The Types of Insurance You May Need or Are Required to Get by Law

 

The world of insurance can be overwhelming and confusing to most Americans.

It is difficult to know what types of insurance you should prioritize. When you're working within a budget, you may be tempted to cut certain types of insurance out to save a bit of money. In many cases, this could be a huge mistake.

Some types of insurance are required by law and, if you're caught without them, you could be in serious trouble. Depending on where you live, the required insurance may include auto insurance, health insurance, homeowners or renters insurance, and even disability insurance.

Auto Insurance

Auto insurance is mandatory in almost every state. If you are caught driving without it, you may face serious fines and penalties. Most states require a minimum amount of liability coverage as well as uninsured motorist coverage (in case the other driver doesn't have insurance).

Home/Renters Insurance

There aren't any laws stating that you need to get homeowners or renters insurance, but it's certainly wise to do so. If you've got a mortgage, your lender may require you to get home insurance to protect their stake in the property.

These types of insurance help you financially if your home or belongings are damaged or stolen. Without it, you'd have to pay out of pocket to replace your belongings, which can be financially devastating in many cases.

Health/Life Insurance

Health and life insurance are both non-mandatory, yet essential forms of protection. If you have dependents, life insurance is necessary to ensure that they're looked after financially when you pass away. You'll choose between term and whole life insurance, which will depend on your budget and needs.

Health insurance is important because most medical attention in this country is enough to cripple someone financially. If you pay into a health insurance policy or get it through your employer, you can significantly reduce the burden of medical bills.

Business Insurance

If you're a business owner, there are a few different types of insurance that are mandatory. General liability insurance protects your business against claims of bodily harm or property damage. For example, if someone slips at your restaurant, general liability insurance covers their medical bills.

Workers' comp insurance is similar but covers an injured worker's medical expenses and missed time. If you're found without one or both of these, you could be hit with major expenses or even serious fines.

Get the Right Types of Insurance

Not all these types of insurance are legally required, but they're all highly recommended. Not only do they protect you, but they put your mind at ease. Knowing that you're covered in the event of an auto accident, natural disaster, or medical emergency allows you to focus on other things.

If you need auto, home, business, or life insurance in Greensboro, NC, look no further than the Tom Needham Insurance Agency. We'll help you find the best possible rates, so you have the protection you need without breaking the bank. Contact us today to find out what we offer.

How Do Car Insurance Companies Set Rates?

All types of insurance, including car insurance, involve a transfer of risk between two entities - the insured and the insurer.  As a car insurance policyholder, you're contracted with your insurer for them to underwrite a number of the risks posed by the ownership/operation of your vehicle.  The number of risks being underwritten will partially determine premium rates.  The greater the risks being underwritten, the greater the policy premium costs.

These risks protections may include:

• Liability coverage for bodily injury or death of a third person or persons (legally required coverage in NC)
• Liability coverage for property damage of a third person or persons (legally required coverage in NC) 
• Uninsured motorist coverage (legally required coverage in NC)
• The risk of collision
• The risk of a non-collision loss such as fire, theft, vandalism or severe weather damage
• Personal Injury Protection to help toward the medical costs of your own injuries, regardless of who is found to be at fault

Collision coverage is typically the most expensive portion of a car insurance policy, since the risk of a costly claims payout may be greatest in a serious collision deemed your fault.  This high cost can be reduced by increasing your deductible amount from, say $500 to $2000.  The amount of your policy deductibles is another factor affecting your final policy rate. 

Other Factors Affecting Car Insurance Rates

A broad range of data is used by car insurers to determine rates.  Some factors are more important than others but, taken together, they give underwriters a good idea of what kind of insurance risk you represent to their company.  Consider the following:

• A major rating factor, especially for young drivers, is policyholder age.  The most expensive rates are for teenagers and the least expensive are for those drivers in their 50s.  The reason is because teens have proven to be faster, more reckless and aggressive drivers.  Higher risks equal higher premium costs.
• Driving history - a history of moving violations and/or accident claims are a red flag and will cause higher costs.
• Location plays a role because certain zip codes show higher accident rates and higher risk of theft, vandalism, wildfires or floods.
• Gender - primarily affects young drivers.  Young males are more likely to drive recklessly than females.
• Mileage traveled - more miles driven means higher risk to your insurer.
• Age and value of your vehicle plays a role in rating your insurance.

 

Auto Insurance and Teen Driving Lessons

 

In North Carolina, teen drivers between the ages of 15-17 are required to go through a process called "graduated licensing" before being allowed to receive full driving privileges.  This process has strict requirements for teens as they gain the on-the-road experience needed to drive a vehicle with minimal restrictions and no supervision.

Eligibility requires that a teen driver: 

• Be at least 15 years old
• Has received a Driving Eligibility Certificate
• Has completed a state-approved driver education course

Driving Eligibility Certificate

Students completing their high school requirements will be issued a Driver Eligibility Certificate by their school.  They must be between the ages of 15 and 17 and currently enrolled in school and be making progress toward achieving either a high school diploma or GED.

Driver Education Courses

Teens 14-1/2 years old or older and progressing toward a high school diploma or GED may enroll in an approved driver education course.  These are provided through North Carolina high schools.  

