September 30, 2010

How Indemnification Affects Auto Insurance Premiums

Many drivers are confused by the concept of indemnification and how it affects auto insurance premiums. Indemnification is closely related to fault, and it's one of the most common insurance terms that you'll hear if you're involved in an accident. Indemnity is also mentioned on many auto insurance quotes, and in order to fully comprehend your policy, you should understand this auto insurance term.

There are several important principles to understand when discussing indemnification. First of all, indemnification isn't necessarily the payment of all of the damages from an accident. Many states establish a percentage of fault in each accident, and as such, a driver may be paid in part for his damages in an accident. For instance, if an accident occurs in which driver A is 33 percent at fault, depending on state law, driver B may be required to pay for 67 percent of driver A's damages, all of the damages, or even none of the damage if the drivers live in a "no fault" state. Indemnification is limited to the financial standing of the injured party, so one party can't sue to be in a better financial position than they were in before the accident. It's important to understand how your state's car insurance laws work in order to understand how indemnification will affect your auto insurance premiums, so do some research. Visit the website of your state's insurance agency or contact them for information.

If you have to pay for indemnification in an accident, then you're at least somewhat at fault for some of the damages. Your auto insurance premiums will usually rise after an accident, because once you're involved in one accident, the chances of being involved in a second accident are quite high (at least from the insurance company's perspective). This is why indemnification is an important term for understanding your auto insurance.

If you're involved in an accident and the word "indemnification" pops up, you should contact your insurance agent right away to make sure that you understand the situation. You can often improve your chances of keeping your auto insurance premiums low by acting fast. Make sure that you file the correct insurance paperwork when making a claim, and document the accident as well as you can. This will help you avoid being liable for the full indemnification of the other driver. Once the claim is completed, you can also take defensive driving classes or compare car insurance quotes online to keep your costs down, but try to avoid a rise in premiums in the first place by understanding your policy and acting quickly.