Home and Automobile Insurance Guide General Information Finding the best insurance policies to suit your needs can be a complex and confusing business. To help you, we have addressed questions and defined terms you may come across, both for auto and homeowner s/renter s insurance. You can compare rates and even purchase insurance online. However, we recommend you find a good insurance agent or broker who can answer your questions simply and clearly. You can still compare rates online before choosing an insurance company. You can find an agent or broker online or in the telephone directory, but a personal recommendation is also a good idea. Insurance salespeople may be agents or brokers. The difference between the two is that agents represent one or more insurance companies whereas brokers represent the purchaser and obtain insurance policies from one or more companies. If you take out a financial loan to buy a car or a house, the lender will insist on some form of insurance. For a house you will have to purchase title insurance, home owner s insurance and possibly life insurance. For a car you will need collision and comprehensive coverage and possibly some form of life insurance. If you are renting some landlords will require you to have renter s insurance. These required coverages, however, should be considered as minimum requirements. The amount of coverage required by law varies from state to state. The legal requirement should be regarded as a minimum. It is a good idea to carry more insurance than the state requires in order to be fully protected. Your insurance agent/broker can advise you. For example, in California the minimum property damage coverage required by law for automobile insurance is $5000. This amount would not be adequate to cover the cost of repairs to a new car, if it were damaged in an accident. Responsibility for the remainder of the costs would be that of the driver at fault. Contents General Information page 1 Terms pages 1-3 Renter s Policies page 3 Automobile Insurance pages 4-5 What to do if involved in an accident page 6 Resources page 6 First Party coverage / Third Party coverage In order to be adequately covered by your insurance policies, it is important to understand the difference between first party and third party coverage. A first party claim is one brought by the policy holder against the insurance company. An example would be if you claimed against your homeowner s policy for items stolen in a burglary. A third party claim is brought against the holder of a policy of liability insurance. For example, if someone had a fall on your property and was injured, they could make a third-party claim against you, as the holder of a liability insurance. (Liability insurance is included in homeowner s, renter s and auto Insurance.) For information about health insurance, please refer to our First Steps Health and Emergency Information 1
Deductibles Insurance policies generally include a deductible, which is an amount the policy holder must pay before the insurance company makes payment. The insurer pays for losses over a specified amount, (the deductible) and the policyholder is responsible for losses under the deductible. For example, your car insurance may pay for collision damages over a $250 deductible. If you are involved in an accident and cause $750 damage, the insurance company will pay $500 and you will pay $250. You may be able to save money on your insurance policy if you are willing to raise the deductible amount. In addition to deductibles, the insurance policy will usually set an upper limit on the amount they will pay in the event of a claim. Please note that with all insurance policies, it will be of benefit to you to keep claims to a minimum and to develop a good claim record. This may mean limiting claims for small items lost or damaged, as frequent claims may lead your insurer to increase your premiums. Premium This is the amount you pay annually for an insurance policy. In most cases premiums may be paid monthly, quarterly, semi annually or annually. All Risk and Named Peril The basic homeowner s and renter s policies may vary in the types of insurance they offer for various perils. All Risk insurance protects against loss from any causes, except those specifically excluded. For example, damage caused by flood or earthquakes may be excluded. Named peril insurance covers specific perils listed in the policy. For example, the policy may state that the holder is insured when loss arises from fire or theft. Homeowner s and renter s policies may be either all risk or named peril or a combination of the two, with all risk protection on the dwelling and named peril on personal property. Replacement Cost and Actual Cash Value When payment is made to a policyholder for a claim, the payment is based on replacement cost or actual cash value of the loss or damage. Replacement cost means that the insurance company is responsible for the full cost of the repair or replacement, without making deductions for depreciation. Actual cash value is based on many factors, including, age, market value, etc. In homeowner s, renter s and auto policies, valuation is at actual cash value unless replacement value is specified. Personal Liability Personal liability insurance protects the policyholder from paying for injury to others and for damage to another s property. This applies even when the damage occurs away from the home. Personal liability