The Consumer's Independent Guide to Auto Insurance
Back in 1898 when the first U.S. automobile insurance policy was purchased, there were barely 100 cars on the streets, nationwide. Horses and carriages ruled the roads, and the main concern then for both insurers and auto drivers was any injury those noisy new machines might do to horses.
Today a motor vehicle accident occurs every second. Auto accidents cause an injury every 14 seconds, and every 13 minutes a car accident results in a fatality. More than 31 million accidents occur per year, at an annual cost of almost $100 billion. Theft and vandalism are other major perils facing drivers, In fact, every 20 seconds another vehicle is stolen.
With more than 150 million drivers and 160 million registered vehicles on the road today, auto insurance is the most widely purchased of all property-liability insurance. Drivers buy auto insurance for economic protection against theft, vandalism, and other risks, but few are familiar with the ins and outs of their particular policy.
This guide was designed by the Independent Insurance Agents of America to make it easier for you to know your insurance needs and the many options available to you. Though this guide does not represent the provisions of any particular policy, it should serve as a starting point on your road to finding the best policy for your needs.
Your car has two unique qualities. First, it is probably one of the most expensive things you own. Insurance protects your investment and guarantees you a way of coping with the expense of accidents, vandalism or theft, as well as securing your financial responsibility to the bank or other institution lending the money to buy your vehicle.
Second, when you drive, you are operating a powerful machine, weighing one ton or more and capable of moving at over 100 miles per hour. You are responsible for the safety of your passengers, your fellow drivers, other people's property, pedestrians and yourself. Insurance helps you live up to that responsibility by ensuring your ability to cover the costs of potential damages or injuries.
You are also required to be financially responsible by state laws,
which are best satisfied through your insurance coverage. In fact,
in most states insurance is a prerequisite to registering your
car. So if you want to drive your own vehicle, you must be insured.
Auto insurance is divided into several different types of coverage:
Drivers are grouped according to the level of risk each one poses--i.e., the amount of loss incurred by insurers within various categories of policy holders. For various reasons, drivers are categorized by:
The cost of your insurance policy is based on the average cost of covering actual losses, spread out over your particular "rating group" as a whole. Of course, you may never have an accident or have your car stolen, and therefore will never need to be compensated. But others in your category may not be so lucky. Your premium will help to pay for their losses, just as their premiums would help to pay for yours. In other words, you are investing a little today in case you need a lot tomorrow; your investment is pooled with others, and the pool pays for your loss.
For example, if you are a 23-year-old man and you park your new sports car on a downtown street in a large city, you will likely pay more for insurance than a 37-year-old woman who parks her four-wheel-drive in the suburbs, simply because--based on average losses--you have a greater chance of having an accident or being the victim of auto theft.
Where you live (or, more precisely, where you keep your car) has a bearing on your chances of having an accident or becoming a victim of theft or vandalism. That's why a vehicle owner in Brooklyn, New York, pays a higher rate than the owner of an identical vehicle in Casper, Wyoming.
Other factors affecting regional insurance rates include time
and efficiency of police response and law enforcement, local road
and traffic conditions and the quality of local medical services.
Insurers even factor in the litigation rates in a given area--that
is, how many lawsuits are filed, go to trial, are settled out
of court and for how much.
Top of List
Vehicles are also grouped into categories according to their likelihood of being damaged, vandalized or stolen. Insurers generally consider the size and type of vehicle, as well as the value and the cost of repairs (which can vary greatly, even on vehicles that cost roughly the same). Thus, a new station wagon is expected to hold up better in an accident than a sports car or a subcompact.
Putting insurance aside, safety is key when buying an automobile. Your life depends on it! Some cars are considered safer than others because of their performance record in safety tests and real accidents.
That's why you should research insurance coverage before you buy
your car. It helps you to understand the actual cost and indicates
those vehicles with good safety records. Your insurer will ultimately
reward you for putting safety first.
No-fault insurance is a system adopted in some states that essentially
bypasses the conventional legal procedure which finds fault in
an accident. (This is the procedure by which you hire a lawyer,
file suit and possibly go to court to prove the accident was the
other guy's fault.) No-fault simply does away with the concept
of one party or the other being at fault--no lawyers, no court,
no judge, no jury, no lengthy lawsuits against the other party.
This is considered beneficial to taxpayers, because it eliminates
costly legal proceedings that the state must manage, and to insurance
policyholders, because it helps keep rates down.
If you are insured in a no-fault state and have an accident, you don't go after the other driver. You contact your own insurer and file a claim. Your own insurance policy guarantees you immediate compensation for damages, medical expenses, lost wages, etc.
The type and range of no-fault coverage varies from state to state. What defines the limitations of no-fault policies can differ in two critical areas:
The details of no-fault insurance can be complicated. Contact
your agent or state's insurance department for further information.
No. Some states, while not mandating auto insurance, have "financial
responsibility laws" that require all drivers to be able
to pay for any damage or injury they may cause. However, carrying
liability insurance is still the best way for you to meet your
state's financial responsibility requirements.
