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Understanding the Fine Print of Your Auto Insurance Policy

understanding the fine print on your auto insurance policyReading and understanding the fine print of your auto insurance policy is crucial these days. Before you complete your purchase, make sure you have the opportunity to review every detail. You must verify that you have adequate coverage in the event of an accident.

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Just like every other contract you sign, your car insurance policy has exceptions and exclusions, also known as fine print. The size of the writing is typically much smaller than the rest of the document. Many people have an idea that this information exists, however the majority fail to go over this section thoroughly. This is a huge mistake, which you may regret in the end.

Added Accessories

If you are the type of person who likes to dress up your car, you may be shocked to learn that many car insurance companies do not cover certain accessories. One of the most popular car accessories are custom rims, they are especially common on sports cars and SUVs. Unfortunately, they can be very expensive.

If you review the products on Custom Wheels and Car Rims.com you will see that the prices range from $600 to $1,000 for the rims, the tires cost extra. That means you could easily spend $2,000 just for your tire rims alone.

Your auto insurance company provides coverage for your standard tires and rims, as long as you pay for comprehensive. They consider these as permanent fixtures on your vehicle. However, when you decide to remove the factory installed rims and tires and exchange them with fancy, specialized selections, you might be on your own.

One of the reasons why many car insurance companies fail to cover these items is because of the added chance of theft. Ironically, they do not increase the overall value of your car, but they do appeal to thieves because they can steal and sell them quickly.

The only way to be sure you have protection is to read your agreement and look for any verbiage that states this clearly. If you do see any statements regarding custom accessories, be sure to bring this to the attention of your auto insurance agent.

If they confirm that they will not cover your accessories, see if you can purchase separate insurance in the form of a rider. This is like an addendum to your current policy that will adjust the coverage selections section so you can receive the protection you need.

Breaking Driving Laws

It may not surprise you to learn that breaking driving laws prevent you from receiving an approval on your car insurance damage claim. However, you might be a little upset when you realize that your failure to fasten your safety belt is the reason for denial.

understanding the fine print of your car insurance policyMost people think of serious laws, like DUIs or reckless driving, but many never give simple infractions a second thought.

Accidents happen anytime and when you are unsuspecting. This is why you should remember to adhere to all of the regulations, not just the major laws. If you sustain a major injury because you did not wear your seat belt, your car insurance company may deny your medical or personal injury protection claim.

The Center for Disease Control (CDC) explains how wearing seat belts help with the reduction of major collision injuries by 50%. They go into further detail with specific age groups and regions. For example, they show that those between 18 and 34 wear their seat belts less frequently as opposed to older adults.

The CDC states that men use their seat belts 10% less frequently than women wear theirs.

People living in an urban or metropolitan cities use their seat belts 87% of the time, while rural residents only buckle up 78% of the time. Finally and perhaps, the most important are the states with seat belt laws in place. Citizens with current seat belt laws make sure they use them 88% of the time, compared to secondary or non-existent seat belt law states with a rate of 78%.

The car insurance industry knows the importance of preventable injuries. It costs them millions each year to pay their customer’s claims. To avoid unnecessary spending, they definitely consider these kinds of statistics when they create their agreements.

Although you may never read this in your policy, you can bet they have payment exclusions in the fine print regarding seat belt use. This allows them to deny many medical claims.

Using Your Car for Business Purposes

A number of Americans have moved away from traditional employment to start their own business or work as independent contractors. In fact, according to Census.gov as of 2010, there were 10.1 million people working for themselves and 10.3 million independent workers or contractors. This can get interesting when it comes to car insurance needs, depending on the field.

understanding the fine print of your automobile insurance policyFor most auto insurance providers, they mandate that you use your vehicle less than 50% of the time for business purposes. The Bureau of Labor Statistics shows the top self-employment careers are those in the construction, healthcare and legal professions.

