The property coverage part of your personal auto policy covers repair and replacement costs for your vehicle. Understand that this type of coverage only covers the insured’s vehicle. Damages to other parties are covered through liability coverage. There are two types of coverage: collision coverage and other-than-collision coverage (also called comprehensive coverage). [Read more…] about Intro to Property Coverage for Car Insurance
Introduction to Auto Insurance
In terms of property-liability insurance, auto insurance is the most familiar to the general population. With the number of accidents that occur each year, it is easy to understand why.
A particular event that could potentially decrease wealth is characterized as a risk exposure. For our more cynical readers I must specify that “marriage” and “kids” are not typically classified as risk exposures, nor is a prenuptial agreement traditionally considered a form of insurance. In terms of auto insurance, three main risk exposures exist:
- Property damage/loss
- Bodily injury to you/your family
- Legal liability for harm to others due to your negligence.
Most personal auto policies included some level of protection for each category of risk exposures.Keep in mind that although most auto policies have much in common and are written in reasonably understandable language, significant differences, clauses, and exclusions can exist. It is important that you thoroughly review your policy, your state’s requirements, understand your needs and seek clarification on anything that is unclear. A “small” misunderstanding in terms can cost you “big” money.
Under most personal auto policies coverage applies to any individual that has qualified permission (typically from the insured or spouse) to operate the vehicle.
Can We Put a Value on Human Life?
This concept primarily related to the topic of life insurance. We’ve mentioned that we cannot place a value on human life. It is important to understand that though we cannot readily assess the value of a human life, we do put a price on it in different ways, some more direct than others. We will not begin to take a position in this debate, but we will illustrate a few examples for perspective. [Read more…] about Can We Put a Value on Human Life?
Participating vs. Non-Participating Insurance Policies
This concept primarily related to the topic of life insurance. Both types of insurance policies, term and cash value, can act as either participating or non-participating (par or non-par, respectively). Most policies are par policies.
Par Policies
Insurance companies will charge higher than necessary premiums with the intent of returning the excess. Excess premiums are charged because the insurance company will operate based on more conservative estimates. For example, they will base premiums on higher operating costs and lower rates of return than are actually expected. This allows the insurance company to better protect against non-diversifiable (highly correlated) risk. [Read more…] about Participating vs. Non-Participating Insurance Policies
What is Insolvency Risk & Why Does it Matter?
Insolvency risk refers to the possibility that an insurance company is unable to meet its financial obligations. This possibility emphasizes the importance of insurer ratings and choosing a financially strong, highly rated insurance company.
Indemnity vs. Non-Indemnity, What’s the Difference?
Insurance can be broken down into two groups, indemnity and non-indemnity. For example, property insurance is indemnity insurance while life insurance is non-indemnity insurance.
Indemnity means that the insured is entitled to a specific amount of compensation for a loss that is tied to a replacement, reimbursement, or fair-market value. The primary difference is that with indemnity insurance, there is no “profit” so to speak.
Non-indemnity insurance tends to cover things with no real replacement value. The amount of compensation received cannot be directly correlated with the loss. For example, life insurance is non-indemnity insurance because you cannot place a value or a cost of replacement on a person’s life.
