Auto Insurance FAQs
Q: What is an umbrella policy, and what is it good for?
A: An umbrella policy is a policy that sits on top of your auto insurance (and, in some cases, your homeowners insurance). An umbrella policy gives you extra liability coverage, anywhere from one million to five million dollars, generally with a yearly premium of $200 to $300. The extra liability insurance covers you when your liability coverage under your regular auto insurance policy falls short. Car accidents can be very expensive, and it is very possible that the bills for an accident would not be covered completely by your auto insurance; therefore, umbrella insurance is a peace-of-mind policy: it provides you with extra coverage when you need it.
Q: What is the difference between collision and comprehensive insurance?
A: Collision insurance covers a vehicle that is involved in an accident. Comprehensive insurance covers a vehicle that is damaged in an event other than an accident, such as a fire, hail, or a falling tree (such events are given the name “acts of God”). If you are financing a vehicle, most banks or lending institutions require that you purchase both collision and comprehensive. Collision insurance, generally a certain amount, is required by each state. The amount required varies with each state.
Q: If my child has a driving permit, do I need to add them to my insurance policy?
A: It depends on the state and the insurance company. Some states—including Illinois, Indiana, Maryland, New York, North Carolina, Ohio, Pennsylvania, Virginia, and West Virginia—allow insurance companies to require that teenagers with driving permits be added onto your policy. However, the majority of states require that the teenager with the driving permit drive with an insured driver in the car, and then the teenager is covered under the insured driver’s insurance. Once the teenager receives a license, though, he or she will need to be insured.
Q: Will out-of-state tickets show up on my insurance and raise my rates?
A: It all depends on the state you are living in. Some states are part of the DLA, or driver’s license agreement. Under the agreement, states share DMV records with other states. If your state and the state where you received your ticket are members of the DLA, then all of your ticket information would be passed to your state’s DMV. Once that information is in your state’s DMV, your insurance company has access to it. The more tickets you have on your record, the higher your insurance premiums.
Q: Do I need gap insurance for my new car?
A: Gap insurance is very helpful for a new or leased vehicle. It provides security in case of a total loss, giving the insured the difference of the actual cash value of the vehicle (what the vehicle was worth at the time of the accident) and the outstanding loan (what is still owed on the vehicle). This insurance is helpful in situations where a vehicle is totaled. The insurance company agrees to pay $18,000, there is a $500 dollar deductible, and you still owe $23,000 on the car. Then gap insurance will cover the difference between the cash value of the vehicle and the loan, which is in this case $5,500.
