Auto Insurance Buyers Guide

Today, the annual economic loss from automobile accidents is nearly $60 billion. That is why automobile insurance is a major, necessary, and usually mandatory purchase.

Ames Agency - Insurance has prepared this guide to help you create informed decisions about buying your automobile insurance. This is not a legal contract and some points aren't covered. If you have any questions about your insurance needs, please contact Ames Agency - Insurance for further assistance.

Why You Need Insurance

Most states require proof that drivers can pay for injuries or damage up to certain minimum amounts. This is often referred to as Financial Responsibility Requirements. Most people satisfy these requirements by purchasing bodily injury and property damage liability insurance. Minimum amounts and kinds of insurance vary from state to state, so it's best to check with Ames Agency - Insurance to make sure you buy the right kind and the amounts of insurance best for you. Few will argue with the idea that if you own your own car, you need automobile insurance. Just one accident could mean:

A lawsuit against you for hundreds of thousands of dollars.
Costly medical bills.
Thousands of dollars to replace your car.

Several different types of coverage are normally offered as part of an automobile policy - each with its own coverage limit. They are Bodily Injury Liability, Property Damage Liability, Uninsured Motorists, Medical Payments, Comprehensive and Collision.

What Coverages Are Available?

Bodily Injury Liability.
This is the most important coverage you could have because you could be held liable for hundreds of thousands of dollars in hospital and medical expenses, particularly if several people were injured. Bodily Injury Liability protects you from financial loss up to your policy limits when you're responsible for injuring pedestrians, passengers in your car or persons in another car. Your company will also provide a lawyer to defend you if you're sued for injuries or damage.

Property Damage Liability.
This coverage protects you from financial loss up to your policy limits for damage to the property of others that results from an accident for which you are responsible. Damage to another person's car or property such as fences or mailboxes are examples of what property damage coverage provides. With today's new car prices, a minimum of $10,000 is advisable. (Coverage for damage to your car is provided under Comprehensive and Collision coverages.) Bodily Injury and Property Damage coverages are frequently sold together under what's referred to as "Split Limits," such as 30/60/10. (The first two numbers refer to the limits for Bodily Injury Liability and the third number refers to Property Damage Liability.) For example, a split limit of 30/60/10 means that coverage is provided up to $30,000 for any one individual injured in an accident and up to a maximum of $60,000 for all persons injured in any one accident. In addition, up to $10,000 is provided for damage you cause to the property of others. Unfortunately, many Financial Responsibility laws require minimum limits that are frequently inadequate to fully protect a person's assets. For only a few extra dollars you can buy higher amounts of this valuable coverage. Higher limits such as 50/100/25, 100/300/25 and even 250/500/50 are available and are frequently recommended. (If your assets are significant, ask Ames Agency - Insurance about personal catastrophe liability policies, also known as "umbrella" policies. These policies provide limits of $1,000,000 or more.)

Example of 25/50/10 Split rate

Example: You have limits of 25/50/10 (unable to sell in Minnesota). You cause an accident in which three occupants of the other car are injured and they successfully sue you. In addition, the other car is severely damaged and will cost $7,500 to repair.

Court Awards: Your Policy Pays: You Pay:

$30,000 to the most seriously injured $25,000 (policy limit per person) $5,000

$24,000 to the second injured person and $20,000 to the injured third person $25,000 - shared by the second and third person - (remainder of policy limit person per accident) $19,000

$7,500 for damage to the other car $7,500

$3,000 for damage to a fence and sign $2,500
(Property damage limit of $10,000) $500

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$84,500 - $60,000 = $24,500

If all three persons had been more seriously injured, and you had only the minimum liability limits, you could be heavily in debt for years to come. This is why the extra cost for higher limits is a good investment. Particularly since jury awards and medical costs can be so high.

Example: You have limits of 25/50/10 (unable to sell in Minnesota). You cause an accident in which three occupants of the other car are injured and they successfully sue you. In addition, the other car is severely damaged and will cost $7,500 to repair.
Court Awards:	Your Policy Pays:	You Pay:
$30,000 to the most seriously injured	$25,000 (policy limit per person)	$5,000
$24,000 to the second injured person and $20,000 to the injured third person	$25,000 - shared by the second and third person - (remainder of policy limit person per accident)	$19,000
$7,500 for damage to the other car	$7,500
$3,000 for damage to a fence and sign	$2,500 (Property damage limit of $10,000)	$500
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$84,500 -	$60,000 =	$24,500
If all three persons had been more seriously injured, and you had only the minimum liability limits, you could be heavily in debt for years to come. This is why the extra cost for higher limits is a good investment. Particularly since jury awards and medical costs can be so high.