If you are a contractor, attorney or independent nurse you could easily go over the limit and run the risk of receiving a denial on your claim. You might need to meet with clients every day, away from your home. The distance could vary immensely.

Plumbers and carpenters are always on the road. Home health aides travel from one patient’s home to another each day. Instead of purchasing a passenger automobile insurance policy, you should play it safe and opt for commercial auto insurance coverage.

It is not worth taking the chance that your current car insurance provider will never discover your secret.

Insurance providers have their ways of finding out your mileage. If you have a low mileage discount, for example, they may want to monitor this area very carefully.

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Replacement Costs and the Value of Your Car

understanding the small print of your car insurance policyThis is always a particularly confusing part of the fine print on an automobile insurance policy. Many people do not clearly comprehend certain terms. For most policies, the car insurance companies use something called actual cash value. The minority select agreed upon value. Even their names sound the same, but the differences are huge.

With an actual cash value policy, you receive an amount of money to repair your vehicle equal to the actual value, minus the depreciation. This is where the issue starts to confuse most. The average consumer assumes they will receive a large sum of money. However, unless you did your homework, you will soon discover that your car is hardly worth the original amount.

While virtually everyone knows his or her car loses value, most do not understand the time period. The truth is within the first year your car could be worth 1/3 of the original retail price. With an actual cash value policy, you receive this amount after filing your claim if the car insurance company totals the automobile. This is hardly enough to replace your vehicle.

An agreed upon value policy is much more appealing to the consumer, yet standard car insurance companies do not use this type very often.

If you have an agreed upon value policy, you and your auto insurance provider come to an agreement with what you both think is a fair price. Once you settle on an amount, you can be sure of the correct payment if you need to submit a damage claim.

Mandatory Arbitration

Mandatory arbitration seems to be popping up everywhere, not just with car insurance policies. The majority of employers include arbitration stipulations on their new hire applications. The premise is simple and easy to understand.

understanding the small print of your automobile insurance policyIf you suffer any type of critical injury or someone dies in an automobile accident, your car insurance provider has levels of protection. However, if your car insurance company has a mandatory arbitration loophole or clause, you may not have the option of suing them right away if they deny your claim. Instead, they agree to meet with you and your legal representative in an arbitration meeting.

This allows them to present the facts of your claim to a non-biased moderator and together, you and they decide on a settlement. It is usually the first step before a lawsuit. If you both agree to the terms outlined during the arbitration meeting, you cannot seek compensation later. If you cannot come to a settlement, you can take the next step and seek a court appearance to finalize your dispute.

Fees

You are within your rights to cancel your car insurance whenever you like. You do not need to supply any explanation and they must honor what you request. However, this does not mean you do not have to pay a certain amount if you end your relationship early.

understanding the small print of your auto insurance policyTo help cover their costs, your car insurance company may have stipulations about mid-policy terminations and the amount can range anywhere from $150 to $300. This part of your agreement does not require regulations by the Department of Insurance.

As long as they include the information somewhere within your document, they can dictate any price they want. This is another reason for a careful examination of the fine print; they often place these fees in this section.

Other fees include surcharges for too many collisions and claims. Each time you file a claim, you cost your car insurance a specific amount of money. You also damage your personal history and they will likely increase your risk. They may even drop you, if the problem persists.

Most car insurance companies charge approximately $100 to $300 for a surcharge.

They add this amount to your annual premium so make sure you have this information beforehand.

The fact that every American needs auto insurance is one of the reasons why so many consumers rush through the process. Some feel as if they already have enough information and the fine print is simply a formality.

Others believe that they will never fall into a category that negates their coverage so they do not think the content within the text applies.

In reality, the most important part of your car insurance policy is the fine print. If you fail to reflect upon this area, you may find that you do not have as much protection as you originally thought. You might even do something to make your coverage invalid by making a simple mistake.

Be smart in your search for great car insurance rates, start by placing your ZIP code into the FREE tool!

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