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Car insurance: Which insurances do you need for your car in the US?

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 Car insurance: Which insurances do you need for your car in the US?

Car insurance: Which insurances do you need for your car in the US?.

One of the most surprising things about car insurance is that it isn’t mandatory in some states, e.g. Alabama, Iowa, Mississippi, New Hampshire, Pennsylvania, etc. These states have ‘financial responsibility’ laws, requiring you to post a bond, cash deposit or approved self-insurance with the state to cover damages if you’re involved in an accident.
Motorists in states where car insurance is compulsory must provide
proof of insurance at the time of vehicle registration and may be
required to carry it in their vehicles at all times. Buying car
insurance is more complicated in the US than in most other countries and
may include the following types of cover:

Liability Insurance

Liability insurance includes bodily injury liability, i.e. injuries
you cause to someone else, and property damage liability, which is
damage caused to someone else’s property, including other vehicles. In
most states, liability motor insurance is compulsory, although it
doesn’t necessarily include unlimited liability. Most states have laws
setting minimum levels for liability insurance, but these are usually
woefully inadequate. ‘Responsibility’ limits are set by each state for
death or injury to one person, death or injury to more than one person,
and property damage in excess of a certain amount.
If your liability after an accident exceeds your amount of insurance
and you have personal assets, these are used to pay damages, if
necessary, until you’re bankrupt.
Lawsuits often run into millions of dollars and litigation lawyers
are among the richest legal vultures. Liability limits can usually be
raised significantly for a modest extra premium. To protect yourself
against astronomical damages, you can also take out a personal liability
umbrella policy which increases your liability limits to a level that
covers almost any event.
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No-fault Insurance

Around 25 states and the District of Columbia have some form of
Personal Injury Protection (PIP) or no-fault insurance law. This means
that if you’re involved in an accident, you can claim (up to certain
limits) from your own insurance company for personal injury sustained in
an accident, rather than go to court and try to prove that the other
party was at fault. In states without a no-fault law, the victim files a
claim against the other driver, irrespective of whether or not the
driver is insured, and is paid only if it can be proved that the other
driver was responsible for the accident. If you weren’t to blame and can
prove it through witnesses or a police prosecution of the other driver,
make sure your insurance company is informed, or you may lose your good
driver (no-claims) discount.
Where applicable, PIP insurance is usually compulsory and covers
bodily injury only and not vehicle damage. Those insured under PIP
insurance receive prompt payment from their own insurance company, but
their right to sue for general damages is usually restricted. Motorists
insured in states with liability laws should ensure that their insurance
covers them when travelling in states with no-fault laws. Most
insurance companies automatically extend their policies to cover states
with no-fault laws.
PIP cover may duplicate insurance provided by health or disability
insurance policies. PIP insurance provides benefits for medical and
hospital costs (the level depends on your policy), plus lost wages or
income continuation, replacement/essential services, survivors’
loss/death benefit, and funeral expenses. Lost wages and replacement
services are payable up to a maximum amount for maximum periods.

PIP Medical Expenses Insurance

It’s possible to buy Personal Injury Protection cover for medical
expenses only. PIP medical expenses pays the medical expenses of anyone
injured when travelling in your car, irrespective of fault. Depending on
your policy, it may also pay your medical bills when you or your family
members are travelling in someone else’s car, or if you’re hit by a car
while walking. Unlike other health policies, the medical payments part
of a vehicle policy pays for all medical expenses incurred, without
excesses (deductibles) or co-payments (called ‘first dollar coverage’).
If you have comprehensive health insurance, you may not require this
protection, although it also covers anyone travelling in your car. In
some states, you can choose your PIP health insurance provider, who can
be someone other than your car insurance company, e.g. your employer’s
health insurance company.

Catastrophic Medical Expenses Insurance

Some insurance companies offer catastrophic medical expenses cover,
protecting you against abnormally high medical bills. Whether or not you
have this type of insurance depends on the level of your health
insurance. If it has limitations, you’re advised to have catastrophic
medical expenses cover.

Uninsured Motorist Insurance

To protect yourself against accidents with uninsured motorists and
hit-and-run accidents (whether driving or walking), you should have
uninsured motorist insurance. Uninsured motorist laws have been enacted
in many states, requiring insurance companies to include in their basic
policy cover against damage caused by motorists who aren’t insured.
Uninsured motorist cover is usually equal to the minimum financial
responsibility limits set by a state and is compulsory in some states.
If you have collision insurance, you usually don’t need uninsured
motorist insurance.
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In many states, the penalties for driving without insurance are
derisory, and there may be no penalty at all unless you have an
accident. However, when the paltry financial penalties are compared with
the often high insurance premiums, it’s hardly surprising that there
are so many uninsured motorists. If you have an accident involving
another vehicle, the chances of the driver being uninsured are extremely
high in some cities, so it’s important to calculate the financial
consequences of an accident involving an uninsured motorist.

Under-insured Motorist Insurance

This is similar to uninsured motorist cover and covers you when
another motorist is responsible, but has insufficient insurance to cover
the injuries or damage to property (although, if he has sufficient
assets, you can still sue him).

