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Insurance FAQ


Why do I need auto insurance?

Your car is likely one of the most expensive things you own. Insurance protects your investment and guarantees you a way of coping with the expense of accidents, vandalism or theft. It also secures your financial responsibility to the institution lending you money to buy your vehicle.

When you drive you are responsible for the safety of your passengers, your fellow drivers, other people’s property, pedestrians and yourself. Insurance helps ensure your ability to cover the costs of potential damages or injuries.

You are also required to be financially responsible by state laws, which are best satisfied through your insurance coverage. In most states insurance is a prerequisite to registering your car. So if you want to drive your own vehicle, you must be insured.


Why does where I live affect my premium?

Where you live (or, more precisely, where you keep your car) has a bearing on your chances of having an accident or becoming a victim of theft or vandalism. That’s why a vehicle owner in Brooklyn, New York, pays a higher rate than the owner of an identical vehicle in Casper, Wyoming.

Other factors affecting regional insurance rates include time and efficiency of police response and law enforcement, local road and traffic conditions and the quality of local medical services. Insurers even factor in the litigation rates in a given area, that is, how many lawsuits are filed, go to trial, are settled out of court and for how much.


What do I do if my insurer cancels or refuses to renew my policy?

Even “good” drivers can be dropped by their carrier. Reasons range form a “drinking while driving” violation or other serious violations (that make you a high risk) to situations outside your control, such as when insurers in your state are suffering severe business losses. Overall rises in claims or losses can cause insurers to become highly selective in determining whom they can afford to insure.

If you are licensed to drive, by law, you are eligible for insurance. However, your options for new coverage may be limited. Each state has created and regulates a market of last resort for those who cannot otherwise obtain coverage. These groups have various names, depending on the state you live in, such as “assigned risk” plans or the “residual market.” Your Trusted Choice agent will know more about the particulars in your state.

Regardless of the reason you were dropped, you need to act immediately to get a policy. Under no circumstance should you drive your vehicle without insurance. Call your Trusted Choice agent to help you find new coverage. If you do find yourself in the residual market, the price may be higher but it may be your only alternative in maintaining your freedom to drive.


How do I keep my insurance company from canceling my policy?

The most obvious way to maintain your low-risk status is to keep a clean driving record. If you’ve been in an accident, consider taking a defensive driving course. Even those of us who have been driving for years rarely know the simple tricks to preventing accidents through defensive driving.

Also, look into purchasing special safety and security features for your car, such as anti-lock brakes and an alarm system. Your Trusted Choice insurance agent can give you further tips on how to convince your insurer you’re a safe driver.


Do I really need insurance for my home?

Homeowners insurance protects your investment in your home and household possessions as well as providing personal liability protection for you and certain family members.

If you were to suddenly lose your home due to fire or a tornado, or have the contents damaged or stolen, you probably could not afford to replace everything all at once. If somebody sued you for an injury or damage caused by you or your property, the cost of defending against that lawsuit could be very expensive regardless of the outcome.

All of these situations are covered by the homeowners package policy. And while it may be unpleasant to think about fire, theft, and other uncertainties of life, let’s face it, that’s reality.

Yet another reason you need to carry homeowners insurance is that mortgage lenders require it. No mortgage company will lend the large amounts of money needed to finance homes at today’s prices without requiring an insurance policy to protect that investment.


I know I have that homeowners policy in a drawer somewhere. What exactly does it cover?

“Exact” coverage is hard to define because there are different policies. However, about 80 percent of homeowners policies are based on a standard form, which we described in this guide. All homeowners policies cover two important areas: property and liability. Remember that you have to have protection against the proverbial thief in the night and the person who slips on your sidewalk by day.

What this means in insurance terms is that your homeowners policy has two basic components. It covers your structures and possessions – property insurance – and it furnishes protection against personal liability. Personal liability, as its name implies, means you are legally obligated to pay money to another person for actions caused by you, your family, or your property. That liability extends to medical payments to others for injuries caused by you or your family.


What about floods, earthquakes and other catastrophes?

Most catastrophes are covered; for example, wind damage from hurricanes and tornadoes come under the windstorm peril listed in the previous question and so are included. Flood and earthquake damage, however, are not covered by a standard policy.

Be careful not to be lulled into a false sense of geographic security. Flood and earthquake activity is more widespread than many people realize. For example, almost 90 percent of the U.S. population lives in seismically active areas. Since 1900, earthquakes have caused damage in all 50 states. And if your home is located in a flood-prone area, you are 26 times more likely to suffer a flood loss than a loss from fire.

You may want to check with your agent about special catastrophic policies for normally excluded conditions like floods and earthquakes. Of course, the cost of such extra coverage may reflect the high risk involved. If you live along a shoreline, for example, expect to pay a higher premium for flood coverage than someone living on a mountaintop would pay.

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