These auto insurance policyholders might be willing to choose one company over another simply because they perceive them as “greener.” Although it may seem cynical for a company to behave in this manner simply as a marketing ploy, the consequences of these policies still have a potential to benefit every one of us.

It is also possible that the benefits of these auto insurance incentives to insurance companies may have little to do with their environmental component. If consumers actually drive less because this behavior lowers their insurance rates, then auto insurers will certainly benefit from this change. Fewer miles driven means a lower incidence of accidents, which in turn means that the insurance companies have to pay less in costly settlements.

Starting in 2010, a new rule implemented by the National Association of Insurance Commissioners will require insurance companies to detail the risks and consequences of climate change as they affect their business. This information will be available to regulators and investors, helping them to make informed decisions about the future of the industry. It is most likely that the information they report will support the conclusions that they have already reached: climate change will be expensive, and any measures that can lessen its impact will be well worth pursuing.

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