Essay Example on Understanding Auto Insurance Coverage: Recommendations for the Lloyd Family

Introduction

It is unfortunate that besides the clients having acquired the cheapest auto insurance for their cars have limited information on insurance and types of coverage. As a result, the focus of this paper will be an exploration of the different auto insurance coverage policy and their risks as well as providing a better recommendation for the Lloyd family. More so, the case of having a teenage daughter in the family who is still learning to drive will be considered and appropriate advice provided. First, it is paramount in understanding insurance as a whole and auto insurance. I will explain to the Lloyd family that insurance is the arrangement that is made with the insurance company for the provision of the guaranteed compensation following a given loss due to the payment of a specified premium (Honka & Chintagunta, 2017). There are two major forms of insurance namely auto insurance and life insurance coverage but the focus based on this case study will be on auto insurance.

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Auto Insurance Coverage

The auto insurance premium is based on the driving record of the party being insured. Lower premiums are provided for the party that has fewer traffic violations and is free of accidents. Alternatively, those with histories of serious traffic violations and histories of accidents pay a high premium (Masters et al., 2019). Similarly, there is a consideration of the age of the driver as the mature drivers have a tendency of having fewer accidents due to their experience as compared to the drivers who are below the age of twenty-five years. Markedly, since Mr. and Mrs. Lloyd are forty-eight and forty years with five years without any traffic violation or accidents they will pay for a lower premium. However, the more mileage for the case of Mrs. Lloyd will require a higher premium as compared to Mr. Lloyd. Traveling for a long distance most of the time increases the chance of accident hence the insurance company requests a higher premium in comparison to those that travel for short distance. Notably, it is important informing the Lloyd family of the requirements for auto insurance in Maryland.

Auto insurance requirements in Maryland

In Maryland, the law requires each owner of a motor vehicle to obtain insurance coverage on the vehicle prior to its registration. If anyone owns a motor vehicle in Maryland, it is a requirement to maintain enough insurance at all times and keep proof of insurance in the vehicle as well as ensuring that the registration tags are up to date. The penalties of driving a car in Maryland without insurance include fines, confiscation of license plate and revocation of the driver's registration ("Insurance Requirements for Maryland Vehicles", 2020). In addition to these penalties, denial of registration of any future cars and even, imprisonment. Mr. and Mrs. Lloyd should be aware of the current driving regulations in Maryland. Being conversant with these regulations will avert fines and keep their driving records clean.

Different Types of Auto Insurance Coverage

Liability Coverage

A Liability Coverage policy covers for damages afflicted to another person or another person's property caused by for instance Mr. Lloyd's car. This policy can cover for a member of Mr. Lloyd's family to whom, permission to drive the vehicle was granted. If Mr. or Mrs. Lloyd may be sued because of the accident, this type of insurance cover will cater to legal expenses (Honka & Chintagunta, 2017). Usually, there are two categories of liability coverage. There is the bodily injury coverage and there is the property damage policy.

The bodily injury premium usually covers for any other person who is injured in an accident where the driver of the insured car was at fault. These persons include passengers and pedestrians. This policy guarantees to pay in maximum according to the limits of the premium (Masters et al., 2019). These payments cover for medical expenses, anguish and suffering experienced after an accident. In Maryland, the required payment for bodily harm of $30000 per person in the accident and $ 60000 for the vehicle ("Maryland minimum car insurance coverage requirements | Dairyland auto", 2020). The property damage policy covers any damage caused by the driver to another person's property. These include structures such as other cars and fences. Each driver in Maryland is required by the law to have a property damage policy of $15000.

In this case, it is only mandatory for Mr. Lloyd and his wife to obtain both of these covers to cover liability in case of an accident. Even though the law has set the above figures as minimums for policy covers, they can be able to obtain higher covers that ensure that they are more insured and prepared for liabilities that may occur considering that they have a teen daughter who drives under a learner's permit.

Uninsured and Underinsured Coverage

The Uninsured Motorist coverage pays for the drivers and other occupants of a vehicle for bodily injuries or property damaged in an accident involving a vehicle that does not have an insurance cover or a hit and run accident. This also caters to a pedestrian injured by an insured vehicle (Masters et al., 2019). As from 2011 in Maryland, the law requires insurance coverage of $30,000 per person involved in an accident and a total of $60,000 for bodily injuries and $15,000 per accident for any damaged property ("Minimum Auto Insurance Coverage | Maryland Auto Insurance", 2020). Since this coverage is mandatory to have in Maryland, the Lloyd family will be required to have it.

Medical Payment Coverage

Personal injury protection In addition to the above-mentioned mandatory insurance coverages, there is the Personal Injury Premium (PIP). This coverage regardless of fault aims to reimburse for losses incurred and covers medical expenses resulting from an accident (Honka & Chintagunta, 2017). This premium is mandatory in Maryland and each driver is required to obtain a personal injury protection premium of at least $2500 ("How Does PIP Insurance Work in Maryland?", 2020). However, it is possible not to purchase the PIP cover to reduce the premium on the policy. Even so, the PIP insurances benefit much in that it provides a secondary source of recovery when one is being treated for accident-related injuries.