insurance will be included in your homeowner s, renter s and auto policies. However, the standard upper limit on the amount the insurance company will pay in the event of a claim may be low when you take into account the price of medical bills or your net worth. Therefore, it is important to purchase an adequate amount of liability insurance to be fully protected. An alternative to increasing the amount of coverage on your existing policies is to take out an umbrella policy. Umbrella Policies Because of the potential for costly lawsuits and third party claims, you may want to take out a personal liability umbrella policy. An umbrella policy provides excess liability coverage over and above the coverage which is provided by your auto, renter s or homeowner s policies. This is additional protection which goes into effect when your other personal liability insurance is exhausted. An umbrella policy covers all your other policies and protects your assets, income and future income. It is also possible to buy extra liability protection by extending the upper limit of your personal liability on your homeowner s, renter s and auto policies but the advantage of an umbrella policy is that it will protect you against a wider range of problems and may be less expensive. 2
Floaters If you own valuable items such as jewelry, fine art, silverware etc. you may find that the standard homeowner s policy will leave you underinsured on these items. Homeowner s policies categorize these items and set a cap on the amount they will pay in the event of a claim. Floaters are separate insurance policies that cover certain valuable possessions. This means that the items are listed in a schedule. Floater policies can be endorsements to your homeowner s policy, or separate policies entirely. You may need to have your valuable items appraised before they are scheduled in a floater policy. Earthquake Insurance Even if your homeowner s policy is an all risks policy, damage caused by earthquake will be one of the exclusions. In order to protect against earthquake damage, extra coverage is needed. However, earthquake insurance is extremely expensive and therefore, may be impractical. We advise to you to discuss this issue with your agent or broker. Renter s Policies Renter s policies are a type of Homeowner s policy. The coverage provided protects your personal property and, may give some insurance on improvements you make to the property (shelving, landscaping etc.) Liability insurance will also be included in your renter s policy. If you are renting furniture, you have the option of either including the value of the rental furniture in your Renter s Policy (under the personal possessions coverage) or taking out the insurance offered by the rental company. This is something you should discuss with your agent or broker. It will be less expensive if you include your rental furniture in your renters policy, but you will not be covered for wear and tear. The rental company s insurance is relatively high but will protect you against wear and tear. Making a claim on your homeowner s policy The first thing you should do after damage has been done to your property is to call your insurance company. They will advise you on how to proceed with your claim. In addition to calling the insurance company, you should also write a letter to them detailing losses and damages. It is always a good idea to have prepared an inventory of your property, with photos or video of your valuables, to support your claim. Homeowner s Policies The following are protected under a typical homeowner s policy. The first three aren t covered if the policy is renter s insurance. your house and the structures attached to it other structures on the premises protection for loss of use of your house because of damage personal property a variety of additional coverages As mentioned before, you may want to take out additional coverage For example you may also want to take out floaters on some of your valuable personal property. Regardless of the type of homeowner s (HO) policy you have, you will have liability coverage. This includes: personal liability coverage medical payments to others damage to other s property As mentioned before, you may want to look into ways of increasing your personal liability coverage, possibly with an umbrella policy. 3
Automobile Insurance California law requires that you carry automobile insurance. You are required to have both bodily injury liability and property damage liability. In the event that you cause an accident, this will cover the medical expenses and damages incurred by the occupants of the other party s vehicle. This required insurance does not cover you or your vehicle. It is recommended that you consider the legal insurance requirement a minimum. Anyone who is licensed to drive in California is covered to drive your car under the terms of your insurance unless they are specifically excluded. Exclusions will usually be members of your household who the insurance companies consider carry a greater risk (for example, young drivers, drivers with a bad record). If you have visitors arriving from out of state or out of country, who may be driving your car, you may want to check with your insurance company as to whether they are protected by your insurance. When you compare rates online or call an insurance company for a quote, they will need to know the following: Age and type of automobile you wish to buy Age of driver Length of time you ve been driving Driving record The insurance company will ask which members of your household will be driving the car. The coverage you buy will be based on the member of your household who carries the most risk. To save money you can exclude that family member. You may also save money if you already have your California Driver s License when you apply for insurance. If you have a good insurance claim record in your home country or state, it is a good idea to have that documented and be ready to show it when you apply for new insurance. 4
