Answers to Common Insurance Questions

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1. How large should my deductibles be?
2. How much liability insurance is enough?
3. How much can I expect to pay when my son or daughter begins driving?
4. Why do my insurance premiums go up when I get a ticket or have an accident?
5. Why are some vehicles more expensive to insure than others?
6. What payment plans are available?
7. What is an umbrella policy?


1. How large should my deductibles be?

Generally, the higher a deductible is on a policy, whether it is home or auto, the lower the premium will be.  Call your agent to discuss raising your deductibles to $500 and you may notice a substantial saving on your annual insurance bill.  A good rule of thumb is to increase your deductible(s) as high as you can afford to pay out at any one time.

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2. How much liability insurance is enough?

It is virtually impossible for your agent to determine how much liability insurance you will need.   No matter how much we could recommend, you could always be sued for more.  Remember though, higher limits of liability are comparatively inexpensive.  We recommend that people should carry at least a $1,000,000 umbrella policy.  Umbrella policies are generally not more than $150 per year unless you have several vehicles or pieces of real estate to cover.

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3. How much can I expect to pay when my son or daughter begins driving?

Our current sources tell us that boys are still involved in more accidents than girls so the premium on the vehicle they drive will be more.  However, the amount of increase depends on many different things, i.e. the age and value of the vehicle, whether the son or daughter has a "B" average or better at school, how the car is used, and whether this youthful driver passed driver education class.  On average, we tell our customers to expect the premium to double on the vehicle the youthful operator drives.

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4. Why do my insurance premiums go up when I get a ticket or have an accident?

On the whole, the public feels that those who have accidents ought to pay more for insurance.  If this were not the case, the rates for those who never have accidents would be significantly higher.  The good news is that most companies now offer a type of "first accident forgiveness" deal, so rates do not go up the first time you have an accident.

Insurance companies generally do not raise the rates of an existing customer who may have received a ticket or two, but are more cautious in accepting new business.  Several studies have shown that people with tickets are more likely to be involved in accidents.

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5. Why are some vehicles more expensive to insure than others?

There are two main reasons: greater expense to fix when damaged, and the greater the likelihood of loss.  There are certain vehicles, like convertibles or sports cars that are more prone to theft or vandalism than others.  Crash tests reveal different vehicles sustain different amounts of damage, even in identical circumstances.  These differences along with the above mentioned items must be reflected in the premiums that companies charge.

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6. What payment plans are available?

Most companies offer anywhere from annual, semi-annual, quarterly, or even monthly.  Some companies have recently added EFT to their options so that the premiums are directly withdrawn from your checking or savings account.  Call your agent to see what your company offers by way of payment plans.

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7. What is an umbrella policy?

You do not have to be a millionaire to be sued for $1,000,000.   Each year, the number of court verdicts for high dollar judgments increased dramatically.   And in most cases, your basic auto or homeowner policies are not enough to cover these expenses.

Accidents resulting in serious injuries and damage to property can happen to anyone - and often, massive lawsuits ensue.   An umbrella policy can help protect you in these cases by extending more liability coverage on top of your current home or auto policies.   These policies generally start at $1,000,000 and increase in $1,000,000 increments.   A few examples from real losses help illustrate this point:

• A policyholder in Iowa was sued for $1.8 million for starting a forest fire. He was towing his car behind a camper when the car had a flat tire. Sparks flew from the tire rims, resulting in fire damage to many acres of state property. The insureds had to use their retirement nest egg; their insurance only covered a quarter of the bill. Could you foresee this happening to you? They couldn't either.

• $251,000 was awarded to the plaintiff's family for a fatal injury caused by the careless use of a firearm.

• $783,000 was awarded to a pedestrian who suffered serious injuries in an automobile accident caused by a teenage driver

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