ago, people realized that there is strength in numbers. For hundreds of years, we have been joining forces against all kinds of calamities — including financial troubles.
The concept of insurance is simply that if enough of us can pool our money to form a large enough fund, then together we can handle practically any financial disaster. Our motivation for contributing to this fund is our own eligibility to draw from it in the event of a disaster. One for all and all for one, so to speak.
An early example of the concept comes from the Code of Hammurabi, Babylonian laws dating back to 1700 B.C., which contain a credit insurance provision. For a little higher interest, the ancients could exempt themselves from repayment of loans in the event of personal misfortune. A citizen of the Roman Empire could buy life insurance through the Collegia Tenuiorum for slaves and wage earners, or the Collegia for members of the military. The funds provided old-age pensions, disability insurance, and burial costs. In spite of some complications and occasional bureaucratic snarls, the system has worked remarkably well through the ages.
Today, virtually all heads of families should carry life insurance. Most financial advisors also recommend automobile, health, homeowners, personal liability, professional liability and/or malpractice, disability, and long-term-care insurance.
Purchasing individual or family insurance coverage is probably one of the most important financial decisions you will make. A great deal of study and advice is needed to choose wisely. A few basic guidelines can safely be applied to most consumers. Beyond these, each individual’s needs are unique and should be carefully assessed by an expert.
1. How much insurance do you need?
A good rule of thumb is: Don’t insure yourself against misfortunes you can pay for yourself. Insurance is there to protect you in case of an event with overwhelming expenses. If anything short of a calamity does occur, it will usually cost you less in actual costs than the insurance premiums you would have paid.
2. What kind of policy is best?
Broader is better. Purchase insurance that will cover as many misfortunes as possible with a single policy; for example, homeowners insurance that covers not only damage to the house itself but also to its contents. Carefully examine policies that exclude coverage in certain areas, the “policy exclusions.”
3. From whom should I buy?
Always buy from a financially strong company. Take the time to shop around for the best prices with the most coverage for your specific situation,. You may be able to save money by buying multiple policies from the same agent.
Sunday, November 9, 2008
Who's at Fault
Whenever an auto accident occurs, the issue of responsibility takes center stage. In most cases, the insurance company of the "at-fault" driver must cover the damages, so a careful investigation is conducted.
Police at the scene often write a report that may be used to determine who was responsible for the crash. Insurers make their decision based on an investigation that considers the police report and other accounts of the accident by drivers and witnesses. Even if you don't think you were at fault, you should contact your own insurance company, so that it may begin to work on your behalf.
In some states, comparative negligence laws make it possible for more than one driver to share responsibility. If a red car is driving too fast and rear-ends a blue car, but the blue car did not have functioning taillights, then the red car may be found 70 percent responsible and the blue car 30 percent. A driver may only collect damages for the percentage of the accident that was not their fault, so the driver of the blue car could recover only 70 percent of the damages.
If another driver damages your car or causes you injury, his or her insurance company should pay for your repairs and medical bills. However, the company's adjuster may require that you obtain authorization before making repairs. The insurer might even recommend that you take your car to a certain repair shop.
If the driver who caused the accident has no valid insurance, then your uninsured motorist coverage would likely take effect. You would make a claim with your own insurer, and the company would verify the facts surrounding the accident, and that the driver had no policy in effect. Of course, if you are found partially to blame, your insurer will only cover the percentage of damages for which the uninsured motorist was responsible.
There are also some states with various forms of no-fault insurance. Generally, no-fault laws require each person involved in an auto accident to pay their own medical expenses and lost wages - and stricter versions disallow certain pain-and-suffering lawsuits. Therefore, many no-fault states require drivers to have Personal Injury Protection (PIP), which pays extensive medical expenses, lost wages, and a small death benefit for the driver and all passengers. PIP usually comes with a 20 percent deductible.
Clearly, the laws concerning insurance coverage can vary greatly from state to state. It might be comforting to know that if you have the minimum auto liability coverage for your home state, but are involved in an accident in another state, your policy must automatically adjust to meet that state's minimum legal requirements.
Your Car, Other Drivers
If you lend your car to another driver who is not insured, and that person causes an accident that results in damages to others, then it's likely you will inherit the responsibility. If the resulting damages are over and above your policy limits, then you could end up paying out of pocket for medical and property-damage expenses.
On the other hand, if an insured friend borrows your car and wrecks it, then his or her insurance will probably pay for the damage to your car.
If your car is stolen and then crashed, you should not be held responsible for any damage that the thief caused. But you will probably have to count on your own insurance company to pay for repairs to your own car.
In the wake of any accident the determination of fault can be a hot issue, and the financial responsibility may be handled differently from state to state. It is important to understand the specific laws that affect liability in your state, and how they will apply if and when you must file a claim.
Police at the scene often write a report that may be used to determine who was responsible for the crash. Insurers make their decision based on an investigation that considers the police report and other accounts of the accident by drivers and witnesses. Even if you don't think you were at fault, you should contact your own insurance company, so that it may begin to work on your behalf.
In some states, comparative negligence laws make it possible for more than one driver to share responsibility. If a red car is driving too fast and rear-ends a blue car, but the blue car did not have functioning taillights, then the red car may be found 70 percent responsible and the blue car 30 percent. A driver may only collect damages for the percentage of the accident that was not their fault, so the driver of the blue car could recover only 70 percent of the damages.
If another driver damages your car or causes you injury, his or her insurance company should pay for your repairs and medical bills. However, the company's adjuster may require that you obtain authorization before making repairs. The insurer might even recommend that you take your car to a certain repair shop.
If the driver who caused the accident has no valid insurance, then your uninsured motorist coverage would likely take effect. You would make a claim with your own insurer, and the company would verify the facts surrounding the accident, and that the driver had no policy in effect. Of course, if you are found partially to blame, your insurer will only cover the percentage of damages for which the uninsured motorist was responsible.
There are also some states with various forms of no-fault insurance. Generally, no-fault laws require each person involved in an auto accident to pay their own medical expenses and lost wages - and stricter versions disallow certain pain-and-suffering lawsuits. Therefore, many no-fault states require drivers to have Personal Injury Protection (PIP), which pays extensive medical expenses, lost wages, and a small death benefit for the driver and all passengers. PIP usually comes with a 20 percent deductible.
Clearly, the laws concerning insurance coverage can vary greatly from state to state. It might be comforting to know that if you have the minimum auto liability coverage for your home state, but are involved in an accident in another state, your policy must automatically adjust to meet that state's minimum legal requirements.
Your Car, Other Drivers
If you lend your car to another driver who is not insured, and that person causes an accident that results in damages to others, then it's likely you will inherit the responsibility. If the resulting damages are over and above your policy limits, then you could end up paying out of pocket for medical and property-damage expenses.
On the other hand, if an insured friend borrows your car and wrecks it, then his or her insurance will probably pay for the damage to your car.
If your car is stolen and then crashed, you should not be held responsible for any damage that the thief caused. But you will probably have to count on your own insurance company to pay for repairs to your own car.
In the wake of any accident the determination of fault can be a hot issue, and the financial responsibility may be handled differently from state to state. It is important to understand the specific laws that affect liability in your state, and how they will apply if and when you must file a claim.
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