Car Insurance Pricing & Umbrella Policies
Your car insurance rates are determined by your driving record, age, sex, and the type of vehicle you drive. If you have a history of moving violations (speeding tickets, failure to signal, at-fault accidents, etc) in your driving record, it is generally considered that you are more likely to incur further moving violations in the future. Thus, you will have to pay more to get coverage than someone without a history of moving violations. Age also affects your rates. Teenagers and older adults tend to cause more accidents than people in other age groups, so their insurance premiums are generally higher. Similarly, men tend to cause more accidents than women, so men pay higher premiums than women on average. If you have full coverage (comprehensive and liability), your rates will be affected by what kind of car you drive. SUV's, for example, cause more property damage and bodily injury in accidents than smaller, lighter cars. Accordingly, SUV drivers pay more for their insurance. People with newer or more luxurious cars will pay more in premiums for their comprehensive and collision coverage than those with older or more modest automobiles.
Traditionally, the factors listed above were all that insurance companies would consider when calculating rates. Lately, however, insurance companies have insisted that people with poor credit ratings present greater risk and, therefore, should pay higher rates than those with better credit histories. So, your credit history will also affect how much it will cost to insure your vehicle. You might have to pay significantly higher premiums - on the order of 10-20% more - if you have poor credit. Further, insurance companies may deny you automobile coverage altogether if your credit score falls below a certain level. Clearly, it pays to have good credit.
Umbrella coverage is added coverage that protects you in the event that your other policies (homeowner's, auto, etc.) are not large enough to satisfy a claim made against you. Without umbrella coverage, if you were in a car accident and became responsible for paying $200,000 worth of someone else's medical bills (more than your automobile policy liability level), you'd be left "holding the bag" as they say and have to pay the difference between what your liability policy would pay and the rest of the bill. You would have to find a way to pay for the rest of the damages, which could be substantial especially if the claim involves medical bills. If you cannot pay for what your insurance will not cover, your personal assets could be seized. You could lose your home, savings, etc. An umbrella policy will activate in this situation and pay the difference up to the limit of the umbrella, much like gap car insurance, between what the other policies will cover and the total cost of the claim or the limit of the umbrella, whichever is lower. The cost of umbrella coverage is very reasonable considering the additional coverage it offers.
One wrinkle concerning umbrella insurance is that typically, it is only sold to people who purchase both their homeowners and automobile policies from the same company. If you buy homeowners insurance from one company and auto insurance from another, you may need to consolidate both insurances under one company before you qualify for an added umbrella policy.