Car Keys

by R. Craig

Mention "Auto Insurance" and people wrinkle up their noses in defiance, a typical reaction toward purchasing the non-tangible. Yet, no where in all our classroom training and driver's education are we taught just exactly what insurance is. We know we must have it and we feel we pay more for it than we should, but, just what exactly are we paying for?

First of all, it is a statistical certainty that vehicle related losses will occur. These losses will involve physical damage to the vehicle itself, damage to the property of others, injuries in the insured vehicle or other vehicles, or injuries to pedestrians. While certain hazards increase the chance of loss, much of what can and does happen on our congested highways is unforeseen.

Insurance companies can closely predict how many losses will occur but no one can precisely know to whom or when it will happen. Insurance, simply put, is a way of spreading that risk among those insured to ensure there will be sufficient funds to cover the claims of the unfortunate. Thus insurance companies are much better equipped to handle large claims than the average consumer.

New York State is a "No Fault" state. Many people are confused by this term. "No Fault" is just another idiom for Personal Injury Protection. This coverage pays for injuries sustained by the driver and passengers in the insured vehicle regardless of who is at fault. (It also includes wage loss and funeral benefits.) Historically, many people sued each other over minor injuries and clogged up the already overloaded legal system. So the New York State Department of Insurance mandated that each New York policy carry at least $50,000 of No Fault protection.

Everyone should know that No Fault coverage will be denied in certain instances. Anyone injured because of alcohol, racing, or other felon would be denied No Fault Protection under his own policy.

Every insured in New York must also carry Bodily Injury and Property Damage Liability. These limits provide protection for the insured against injuries to others or damage to the property of others for which he or she is legally responsible. New York State requires that each policy holder carry at least $25,000 per person and $50,000 per occurrence for Bodily Injury and $10,000 for Property Damage. These state minimums are often inadequate protection. Medical and hospital costs can quickly exhaust these limits and most vehicles on the road today exceed $10,000. If inadequately insured, personal assets, such as homes and investments, are next in line and after they are exhausted, future earnings may be garnished to pay a lawsuit. Usually, higher limits of protection are available for less than one would expect. This protection has nothing to do with the age of the vehicle as it is just as easy to injure someone or damage another's property in a 20-year-old rust bucket as in a brand new sports car.

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Car Keys -

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Policyholders in New York will also notice they carry Uninsured/Underinsured Motorist. This coverage pays for serious injuries caused by a driver with no insurance or inadequate liability protection. Again, the state minimums are $25,000 per person and $50,000 per occurrence but a policy holder will only be able to collect the difference between the offender's policy and his own. If the at fault party is carrying state minimums, then it's good sense to carry higher limits on our own policies. While it is true that in this case we are buying insurance for the person who is inadequately insured, most people feel that their families are worth protecting.

In order to protect the vehicle itself from damage one must carry collision and comprehensive. Collision pays for damage to one's own vehicle when he is at fault, (sliding on ice and hitting a guard rail is at fault), or when the vehicle is upset or rolls over. If the other party is at fault, then that party's Property Damage Liability pays for the damage. Comprehensive coverage can be carried without collision and covers fire, theft of the vehicle, vandalism, hitting an animal, and glass breakage. Deductibles usually apply to both of these coverages.

There are several other coverages available on a New York State policy and each person is encouraged to have an insurance expert review his policy at least annually. Being inadequately protected means we are self-insuring our biggest assets.

While we are required to carry insurance at some limit, it is ultimately up to each and every one of us to feel comfortable with the level of protection wh choose. Insurance is the peace of mind of knowing that our lives will carry on in much the same way if misfortune strikes due to an auto related incident.