How the 25/50/10 Split rate works

Coverage is provided up to $25,000 for any one individual injured in an accident.
Coverage up to a maximum of $50,000 for all persons injured in any one accident.
Coverage up to $10,000 is provided for damage you cause to the property of others.

Uninsured Motorists Liability. Most states require that all drivers have some insurance, but not all drivers comply. Uninsured motorist coverage is designed to protect you and your passengers if you are injured in an accident that is caused by a driver who has no insurance or by a hit and run driver. This coverage also protects you and resident relatives as pedestrians from uninsured drivers.

Underinsured Motorists Liability. This coverage compensates you and your passengers for bodily injuries caused by a driver who has some liability insurance but not enough to pay the damages which you are legally entitled to collect. This coverage is not available in all states.

Medical Payments. In view of rising costs of hospital and medical care, this coverage can be very important. Coverage is provided for you and passengers in your car for injuries resulting from an accident. Specifically, it covers the following expenses up to your selected coverage limit: Doctor, Hospital, Surgical, Ambulance, X-Ray and Funeral Services. Medical Payments coverage differs from bodily injury liability in that it covers medical expenses incurred by you, members of your family, and guests in your car. In addition, payment is made regardless of who is at fault. If you have good hospital insurance for yourself and members of your family your may not need medical payments coverage for yourself and members of your family. You'll probably want to retain medical payments coverage for other passengers in your car.

Collision. Collision coverage pays for damage to your car caused by a collision with another car or an object. It pays for all repair costs even when you cause the accident - minus your deductible - up to the value of your car at the time of the accident. If your car is "totalled," your company will pay you an amount equal to the retail value or "Actual Cash Value" of your car. Damage to your car is paid by your insurance company; however, if the other driver is at fault, your company will seek reimbursement from the other driver's insurance company.

Comprehensive. Comprehensive insurance covers most damage to your car other than collision and mechanical and electrical failures. For example, theft, glass breakage and damage from fire, falling objects and vandalism are covered. And if your car is stolen, coverage for transportation expenses up to a specified limit begins 48 hours after the theft is reported.

Other Available Coverage.
Towing and Labor - an inexpensive coverage, this pays up to a specified amount for towing when your car is disabled and for any labor required at the scene where the vehicle becomes disabled.

Rental Reimbursement - while your vehicle is disabled because of a collision or comprehensive loss, this coverage pays up to a specified amount toward the cost of a rental car after an initial waiting period of 24 hours.

A Word About "No-Fault."

Under traditional insurance laws, an accident victim would have to prove that the other driver was at fault (legally liable), usually by means of lengthy law suits, in order to collect damages from the other driver's insurance company.

"No-Fault" insurance acquired its name because under these laws (which vary considerably from state to state), most provisions allow accident victims to receive benefits from their own insurance company up to specified limits for certain medical and hospital costs without first having to prove fault.

If the victim's expenses exceed a specified limit determined by each state, he retains the right to sue in order to determine responsibility for the accident and to collect additional compensation. The primary purpose of no-fault laws is to eliminate long, involved and costly law suits and to pay accident victims promptly.

Many states have enacted some form of no-fault legislation (Minnesota). It is similar to Medical Payments coverage except that it is more inclusive - and it's compulsory in those states that have no-fault laws. These laws usually include payment for:

Medical expense

Wages or salary

Survivors and funeral benefit

Loss of necessary services

Factors Affecting Your Premium.

Because of the state-to-state variations in no-fault plans, it's best to discuss with your agent the provisions as they apply in your state. Here are some of the factors that are used to determine your premium:

Age of driver	Number of vehicles
Driving record	Coverage & limits
Use of car	Deductibles
Place of garaging	Type of car

Age of driver - Statistics show that younger, less experienced drivers are far more likely to have an accident than older drivers. Because of this, younger drivers are charged higher rates than older drivers.
Driving record - Most states have "Safe Driver Plans" or "Merit Rating" plans which are designed to reward careful drivers with lower rates. Drivers with at-fault accidents or violations, on the other hand, will have higher insurance costs.
Use of car - If your car is used in business or if you regularly drive to work or drive over 15 miles to work your rate will probably be higher than if you drive only occasionally.
Territory/place of garaging - Your rates as a car owner vary according to the city or town in which you live. Generally, large cities are more congested and present a greater chance for accidents to occur and a greater chance for theft, so rates in these locations are usually higher than rates in smaller, more rural communities.
Number of vehicles - You can save on the premium for your cars if you insure them together in one policy. Discounts are usually about 15% for both cars.
Coverage & limits - The type and amounts of coverage you buy obviously affect your premium. Higher limits usually give you a better value for your insurance dollar. For example, you can normally double your liability coverage by paying as little as an additional 15%.
Deductibles - A deductible is the amount you agree to pay when you have a collision or comprehensive loss. The higher your deductible, the lower your premium.
Type of car - Certain car models have a higher susceptibility to loss than others. For example, a two-door high performance sports car is more susceptible to theft than a four-door station wagon. In addition, a smaller car is susceptible to more damage in an accident than a larger car and these factors are considered in determining premium.

