Before the 1950's, if a person wanted to purchase all the coverage that the modern day automobile insurance policy provides, he or she would have had to purchase at least four separate policies. Changes in the laws that regulate the sale of insurance now allow the insurance industry to sell policies that combine the separate coverages into one all encompassing policy.

The main advantages of combining the various coverages are lower expenses, and therefore a lower cost to consumers, and the convenience of being able to purchase the property, automobile liability and other coverages in a single policy.

The standard private passenger automobile insurance policy can have up to four different coverages. Only the first coverage is standard - the remaining three coverages are optional.

Part A provides liability coverage that protects the insured from lawsuits arising from either the negligent operation or ownership of a covered automobile. There are two coverages provided in Part A - bodily injury liability (BIL) and property damage liability (PDL).

1. BIL provides coverage for the bodily injury claims of people you negligently injure in an accident.

2. PDL provides coverage for any third party property damage claims that the courts determine you are responsible to pay.

Part B provides medical payments to the policyowner and any other passengers in the car when there is an accident.

Part C provides uninsured motorist and underinsured motorist protection for the policyowner.

Both coverages are designed to compensate the injured policyowner when the negligent driver has an insufficient amount of liability insurance under his/her own policy. Typically, Part C covers only bodily injury losses, but property damage losses are included in some states.

Part D covers damages to your car when it is involved in an accident.

I have an older car whose current market value is very low - do I really need to purchase automobile insurance?

Most states have enacted compulsory insurance laws that require drivers to have at least some automobile liability insurance, Part A. These laws were enacted to ensure that victims of automobile accidents receive compensation when their losses are caused by the actions of another individual who was negligent.

Except for the minimum liability coverages that you may be required to purchase, many people with older cars decide not to purchase any of the physical damage coverages. It is often the case that the cost of repairing the damages to an older car is greater than its value. In these cases, your insurer will usually just "total" the car and give you a check for the car's market value less the deductible.

Many people forgo the Part D coverages because of the relatively low values of their automobiles.

Suppose I lend my car to a friend, is he/she covered under my automobile insurance policy?

Whenever you knowingly loan your car to a friend or an associate, he or she will be covered under your automobile insurance policy. In fact, even if you do not give explicit permission each time a person borrows your car, they are still covered under your automobile insurance policy as long they had a reasonable belief that you would have given them permission to drive the car.

What coverage does my automobile insurance policy provide me when I rent a car?

The answer to this question is not as easy as it once was. In the not-too-distant past, most automobile insurance policies would extend coverage to rental cars whenever you rented one. This is not quite true anymore.

In most cases, your personal automobile insurance policy will provide coverage only when you are renting a car on vacation. Many insurance companies no longer extend personal automobile insurance coverage when you are traveling on business. The best way to find out what rental car coverage you have under your automobile policy is to call your insurance agent/company.

What is the difference between collision physical damage coverage and comprehensive physical damage coverage?

Both collision and comprehensive are Part D coverages.

Collision is defined as losses you incur when your automobile collides with another car or object. For example, if you hit a car in a parking lot, the damages to your car will be paid under your collision coverage.

Comprehensive provides coverage for most other direct physical damage losses you could incur. For example, damage to your car from a hailstorm will be covered under your comprehensive coverage.

It is important to know the differences between the collision and comprehensive coverages for a couple of reasons.

First, in order to make an informed purchasing decision about these optional coverages, you need to know the difference between them.

Second, the deductibles under the collision and comprehensive coverages are often different in amount.

What should I do if I have an accident?

The duties you need to perform after you have an accident are prescribed both by state law and by the terms of your contract. Obviously, the first thing you should do is make sure everyone is all right and call an ambulance if one is needed.

Second, for most accidents in most states, the police should be notified.

Third, you should give the other driver(s) involved in the accident your name, address, telephone number, and the name of your insurance company and/or your insurance agent. You also need to get this same information from the other driver(s).

Fourth, at the first opportunity, you should contact either your insurance agent or your insurance company to notify them that you have been involved in an accident.

Finally, there are a number of conditions in the insurance contract that you must satisfy in order to receive compensation from your insurer. For example, you need to cooperate with your insurer during any investigation undertaken during the claims settlement process. Failure to complete any of these actions can, and sometimes does, result in non-payment by your insurance company for losses that otherwise would have been covered.

Why does the premium for my automobile insurance go up if I have an accident or if I get a ticket?

Actuaries and statisticians who have studied the claiming behavior of people involved in accidents have long known that people who have either had an accident or received a ticket recently are more likely to have another accident in the next couple of years than people whose recent driving record has been incident free.