Driver education courses consist of:

• 30 hours of classroom instruction
• An eye test
• Six hours of behind-the-wheel training on the road 

Upon completion, a Driver's Education Certificate is awarded, which is part of the requirement for obtaining a learner permit, step one in the graduated licensing process.  Click here to see descriptions of all three levels of the graduated licensing process.

Driving Lessons

Driving lessons extend throughout the North Carolina teen graduated licensing process.  They start while qualifying for step one, obtaining the Limited Learner Permit, while completing the driver education 30 hours of classroom instruction and six hours of behind-the-wheel training.

Driving lessons continue during the 12-month learner permit period and an approved adult driver is required to be in the passenger seat during all drive times.  A minimum amount of 60 hours driving time, certified by a supervising driver, is required before moving onto step two of the process, Limited Provisional License.

Teens driving their parents' vehicle during the 12-month learner permit period are automatically covered under their parents' auto insurance.  Once the Limited Provisional License is obtained, the teen driver must be added to the parents' auto insurance or a separate policy taken out.  Offspring of insured drivers may stay on the parents' auto insurance policy as long as they reside in the same home or are away at school.  This is often a less expensive option than getting their own policy.  Parents should expect premiums to rise significantly.

What Drives Auto Insurance Rates Up?

 

Many of our clients are noticing that their Greensboro auto insurance rates continue to increase year over year and they're wondering why.  There are a number of answers to this question and they can be divided into two sections:

1.  Rate increases affecting everyone
2.  Rate increases specifically affecting you

Everyone's Coverage Rates Going Up

The auto insurance business is highly competitive and many auto insurance companies are struggling to stay profitable in these days of unusually high claims payments.  This has caused insurance rates to spiral upwards during the past several years.  This affects your Greensboro auto insurance rates as well as rates with companies all across the country.

Like any other business, an auto insurance company must stay profitable in order to remain in business.  They make money in two ways:  by collecting premium dollars from their policyholders and by putting these collected funds into profitable investments.  These funds are then used to pay out claims and to cover employee salaries and other administrative costs.  When claims payments going out surpass premiums coming in, a phenomena that's known as underwriting loss, premium costs must be increased in order to make ends meet.   There are some definite reasons why claims have risen so much recently.  Consider this:  

In the past several years, eight out of the ten largest auto insurance companies in the U.S. have reported losing money in their policy underwriting efforts.  In other words, they've paid out more in claims than they've collected in premiums.  Reasons for this include:

• A record number of disasters occurred in 2018-2019, including wildfires, hurricanes, floods and more.  These disasters not only negatively affected home insurance companies but also those companies insuring automobiles.  An inordinate number of claims were made on vehicles that burned, suffered flood damage or were damaged in tornadoes.
• An increase in distracted-driving accidents, mostly attributed to cell phone use, have been occurring lately.  Millions of crashes are blamed on distracted driving, causing insurers to raise rates.
• Expensive technology added to newer vehicles have made repairs more costly.  What used to be a simple rear bumper repair, for example, now includes repair of rearview video cameras, now required on all new cars sold in the U.S.

Rate increases affecting you individually may result from:

• Too many claims filed
• Adding a teen driver to your policy
• Moving to a higher crime/higher accident-prone area
• Too many moving violations
• You've turned 70 years old

Is Car Insurance Different for Leased Cars?

All motor vehicles being driven on public roads in NC are required by law to be covered by at least a minimum amount of vehicle insurance. This includes liability protection and protection against losses from injuries resulting from an accident caused by an uninsured or underinsured driver. Liability coverage is meant to protect the other drivers involved in an accident for which you are deemed responsible. It can help pay for their losses resulting from physical injury or damaged/destroyed property. Greensboro car insurance liability coverage does nothing to protect you from losses such as personal injuries or damaged, destroyed or stolen vehicles.

To be protected for these losses you must add more to the basic liability coverage found in a minimal Greensboro car insurance policy. For more complete protection you need to at least add collision and comprehensive coverage to your policy. There are other protections you may choose to add, but these three – liability, collision and comprehensive – should be at the top of your list unless your car is of such low value you can't justify the additional cost of adding this coverage.

Buying Versus Leasing Insurance Requirements

Whether you're buying a car, using a car loaner or leasing a car, insurance requirements are similar. The specifics of the coverage are dictated by the lender or the lessor, with their main concern making sure their financial exposure is protected in the event that something unexpected  happens to your car. With this in mind, you'll be required to have full coverage in place, including collision and comprehensive protection.

As with all cars being driven on NC public roads, you must carry at least the minimum amount of liability protection. It's worth mentioning here that the State's minimum liability requirements are low and would typically only cover a small fraction of the money you'd need to pay for losses you cause to others in an accident deemed your fault.

Gap Insurance

One other type of protection leasing companies typically require is something called gap insurance. New cars start to depreciate in value the minute they're driven off the lot. A new car may depreciate in value as much as 20% or more during the first year. If you have an accident and total your leased car early on, the payoff from your insurer may not be enough to cover your outstanding financial obligation. Gap insurance will cover this shortfall and can be purchased from your loan officer.