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Most people understand that they need auto insurance. In fact, it's the law, if you drive a car, it has to be insured and the penalty for driving without insurance is pretty severe. However, insurance policy wordings are not easy for everyone to understand. And what you don't know about auto insurance can hurt you. Here's some clarification of a few things that are commonly misunderstood about auto insurance.
* Personal property in your vehicle is not covered on an auto insurance policy. Auto insurance policies provide coverage for automobiles. For instance, items like compact discs, laptop computers and cell phones are not covered on an auto insurance policy. Items like these can be covered on a property insurance policy. What this means is that if the contents of your car, like the items listed above, are damaged in an accident or lost by fire or theft while in your car, you'll need to file a claim for your contents on your property insurance policy.
* If you loan your car, you've also loaned your insurance. If your friend is involved in an accident while driving a car borrowed from you, there's good news and bad news. The good news is, your insurance company will most likely cover the accident (except in extenuating circumstances like if the driver isn't licensed, or was impaired at the time of the accident, then coverage can be denied or limited). The bad news is, your insurance company treats the accident as if you were driving your car. This means that the accident your friend had while driving your car, is on your insurance record. It's as if you were driving the car yourself. Best advice, don't loan your car out.
* When you change insurance companies, you MUST officially cancel your old policy. With most insurance companies, you can request the cancellation of your policy at any time by notifying them in writing stating the date you wish your policy to be cancelled. So many people misunderstand this and presume that if they decide not to renew a policy, all they have to do is ignore the bill. DON'T DO THIS! Unfortunately, the insurance companies most times will send you another bill and then when the premium isn't paid, they will register a cancellation due to non-payment of premiums on your insurance record. Having a non-payment cancellation on your insurance record is serious stuff and getting this straightened out after the fact can be a real hassle. What you'll want to do when you change insurance companies, is request cancellation of your old policy in writing. Make sure you watch the dates (the date you're canceling one policy and starting another policy) so that you have continuous coverage while making the change between insurance companies. You don't want to be without auto insurance for a day or so while you make arrangements for new insurance.
The best advice on any of these things if you're not sure is to contact your broker and ask for their advice. Doing this will ensure that you have the coverage you need when you need it the most and it could save you a head ache or two down the road.
Liane Wood is a chartered insurance professional and registered insurance broker specializing in personal and small business insurance. Visit her website at: www.insurance-rates.ca.