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Coverage Concerns Personal auto insurance buyers need guidance Comparisons must involve identical coverage By Roy C. McCormick
The current barrage of media advertising by automobile insurers, including insurance companies, brokers and agencies, raises concerns about limited knowledge on the part of the audience and whether comparison price quotes apply to the same coverages and limits. Clearly, insurance buyers need to be informed. Insurance providers have an obligation to help insureds and prospective buyers understand both the scope of coverages and their costs. What every insured should know A brief review of the scope of individual coverages follows: Bodily Injury Liability. Covers the liability of an insured person for bodily injury to others arising out of ownership, maintenance or use of a covered vehicle. Also covered is third-party injury that is caused by the use of a trailer attached to a covered vehicle or a non-owned vehicle operated by an insured person. Property Damage Liability. Pays damages for property damage for which an insured person is legally responsible because of an accident arising out of: ownership, maintenance or use of a vehicle; use of a trailer attached to a covered vehicle or to a non-owned vehicle operated by an insured person. Personal Injury (No-Fault) Protection. Pays benefits that an insured person is entitled to receive under the no-fault statute of the state. Provisions of the various state laws vary among the states that have enacted them. Benefits are payable for bodily injury caused by accident, sustained by an insured person, and arising out of the ownership, maintenance or use of a motor vehicle. The benefits include medical benefits, disability benefits and death benefits. Medical Payments Coverage. Pays, within the specified limits of liability, reasonable and necessary expenses incurred for medical and funeral expenses because of bodily injury sustained by an insured person, caused by an accident, and arising out of the ownership, maintenance or use of a motor vehicle or trailer. Medical payments coverage is an important consideration for benefits greater than those included in no-fault insurance and, certainly, when no-fault protection is not available or is not in force. Uninsured/Underinsured Motorist Coverage. Pays for damages, within covered limits, that an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by an insured person, caused by an accident, and arising out of the ownership, maintenance or use of an uninsured (or underinsured) motor vehicle. The one concept applies when the offender has no liability insurance; the other, when his or her insurance limits are insufficient. Many insurers write the protection as a single coverage; others, as two separate coverages. Collision Coverage. Pays for loss to a covered vehicle for which the coverage has been purchased, to a non-owned vehicle, or to a trailer. It applies when the vehicle or trailer overturns or is in a collision with another object. Comprehensive (Other Than Collision) Coverage. Pays for comprehensive loss to a covered vehicle for which the coverage has been purchased, to a non-owned vehicle, or to a trailer. Comprehen-sive loss is one other than a loss covered under collision coverage, including theft. One recent example of its value is the widespread flood damage generated by the recent Gulf hurricanes and heavy rains that inundated many states. Apples to apples vs. apples to oranges It is important to quote premiums based on protection that is identical to that of other insurers with which cost comparisons are made. Quotes must pertain to the same coverages, subject to the same limits upon which the premiums of the other insurer(s) are based. Care must be taken that proper classifications are used when computing premiums. How are vehicles used? Do young people in the family use them and, if so, to what extent? When these facts are established and a policy is written, it is important to periodically check to determine if changes have occurred. Rating would be adjusted, for example, if a covered car is no longer used for business purposes or if a child obtained a driver’s license and became a driver. As an automobile insurance policy is based on information provided in an application by an insured, the need for accuracy in its details must be made clear to the applicant. Data with regard to drivers, use of cars, accident and loss experience, and convictions for traffic violations must be disclosed. A good application contributes to sound insurance coverage and accurate premium computation. When making a cost comparison, a quote must reflect the true exposure. Insurance providers must explain coverage options in order for buyers to make good choices. Care must be taken in making premium comparisons with those of other companies and avoiding criticism for comparing apples with oranges. Comparisons must be based on identical coverages with the same limits of insurance. By informing clients of the basic auto insurance provisions and stressing accurate comparisons with other quotes, agents can have a positive effect on the public image of our industry. That image has taken hard knocks lately, often undeserved. * The author |
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