Finally, passing up coverages you do not need, getting the discounts you are entitled to, and selecting higher deductibles can make a difference in your insurance bill.

Of course, not all insurance buying decisions are simple or clear cut. When in doubt, remember that it is more important to have insurance against large losses that could threaten your standard of living than to have protection against small losses you can afford to pay yourself.

Here's A Chart You Can Refer To For Quick Answers Regarding Coverage.

Liability Coverage
Bodily Injury
and Property
Damage Liability
Protection Protects:

You, or resident
relatives covered by
your policy
- when driving your car
- when driving other
cars with permission
Others, when driving
your car with permission
Pays You For:

Certain defence costs
Cost of bail bonds
Emergency first aid
for others
Pays Others For:

Death
Injury
Sickness
Loss of Services
Medical Services
Loss of income
Property Damage
If you are legally liable

No-Fault Protection
(Where Applicable) Covers:

You
Covered passengers
Resident relatives
covered by your policy
Pays For:

Medical Services
Loss of Income
Loss of Services
Funeral Expenses

Uninsured Motorist
Coverage Covers:

You and your
passengers
You and resident
relatives as pedestrians
Pays For:

Injury
Death
Sickness
Property Damage
(some states) if the
uninsured motorist
is legally liable

Medical Payments
Coverage Covers:

You
Resident relatives
Your passengers
Pays For:

X-Rays, Physician
Surgical, Hospital
Ambulance, Dental

Collision Coverage Covers:

Your insured vehicles
Pays For:

Repair or replace-
ment of vehicle (up to
actual cash value)

Comprehensive
Coverage Covers:

Your insured vehicles
Pays For:

Damage caused by -
Falling Objects, Fire,
Theft, Vandalism,
Explosion, Earthquake,
many other perils

**Here's A Chart You Can Refer To For Quick Answers Regarding Coverage.**
*Liability Coverage* Bodily Injury and Property Damage Liability Protection	Protects: You, or resident relatives covered by your policy - when driving your car - when driving other cars with permission Others, when driving your car with permission	Pays You For: Certain defence costs Cost of bail bonds Emergency first aid for others	Pays Others For: Death Injury Sickness Loss of Services Medical Services Loss of income Property Damage If you are legally liable
*No-Fault Protection* (Where Applicable)	Covers: You Covered passengers Resident relatives covered by your policy	Pays For: Medical Services Loss of Income Loss of Services Funeral Expenses
Uninsured Motorist Coverage	Covers: You and your passengers You and resident relatives as pedestrians	Pays For: Injury Death Sickness Property Damage (some states) if the uninsured motorist is legally liable
Medical Payments Coverage	Covers: You Resident relatives Your passengers	Pays For: X-Rays, Physician Surgical, Hospital Ambulance, Dental
Collision Coverage	Covers: Your insured vehicles	Pays For: Repair or replace- ment of vehicle (up to actual cash value)
Comprehensive Coverage	Covers: Your insured vehicles	Pays For: Damage caused by - Falling Objects, Fire, Theft, Vandalism, Explosion, Earthquake, many other perils

Getting The Most For Your Insurance Dollar.

One of the easiest and most effective ways you can reduce your premium is to increase your deductible on your collision and comprehensive coverages. The higher your deductible, the lower your premium. For example, increasing your collision deductible from $200 to $500 may save you up to 35% on your collision premium.

Increasing your comprehensive deductible from $100 to $200 could save you about 15% on your comprehensive premium, sometimes more.

Consider dropping collision and comprehensive coverage when your car has a relatively low value. Depending upon the type of vehicle and its care and maintenance, you may want to consider dropping these coverages when your car is between 5 and 10 years old.

If you own two or more cars, insure them under one policy, as most companies give "multi-car" discounts.

In most states, you can get a premium discount if a youthful driver in your family completes an approved driver education course or if the young driver is a resident student without a car at a school more than 100 miles away.

Install an anti-theft device. It not only lowers the chance of your car being stolen, but you can probably get a 5% to 15% discount on your comprehensive coverage, too.