Insurance Coverage and why its important you understand them when purchasing a Insurance policy
When you are buying insurance its important to understand your coverage and how the insurance companies are using this information to evaluate you the customer as a risk. Believe it or not your current policy and existing liability limits will either cost you or save you money. Most consumers will never understand this and that’s why I will explain this simple but sometimes confusing underwriting guideline. There are many important coverage’s in your policy but the one specific coverage insurance companies are looking at in particular is your Bodily Injury Liability Limit. In New York this coverage is mandated by the state that you at least carry a minimum split limit amount of $25k/50k per accident. these coverage’s can range from the 25k amount all they way to 500k. The question you have to ask yourself is what cost more? 25k or 500K. The answer is 25K. Well you might say this is considerably less coverage therefore it should be less to insure. In a perfect world this makes a lot of sense but what we must remember we are dealing with insurance companies and insurance companies always use what I call the common sense theory. if you truly want to understand this you have to use the rule of large numbers. Take for example 100 customers who typically may carry 25K in coverage state minimums. These consumers appear to insurance companies as typically not very fiscally responsible more so no real assets to protect and have always trend to perform poorly over the course of time in respect to loss frequency. In comparison we compare these risk to the opposite end of the spectrum the consumer who carries 250k in coverage. The insurance carriers see this as a person who has something to protect and is equally responsible both fiscally and personally to their driving habits therefore offering a lower premium to attract this type of risk knowing it will perform better over time and in turn have much lower frequency of claims and be profitable to the insurance company. So if have you feel like you should be getting better rates and the insurance companies are not offering their best rates check your liability limits make sure they are above the state minimums. chances are by increasing them this will save you money now and in the future. Remember when your shopping the first thing the insurance companies are looking at is prior Bodily Injury Limit.