Q: Is automobile insurance required?
A: Most states have minimum coverage requirements that may include, for example:
- Medical payment coverage
- Liability coverage for both personal injury and property damage
- Insurance on vehicles that may be located in another state or even if inoperable if they are registered
- If your vehicle is financed, the lender may require a specific type or amount of insurance
Q: What is "Personal Injury Protection" insurance ("PIP")?
A: PIP is "no fault" coverage that will compensate a loss due to injury, regardless of who is charged with causing the crash. PIP insurance may also protect you if you're injured as a pedestrian or bicyclist, as long as the injury is caused by an accident involving a motor vehicle. Only certain states are "no-fault" states.
Q: What is "Property Damage Liability" ("PDL") insurance?
A: This coverage pays for damages you or members of your family cause (and are liable for) to other people's property in a crash involving a motor vehicle. The damages would include the vehicle but can also include real estate damage (if you lost control and ran off the road and hit a fence, deck or even a home) or even the contents of the other party's automobile.
Q: What is " Bodily Injury Liability" ("BIL") insurance?
A: Bodily Injury Liability coverage pays for serious and permanent injury or death to others when you cause an accident involving your automobile. Your insurance company will pay for injuries up to the limits of your policy and provide legal representation for you if you're sued. In particular, your company pays for injuries caused by you or members of your family who live with you, even if they were driving someone else's vehicle. It may also cover others who drive your automobile with your permission. This coverage also provides you with legal defense in the event the injured party sues you. If you're sued due to an accident and the jury or judge awards a verdict to the injured party larger than your Bodily Injury Liability insurance limit, you may be held personally liable for the difference to satisfy the judgment.
Q: What is collision coverage?
A: This type of insurance pays for damages to your auto caused by impact with another vehicle or object such as a tree, telephone pole, building and so forth.
Q: What is "comprehensive coverage"?
A: Comprehensive insurance covers damage that occurs to your auto in a situation other than in an accident, for example:
- Theft Windstorm
- Glass breakage
Q: What is Uninsured or Underinsured motorist coverage?
A: If you're in an auto accident caused by the negligence of the other driver, and the other driver has no insurance or not enough insurance, this coverage will kick in to the limits allowed by the policy.
Q: I'm in a "no-fault" state. What does this mean if I have an accident?
A: Your insurer will automatically pay for your damages, up to your policy limits, regardless of who was at fault for the accident. In exchange for this guaranteed payment, you give up some of your rights to sue the other driver(s) involved in the accident.
Be aware that no-fault insurance can restrict recovery for pain and suffering as well as limit loss payments. Depending on your state, you may be allowed to sue for non-economic damages if the amount of these damages exceeds a specific amount.
Q: What factors can an insurance company look at to determine if they will insure me?
A: Typically, insurance companies weigh the following factors to determine if they will write, or continue, coverage for an individual:
- Your age
- The type of vehicle you drive
- Your claims history
- Your driving record
Insurance companies cannot discriminate against providing coverage based on a protected class such as race, sex, religion, national origin or ancestry. Your state may also have additional restrictions such as profession or marital status.
Q: What if I fail to keep insurance on my vehicle?
A: The Department of Motor Vehicles (or similar agency) in the state in which you live is generally authorized to suspend your driving privileges, perhaps even your vehicle tag and registration, as well as levy fines for failing to maintain insurance.
Q: Can my insurance company refuse to pay my claim?
A: Most insurance policies include a section in your policy that defines what you, the policyholder, are required to do when an accident occurs. This information in your policy sets out the general as well as any specific procedures that you must follow in order to have your claim covered by the insurer. It's essential to follow these procedures carefully, since payment of your claim may depend on your doing so.
Q: Can I require my insurance to authorize the use of original equipment parts when repairing my vehicle? My policy says they will return my damaged vehicle to " pre-accident condition."
