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TO INSURE OR NOT TO INSURE
By Paul Gonzalez
As Americans, what would we do without our precious automobiles? They are one of the major purchases that we will make, and we just can’t seem to live without them. At any given time during the day or night, streets, highways and turnpikes across America are littered with a potpourri of cars, trucks and SUV’s.
We value our vehicles because often times they are a direct reflection of who we are. We take pride in washing our cars by hand, appreciating the blinding gleam of the sun bouncing off the mirrored paint. With the cost of a vehicle today, we should take pride in caring for it. No one takes care of a car more than it’s owner.
However, with the ownership of vehicle comes added responsibilities. One of those responsibilities is making sure that the vehicle is properly insured. What exactly is automobile insurance? Automobile insurance is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed and known small loss to prevent a large, possibly devastating loss.
The next question that might be asked is why do we need automobile insurance? Automobile insurance is needed because if drivers have an accident, they will likely not be able to pay for the damages in full to repair their car or other cars involved in the accident. No one wakes up in the morning and says, “I’ think I’ll have a car accident today.” It just doesn’t happen. That’s why they are called accidents. They are unpredictable. But what certainly is predictable are the costs incurred with any automobile accident. Whether it’s a slight fender bender or a nasty five car pile up, any car accident will require a repair, and it is much nicer to have an insurance company pay for it than the auto owners themselves.
There are varying rates of insurance that one can carry. They range from liability insurance to full coverage insurance. Liability insurance won’t repair your own car, but will sustain the damage costs of another car if needed. The premiums for this type of coverage are typically less expensive. An example of one that might carry liability insurance is someone who has a very old car that isn’t worth much money. Full coverage insurance is generally more expensive, but as it suggests, everything is covered… the driver’s car and any other cars involved if necessary. Full coverage gives total peace of mind. There is also a deductable that’s attached to each policy. What is a deductable? A deductable is an upfront charge that the policy holder must pay before the insurance company will initiate any monetary liabilities. If the deductable is high, then usually the premium payments are lower. If the deductable is lower, then the premium payments are typically higher.
Another need for automobile insurance is for medical expenses. If ever in a car accident, we certainly hope that no injuries are incurred. But the fact of the matter is that cars can weigh in excess of 4,000 pounds… that’s two tons of metal going anywhere from 20 mph to 80 mph. At these rates of speed, if two cars collide, someone is very likely to get injured. An element of auto insurance policies that is required by law in the state of Florida is PIP, or Personal Injury Protection. PIP is typically used if a driver is in an accident, and afterward requires medical tests such as X-rays, CAT scans or MRI’s. Uninsured Motorist is an elective protection but is highly advised to have on a policy because there are vast numbers of drivers who do not carry any auto insurance at all. If there is an accident in which you are injured, and the other driver carried no auto insurance, it is your Uninsured Motorist protection that will aid in paying any medical expenses.
Now that we know what automobile insurance is and why we need it, the next logical question is… with which company do I carry my policy? There are numerous insurance companies ranging from the large well known companies such as Allstate, State Farm or Geico to smaller less known companies. Like anything that we purchase, we want to know or at least think that we are with a reputable company. There is only one way to determine validity with regard to insurance companies, and that is simply through their rating. If an insurance company carries a high rating, this means that they have good financial strength. Why should you care about financial strength and ratings? If you have a claim, do you want to be paid immediately, or do you want to wait months on end? Companies with low ratings could take a very long time to get you the money that you would need.
Capitalism means that companies will compete for your money. In the end, a little bit of research with possibly some friendly recommendations will guide you to which company earns your business. No matter which company is chosen, always remember it is YOUR responsibility as an auto owner to keep your car insured.
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