The following types of coverage are available under automobile insurance. (Items 1 &2 are legally required by law). Bodily Injury Liability: This coverage pays claim and legal defense costs if you are judged legally liable in an auto accident in which others are injured or killed. California law requires a minimum coverage of 15/30. Typically, injury liability coverage limits are expressed in thousands as a split figure, for example 15/30 or 100/300. In the first instance, the policy limits are $15,000 per person with a maximum of $30,000 per accident, in the second, $100,000 per person with a maximum of $300,000 per accident. The per accident limit can come into play when more than one person is injured in a single accident. Property Damage Liability: PDL coverage will pay claim and defense costs if you are legally liable for damages to another s property as a result of an auto accident. In other words, this coverage pays to repair someone else s car or property if you damage it in an accident. There usually is no deductible, which means that if you damage another person s car, your policy will pay the full amount of repairs up to the policy limits (or the cash value of a car if it isn t worth repairing). Minimum property damage required by law is $5,000 in California. That may not pay to fix all the damage on a new car from even a low-speed collision; hence, higher limits are available. Medical Payments: This covers you or your passengers who require medical treatment as a result of an automobile accident, regardless of who is at fault. It also covers you and your family members while you are passengers in someone else s car. Most auto policies provide lower limits for this coverage than for bodily injury coverage, and some have special limits for certain types of care. Collision Coverage: This coverage pays for the repair or replacement of your car up to the actual cash value of the vehicle (minus the policy deductible). Collision coverage pays even if you are at fault in the accident. Comprehensive Coverage: If your car is damaged due to non-collision perils such as fire, theft, falling trees or flooding, this coverage will pay for repair or replacement, up to the actual cash value of the vehicle (minus the policy deductable). It also helps pay for transportation expenses if your car is stolen. Uninsured (and Underinsured) Motorist: UM coverage protects you or your passengers if an uninsured motorist is negligent and injures you. It will pay for things like medical bills, lost wages, and pain and suffering - damages you would be entitled to recover from the other driver, had they been insured. This coverage is very important because it is estimated that one in four drivers on California roads may be uninsured. A related coverage is underinsured motorist. If the driver who injured you did not purchase enough liability insurance to cover all of your losses, this coverage may provide benefits. Additional Coverages You may also want to take out coverage for roadside breakdown or the reimbursement of the cost of a rental car if you have loss of your car because of an accident. ** This is not a legal interpretation, it is a layman s guide to understanding the language used in the auto insurance business. Please check with a professional insurance broker for the precise details of your policy. 5
What to do if you are involved in an accident. There are certain steps you can take at the scene of the accident which will expedite your insurance claim. If possible, ask for a police officer to come to the accident scene. (A police officer will not come to the scene of an accident if it occurs in a parking lot or if the accident is minor). Find out how to get a copy of the police report. If possible, try to get the names and addresses of independent witnesses Ask the other driver(s) if you can see the following documentation and write down the details yourself. Full name and mailing address of other driver(s) Driver s license Insurance Registration of other vehicle(s) license plate numbers If possible, try to get the names and addresses of independant witnesses Insurance may be purchased from the following companies: Farmers Insurance Group State Farm Insurance Prudential Allstate Insurance may also be purchased from the following online companies: www.geico.com www.progressive.com Insurance may also be purchased from AIG (www.aig.com) and AAA (www.aaa.com). Membership of these organizations is required prior to buying insurance. Do not admit any liability at the scene of the accident. You are required by law to carry your driver s license and have proof of insurance when driving a car. It is also a good idea to carry your health insurance card when driving. Insurance Companies and Brokers Homeowner s, Renter s and Auto Insurance can be obtained from several large insurance companies with many locations. 6