Collision Coverage

Other forms of insurance cover apart from the mandatory ones that are beneficial and can apply to Mr. and Mrs. Lloyd's situation include collision coverage policy. The collision coverage policy serves to pay for damages arising from collision and overturning of the car (Masters et al., 2019). This policy is always available and does not consider whoever was at fault; it is, however, subject to a deductible.

Comprehensive Coverage

The comprehensive coverage policy pays for damages on a motor vehicle resulting from any other causes apart from accidents. These include theft or vandalism. Just like the collision coverage, it is also subject to a deductible. A deductible is cash that one pays form out of their pocket before the insurance can pay for the claim.

Consideration of the Case of Teenage Daughter

Keeping in mind that Mr. and Mrs. Lloyd have a teenage daughter who drives under a learner's permit it is important to ensure that they are informed about teenage driving regulations in Maryland as she is insured under them. It is important at all times for teen drivers like Mr. Lloyd's daughter to maintain a good, clean driving record. This will be essential in keeping the insurance premiums at an affordable rate. For instance, if in less than at least three years Mr. Lloyd's daughter has caused an accident or if she is convicted of any driving violation, the insurance firm may decide not to renew the policy or may decide to raise the premiums ("Insurance - Maryland", 2020). Non-renewal of the policy will exclude the daughter and prohibit any possibility of recovery if she drives the vehicle. Revocation and suspension of her driving license will directly affect her parents' insurance policy.

In Maryland, teens just like Mr. Lloyd's daughter can use their learner's permit to drive as long as an adult is supervising them. However, once they start driving on their own, it is a requirement to obtain their own insurance. Due to a lack of experience, the risk of crashing tends to be higher for young drivers. These mainly occur during the first years of driving and due to this; the insurance rates of younger drivers are made higher than those of the older drivers ("8 Best Car Insurance Companies for Teens & Young Adults in 2020", 2020). In this case, it is quite recommendable for Mr. Lloyd to raise his deductibles to lower premiums. Therefore, it will be possible to avoid paying a larger share of the costs when he files a claim after raising his deductibles.

In addition to that, Mr. or Mrs. Lloyd needs to know more about discounts, which may be offered in their insurance premiums. This may give them an added advantage as many insurers offer discounts on students who attain good grades and for teens who complete defensive driving courses or driver education. Moreover, Mr. Lloyd and his wife need to do more practice in driving in various conditions together with their teen daughter to improve familiarity with different aspects of driving such as terrain and regulations ("Insurance - Maryland", 2020). This will reduce shock as the teen driver may encounter a condition that may result in a surprise that in turn leads to crashing. There is also the need for Mr. Lloyd and Mrs. Lloyd to be more involved in the driving activities of their teenage daughter. This will, in turn, reduce fear and bolsters confidence in their daughter. Involving parents in teen driving activities has been noted to considerably reduce risky driving and tickets among teen drivers ("8 Best Car Insurance Companies for Teens & Young Adults in 2020", 2020). This translates into lower and affordable insurance rates for their parents. Due to the presence of their parents, they are also less likely to engage in risky driving. Setting rules and agreements on driving will always keep crashes and accidents at bay.

References

8 Best Car Insurance Companies for Teens & Young Adults in 2020. (2020). Retrieved 24 January 2020, from https://www.thebalance.com/best-car-insurance-for-teens-and-college-students-4158717

Honka, E., & Chintagunta, P. (2017). Simultaneous or sequential? search strategies in the us auto insurance industry. Marketing Science, 36(1), 21-42.

How Does PIP Insurance Work in Maryland?. (2020). Retrieved 24 January 2020, from https://www.valuepenguin.com/car-insurance/how-pip-works-maryland

Insurance - Maryland. (2020). Retrieved 24 January 2020, from https://teendriving.aaa.com/MD/supervised-driving/insurance-vehicles/insurance/

Insurance Requirements for Maryland Vehicles. (2020). Retrieved 24 January 2020, from http://www.mva.maryland.gov/vehicles/insurance/

Maryland minimum car insurance coverage requirements | Dairyland auto. (2020). Retrieved 24 January 2020, from https://www.dairylandinsurance.com/auto/auto-insurance/state-requirements/maryland

Masters, L. S., Andrews, W. J., Moura, P. T., & Oehninger, S. F. (2019). Rethinking Insurance Coverage for Autonomous Vehicles. Scitech Lawyer, 15(4), 18-21.

Minimum Auto Insurance Coverage | Maryland Auto Insurance. (2020). Retrieved 24 January 2020, from http://www.mymarylandauto.com/site/insurance/minimum-coverage-requirements/