Insurance companies use this information not to punish people who have had an accident, but to charge them the premium that most accurately reflects their likelihood of having an accident. People who are more likely to have accidents should reasonably be expected to pay higher premiums.

How can I get insurance for my motorcycle?

Motorcycle insurance can be obtained by adding a miscellaneous-type vehicle endorsement to your existing automobile insurance policy. This endorsement will also provide coverage for mopeds, motor homes, dune buggies and other such vehicles.

What is no-fault insurance?

With no-fault insurance, the victims of an automobile accident are compensated by their own insurance company, regardless of who caused the accident. This outcome is different from what occurs under the traditional tort system of compensating victims of an accident.

In the tort system, the party who is at fault is required to compensate the victims of the accident. The idea behind no-fault insurance is to keep small claims from being settled in our expensive legal system. To accomplish its purpose, no-fault insurance restricts the injured person's right to sue the negligent driver in those instances where the loss falls below a certain threshold.

Two types of thresholds are typically used: verbal thresholds and dollar thresholds. A dollar threshold prescribes a dollar limit that a claim must reach before the injured party regains his or her tort rights, and therefore the ability to sue.

A verbal threshold uses a written description to determine when the injured person regains his or her tort rights. For example, a person might regain his or her tort rights when the accident caused a serious handicap, such as permanent loss of a bodily function.

What do I gain and what do I lose by giving up my tort rights?

Proponents of no-fault insurance argue policyowners gain a number of things by giving up their right to sue in minor accidents. For example, under no-fault insurance you typically pay lower automobile insurance premiums, collect claims payments faster, and spend less time in court. The biggest thing you lose by giving up your right to sue is the ability to collect payments for pain and suffering. No-fault insurance only pays your direct economic losses, such as hospital bills, lost wages, etc. It does not compensate you for any pain and suffering damages that you may incur as a result of an accident.

However, in most serious accidents, where the likelihood of incurring these non-economic losses is greatest, you regain your tort rights and therefore the ability to sue the negligent party for pain and suffering.

I live in a state where I can elect either no-fault coverage or traditional tort coverage. Which one should I choose?

A number of states allow policyowners to choose whether they would like no-fault insurance or traditional tort coverage. Which one you choose depends upon your tolerance towards the risk that you may not be able to sue for pain and suffering damages in all accidents.

However, since the thresholds where you regain your tort rights are usually low, many policyowners choose the no-fault coverage because the premium can be substantially reduced by doing so.

What factors can affect the cost of my automobile insurance?

A number of factors can affect the cost of your automobile insurance - some of which you can control and some which are beyond your control. The type of car you drive, the purpose the car serves, your driving record, and where you live can all affect how much your automobile insurance will cost you.

Even your marital status can affect your cost of insurance. Statistics show that married people tend to have fewer and less costly accidents than do single people.

What should I consider when purchasing automobile insurance?

There are a number of factors you should consider when purchasing any product or service, and insurance is no different.

Here is a checklist of things you should consider when purchasing automobile insurance.

• First, purchase the amount of liability coverage which makes sense for you.

• Second, you should decide which optional coverages you want. For example, do you want the optional physical damage coverages in Part D or is the market value of your car too low to warrant purchasing them.

• Finally, once you have decided what you want in your automobile insurance policy, you can now decide who you would like to purchase the insurance from. For example, you may decide you like the idea of purchasing insurance from a mutual company rather than a stock company.

You should also decide whether you would like an insurance agent to assist you in your purchasing decision or if you would like to buy the insurance directly from a company that sells insurance over the phone or through the mail.

How can I lower my automobile insurance rates?

There are a number of things you can do to lower the cost of your automobile insurance. The easiest thing to do is to shop around. It is not surprising to find quotes on automobile insurance that can vary by hundreds of dollars for the same coverage on the same car. When you shop, be careful to make sure each insurer is offering the same coverage. Many insurers use the ISO policy forms, but this is not always the case.

Another way to lower the cost of your automobile insurance is to look for any discounts that you may qualify for. For example, many insurers will offer you a discount if you insure multiple cars under the same policy, or if you have had a driver education class in the last five years. Be sure to ask your agent or your company about their discount plans.

Another easy way to lower the cost of your automobile insurance is to increase the deductible. Simply raising your deductible from $250 to $500 can lower your premium sometimes by as much as five or ten percent. However, you should be careful to make sure that you have the financial resources necessary to handle the larger deductible.