Daily Financial Tips

Archive for January 12th, 2012

Buying car insurance can be a very big expense on the household budget, especially if you have teenage drivers in the family. Add in the fact that every state has different liability requirements and things can get quite confusing pretty quick. It’s good to know what is required and what everything in a car insurance policy means. So let’s take a quick look at what an auto insurance policy really is.

Liability

This is what protects you in the event you cause an accident and hurt someone else, or damage property. Every state has there own liability requirements. Be sure to check what your individual state requires. Let’s take an example of a policy with a liability limit of 100,000/300,000. The first 100,000 is the limit that the policy will pay for any one persons medical expenses. The next figure, 300,000, is the limit the policy will pay for all medical expenses for anyone in the accident.

It is important to note that liability coverage will not pay for any injuries or damage to your own vehicle.

Property Damage

This is the total amount that your insurance policy will pay for property that you damage if it is determined that you caused the damage. Generally, most policies have $100,000 as a property damage limit. You can increase that if you wish to. With the price of cars and property these days, it may be a good idea to increase that limit up to $250,000.

Comprehensive

This insurance coverage pays for damages done to your car. This includes theft, storm damage, fire and vandalism. This coverage will have a deductible attached. The rate for this insurance coverage goes down as the deductible goes up. This coverage will also be required on any loan you may have on the vehicle.

Collision

Collision coverage will pay you for damages down to your own vehicle in the event an accident is deemed to be your fault. If your vehicle is totaled out in an accident the insurance company will pay you the actual cash value of your vehicle. This could be less in some cases than what your vehicle is worth. Collision coverage is also required by finance companies on any loan against your vehicle.

Uninsured / Underinsured Motorist

Uninsured and underinsured motorist coverage will pay you in the event of an accident that is not your fault and the other party has either no insurance coverage, or not enough insurance. No matter what the law states, there will always be those who refuse to carry insurance. That makes having this insurance coverage vitally important.

Optional Coverages

There are many different optional auto insurance coverages that you can purchase on your auto policy. Some of these include emergency road service and rental car coverage. Both of these services can be a big help to you in the event of a claim.

By understanding the various auto insurance coverages you’ll be able to determine what exactly you need for your particular situation. In the long run this will help save you money and give you peace of mind.

Most people who have disability insurance got it because their employer got it for them. But the truth of the matter is that you need to look out for your own welfare. The group disability insurance is not always adequate for your needs hence the consideration for individual coverage.

You can get your policy through a financial planner or your mortgage company or still, the agent who sold you your other policies. The premium for individual coverage is estimated to be about five to ten times more than the cost for group coverage.

Usually there are policies that you can get for two years, five years or until you retire. You can decide to purchase a Cost of Living Adjustment (COLA) this feature allows your benefit to be raised with inflation and gradual salary increase. It adds a percentage to your coverage each year.

To get individual disability policy, you need to take a medical exam to determine your insurability.
Most policies are on a non-cancellable basis or guaranteed renewable basis.

The non-cancellable basis means that after you have taken the medical exams and have signed the dotted lines with your insurer, they cannot cancel the coverage or increase your premiums.

The renewable guaranteed basis means that your insurer cannot cancel the coverage but they can increase the rates. This cannot be done on an individual basis though but can only raise the rates for the whole group of insured person if they have experience high number of claims.

Your individual disability benefits would pay you a fixed amount every month and most times they would not pay more than 80% of your current salary. The determining factors for your premium and whether the insurance company would cover you include; your occupation, your income and other sources of insurance. When they have decided on the rates that you should pay, they’ll then put you in a rating class with people of the same age, income, occupation and health condition.

Although disability insurance can be very expensive when you buy it personally, it is a very wise financial decision.