A: Possibly. This can depend on both the state you are in as well as the terms of your auto insurance policy. Some automobile insurance companies automatically use original equipment manufacturer (OEM) parts. Others use non-OEM parts. If the repair of the damaged part directly affects the operational safety of the auto, the insurance company may be required by your state law to replace it with an original equipment manufacturer (OEM) part.
For non-safety-related parts, there may be more restrictions on the use of OEM both under state law as well as your policy. You may be able to insist on OEM parts, but where they aren't required you will generally have to pay the difference in cost.
Q: My insurance company is denying my claim because the location where I keep my vehicle is not what is listed on the application. Is this right?
A: Yes, it is possible. If you give false, misleading or incomplete information on the application and if such information increases the insurance company's risk of loss, your company may then be able to refuse to pay the claim under guidelines set out by your state. Misleading information includes the description of where the vehicle is kept, the names of the operators or any information related to those who operate the vehicle.
Q: Is my insurance company required to provide me advance notification if they are canceling my policy?
A: Yes. A seven day notice is generally required. Depending on the state you live in, the method of notification (regular, certified or registered mail) and the amount of advance notice may vary.
Q: Are there any specific time limits for an insurance company to pay a claim?
A: While there are no specific time limits for the settlement of claims, most states require insurance companies to pay all claims in a prompt and reasonable amount of time. However, what constitutes "prompt and reasonable" may vary from claim to claim. Unique situations, special circumstances or abnormal increases in case loads due to, for example, weather events such as a blizzard or hurricane, can slow the process down. Check with your state's insurance division for any specific time frames you insurer must follow.
Q: My auto was declared a total loss. Is my insurance company required to pay me the replacement cost?
A: No. When your auto is declared a total loss, your insurance company will only pay you the actual cash value of the auto at the time of the loss, not the cost to replace it. Your auto's value can be determined a number of ways:
- Retail value for an auto of like kind and quality prior to the accident
- Price paid for the auto plus the value of prior, documented improvements to the auto at the time of the accident
- Actual purchase cost of an available auto of like kind and quality
- There could be a decrease in any of the values due to prior unrelated damage which is detected by the appraiser or for which a claim has been previously paid.
If your auto has substantial value because of its exceptional condition such as an antique, classic or restored auto, you should have it appraised and then insure it for the appraised value.
Q: The accident I was in was determined not to be my fault. The insurance company is offering far less for my vehicle than what I owe. Don't they have to at least pay off my loan?
A: No. The insurance company is not required to take into consideration any outstanding loan on the vehicle. They generally are only required to pay the actual cash value of the vehicle.
Q: May I keep my auto if I have a claim and the insurance company declares it a total loss?
A: Your insurance company is entitled to any salvage value your auto may have and will typically take title to your auto when it pays your claim. You may be able to negotiate with your insurance company to purchase the vehicle from them.
Q: Am I entitled to a rental vehicle and for how long?
A: If your personal automobile insurance policy has an endorsement for rental coverage, or "rental reimbursement" clause, you may be entitled to reimbursement for the cost of a rental vehicle while you are waiting for your vehicle to be repaired within your policy limits. If you're collecting for your damages from a company other than your own, your state may or may not have a law requiring rental reimbursement. Typically, insurance companies allow for a rental vehicle for a specific amount of time once they determine their insured is liable.
Q: Do I have to hire a lawyer to defend me if I'm sued because of an auto accident?
A: No. The liability portion of your automobile insurance provides for representation by the insurance company. The insurance company provides the lawyer but he or she represents you, not the insurance company.
Q: Am I required to have homeowners insurance?
A: Generally, yes. If you have a mortgage on your property, typically the lender will require that you purchase, and continue to hold, homeowners insurance during the duration of the loan. The premium for paying for the insurance may be escrowed with your loan payment or may be an item you will need to pay for separately. Check your loan document for the terms you're obligated to follow. If you own your home free and clear, you'll still want to consider coverage to guard against property loss or damage, as well as liability lawsuits.
Q: What does homeowners insurance protect against? Are all polices the same?