Collision Insurance

Collision cover is for damage caused by you to your own vehicle,
irrespective of who was responsible for the damage. Collision cover
usually has an excess (deductible); the higher the excess, the lower
your premium. Whether it’s necessary (or wise) to have collision cover
usually depends on the value of your car. Collision and comprehensive
cover are usually required by a car loan or a leasing company. With
collision insurance, you usually don’t need uninsured motorist
insurance.

Comprehensive Insurance

Comprehensive cover is for loss of the vehicle resulting from fire,
theft, vandalism, collisions with animals, storms, floods, riots,
explosions, earthquakes, falling objects, plus accidental glass
breakage, e.g. from a stone thrown up by another vehicle. It doesn’t
cover you against accidents involving other vehicles or objects, for
which you require collision cover. Comprehensive cover usually has a
lower excess than collision cover.

Miscellaneous Extra Insurance

This insures you against a wide range of costs, including a rental
car when your car is being repaired, and towing and labour in the event
of an accident or breakdown (also provided by automobile clubs). If you
frequently use rented cars, you may be interested in a policy that
includes collision damage waiver (CDW) for rented cars, which may also
be provided free by a credit card.

Premiums

Insurance premiums are high, particularly for men under 27 and those
who live in inner cities, where driving conditions are more hazardous
and where car theft is endemic. Many factors influence the cost of car
insurance, including:
  1. The make and type of car (and how expensive it is to repair);
  2. The type of insurance cover required;
  3. The age and value of the car;
  4. Your age, sex (some companies offer a discount to women drivers) and occupation;
  5. What you use your car for (e.g. business or pleasure);
  6. Your driving experience and driving record;
  7. Your accident record and no-claims bonus (good-driver discount);
  8. Who will drive the car;
  9. Your health (you may be required to pay an excess if you suffer from epilepsy or diabetes);
  10. Where you live and whether your car is stored in a locked garage overnight;
  11. The number of miles you do each year;
  12. Any extras required, such as a rented car when your car’s being repaired after an accident.
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Shop around a number of insurance companies, as rates can vary by up
to 400 per cent. Among the largest US car insurers are State Farm,
Allstate, Farmers and Nationwide. State Farm is a mutual insurance
company and customers sometimes receive a refund from excess profits.
You should ask your family, friends and colleagues for their advice
regarding car insurance, although you should also make your own
comparisons.
Some ways to reduce your insurance are to:
  1. Make comparisons – shop ’til you drop!
  2. Insure your car with your household insurance company, which may yield a discount of 5 to 10 per cent.
  3. Take advantage of insurer’s discounts, usually 5 or 10 per cent of the
    premium. Most insurance companies offer discounts for cars fitted with
    air bags, automatic seat belts, anti-theft devices or anti-lock brakes.
    Many also provide low-mileage discounts and discounts for more than one
    car, no claims (good-driver discounts, e.g. if you make no insurance
    claims in three years), drivers aged over 50 or 55, driver training
    courses (e.g. defensive-driving), and even good student grades (are
    diligent students safer drivers?). Drivers aged over 65 can complete a
    ‘mature driving course’ in some states, guaranteeing them a three-year
    discount on their insurance premiums.
  4. Don’t get uninsured motorist cover unless required by state law. If
    you’re hit or injured by an uninsured motorist, repair and medical bills
    are covered by your collision insurance (provided you have it!), PIP
    cover and other medical insurance.
  5. Drop your reimbursement for a rented car. If you’re a two-car (or more)
    family, you may be able to do without a rented car while one car is
    being serviced or repaired. Insurance companies have limits on what they
    pay for a rented car.
  6. If you have an employee hospitalisation plan, you could drop your car
    insurance medical payments, which duplicates medical insurance you
    already have.
  7. Drop the emergency towing service, which you probably don’t need unless
    you have an old car susceptible to breakdowns. Insurers often limit
    what they provide for a tow, which is too little anyway. Join the AAA or
    another automobile club providing an emergency towing service.
  8. If your car isn’t a status symbol, consider buying a ‘low profile’ car
    with a low insurance rating and, if you’re considering a house move,
    choose a low insurance area.
  9. One thing not to do in order to save money on car insurance is reduce your liability limits!
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There’s no correlation between the premium you pay and the quality
of service you receive, so paying a high premium doesn’t guarantee the
best service. Some 25 states publish information comparing the insurance
rates of different companies. For information contact your state
insurance regulator. Premiums can be increased at renewal time, which is
likely if you’ve made any claims in that period. Many insurance
companies allow premiums to be paid in instalments, e.g. quarterly or
monthly.
 
When completing your insurance proposal form, make sure that you
state any previous accidents or driving offences; otherwise your insurer
can refuse to pay out in the event of a claim. Drivers who have been
banned for drunk or dangerous driving must usually pay at least double
the standard premium for three years (even penalty points on your
licence increases your premium). Your insurance company may cancel your
policy if you’re found guilty of drunk driving, speeding or recklessness
resulting in injury or death.

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