A: Homeowners insurance has two types of coverage:
- Casualty, which provides protection for the dwelling and often the home's contents
- Liability, which provides protection should someone be injured on your property
All policies are not created equal. There are various levels of casualty coverage, from a very basic policy that provides a minimum coverage of the home only and no contents, to an expansive policy for older, historic homes. Liability coverage typically starts at $100,000, but greater coverage is available and often recommended, depending on your situation.
Q: Is my landlord responsible for the damage to my property because of a fire in the apartment I rent?
A: No. The landlord's policy covers the actual building, but not your property. You should always consider renter's insurance to insure your belongings against the same perils homeowners insure against.
Q: Is replacement cost the same as the sale price of a home?
A: No. The selling price includes the value of the home plus the land the home is located on. The replacement cost is equal to the amount you would need to spend to replace the structure. Typically, homeowners don't need to insure the value of the land, although it is wise to have an appraisal of the home completed to establish the replacement cost of the home.
Q: How is the replacement value of my belongings calculated?
A: Most policies that provided coverage for personal property will assign a value to all the items based on a formula. Typically, the value is a percentage of the replacement value, or cash value, your home is insured for. While it may seem that the amount allowed would be enough to cover the items damaged or stolen, replacing each and every item at current prices can become quite expensive. You should consider photographing, inventorying and evaluating your belongings to come to a total replacement cost. If your policy falls short, consider increasing the standard coverage to ensure that you have adequate coverage. If necessary, add a separate policy for specific items, such as jewelry, electronics or a prized collection that may not be completely covered under a standard policy. Consider adding an inflation clause or endorsement, so your policy continues to keep up with rising prices.
Q: Who pays for the rental my family is in while our house is being repaired due to damage?
A: Typically if your policy includes a provision called "loss of use," your insurance will cover the cost of temporary housing up to the specified limits. If this provision isn't included in your policy, you'll be responsible for the costs.
Q: Am I covered for damage caused by storms, bad weather or other severe weather?
A: Depending on the homeowners' policy you hold, you may be covered for a limited number of perils - such as fire, windstorms or hail - or you may be protected for a more expansive list of perils including those listed plus, for example, water damage caused by appliances or damage to your home from the weight of ice, snow or sleet. Check your policy or call your agent to verify exactly what your policy covers. Earthquake or flood damage insurance generally must be purchased separately.
Q: Is the property I have in my car covered for theft?
A: Often, it is. Check your policy for specific coverage or limits.
Q: My neighbor slipped on my front step and fell. If she sues, will my homeowner's policy pay?
A: The liability portion of your homeowner policy was designed for just this situation. Your insurance policy provides for payment of medical expenses and for the legal costs of defending you against a claim.
Q: My son is at college and lives in a dorm. Does my homeowner policy cover the possessions he took with him against damage or theft?
A: Yes. Personal property normally located at your residence but which is at another location is typically covered. Check with your agent for the specific amount of coverage: electronic equipment taken to college can quickly exceed the standard coverage you may have.
Q: During a thunderstorm, a tree fell on my roof. Is this covered?
A: Yes. The repair of your roof as well as some, if not all, of the cost of tree removal may also be covered. If the tree had not hit your roof, your insurance may not have covered any of the tree removal charges.
Q: My car was damaged by a limb that fell from a tree located on my property. Does my homeowner policy cover this damage?
A: No. Look to your automobile insurance for coverage of this damage. This type of damage is generally covered under the comprehensive portion of automobile insurance.
Q: My sump-pump failed after my house was struck by lightening. This resulted in an inch of standing water in my basement before the pump was repaired. Is the damage covered?
A: Possibly. Water seepage is typically not covered by homeowners' insurance, but damage caused by lightening often is. Check your policy, and check with your agent, to see if the damage is covered.
Q: I have a small, home-based business. Is my inventory covered against damage or loss under my homeowner insurance?
Q: No. A homeowners' policy doesn't cover you for losses that might occur with a home-based business. You can obtain a separate business owners' policy to cover losses from theft or damage, or you may possibly qualify for an endorsement to your current homeowners' policy.