UM and UIM policies are offered by law in all states, including
no-fault states. In fact, some states require all motorists to
carry this coverage in order to gain protection from inadequate
insurance coverage of other drivers.
First, call the police to the scene to be sure all pertinent information is properly recorded. Your nerves will be shaken right after an accident, and it helps to have a calm and knowledgeable person walking you through the necessary details.
Then, contact your agent immediately and ask about filing a claim.
If you followed all the recommended guidelines when you bought
your policy, you should be covered within the limitations of that
policy. Remember, your insurance policy is designed to protect
you.
If the cost of your damages or injuries exceed the amount your
policy will pay out, it may be time to take legal action against
the other party. Even if you have no-fault insurance, sometimes
the only way to be compensated is to place blame and responsibility
where it belongs.
Top of List
Technically, in most states your insurer can cancel your policy
only if:
However, your insurer can choose not to renew your policy for
a variety of reasons.
Do you have a bad driving record? Have you received a lot of speeding
tickets? Have you ever been caught driving drunk? Not only are
these scenarios considered unsafe and illegal, they are justifiable
cause for your insurer to label you a bad risk and refuse to renew
your policy. (Some underwriters may feel compelled to cancel policies
after only one accident.)
Where do you live? Has the neighborhood changed in the last few
years? Have the accident or crime rates risen noticeably? As regions
are reassessed periodically, their status could change and you
could suddenly find yourself living in a high-risk area, where
your insurer's rates may not be adequate to cover losses.
Even "good" drivers can find themselves in the position
of being dropped by their current carrier. Reasons range form
a "drinking while driving" violation or other serious
violations (that make you a high risk) to situations outside your
control, such as when insurers in your state are suffering severe
business losses. Overall rises in claims or losses can cause insurers
to become highly selective in determining whom they can afford
to insure.
That is why it is important to note that if you are licensed to
drive, by law, you are eligible for insurance. However, your options
for new coverage may be limited. Each state has created and regulates
a market of last resort for those who cannot otherwise obtain
coverage. These groups have various names, depending on the state
you live in, such as assigned risk plans or the residual market.
Your agent will know more about the particulars in your state.
Regardless of the reason you were dropped, you need to act immediately
to get another policy. Under no circumstance should you drive
your vehicle without insurance. Call your agent to help you find
new coverage. If you do find yourself in the residual market,
the price may be higher but it may be your only alternative in
maintaining your freedom to drive.
The most obvious way to maintain your low-risk status is to keep
a clean driving record. If you've been in an accident, consider
taking a defensive driving course. Even those of us who have been
driving for years rarely know the simple tricks to preventing
accidents through defensive driving.
Also, look into purchasing special safety and security features
for your car, such as anti-lock brakes and an alarm system. Your
insurance agent can give you further tips on how to convince your
insurer you're a safe driver.
Insurers often discount their rates in order to encourage good
driving practices and the use of safety and security precautions.
Depending on the insurance company, you can often lower your rates
from 5 to 35 percent.
Sometimes the investment you make in your vehicle is worth the
discount, and sometimes it's simply worth some peace of mind.
For example, the purchase of anti-lock brakes merits a discount
from nearly every insurer, but the discount probably will not
pay for the brakes (which cost several hundred dollars) during
the normal life of your vehicle. Anti-lock brakes are touted,
nonetheless, as a life-saving feature ó a serious consideration
when safety is a top priority.
Insurers generally offer discounts for:
You can also lower your insurance rates by requesting higher deductibles
ó the amount of money you pay before you make a claim.
Increasing your deductibles on collision and comprehensive coverage
from $100 to $250, or even $500, will bring your rates down. Moreover,
you may not need collision and comprehensive coverage if you drive
an older car. Ask your agent which discounts are available to
you.
Top of List
The more people you allow to drive your vehicle on a regular basis,
the greater the chances of your vehicle being in an accident.
Teenagers are especially expensive to insure because they are
the least experienced drivers.
A driver's-ed course can help ease the burden of insurance costs
since it teaches your teenager defensive driving techniques. If
your child's high school does not offer driver's-ed, try to find
one offered by another school or a private firm in the area. After
all, the cost of driver's-ed could be cheaper than the extra cost
of your insurance. (Many insurers offer "good student"
discounts as well.)
An adult's driving experience can also affect your rates significantly.
Don't assume that every adult you know has been driving since
age 16 or is a competent driver with a clean record. Again, taking
a defensive driving course is a good way for adults to prove they
are responsible drivers, thus lowering their risk and their insurance
rates. (This is a great solution for new couples who are jointly
insured but unmatched in their driving skills or experience.)
With few exceptions, your insurance company does not set its own rates (unless you live in Illinois). It request the right to charge appropriate rates from your state's insurance department, which responds with legal approval and authorization, provided the requested rates are fair.
Every state has some sort of department, administration or agency that regulates and monitors every insurer operating within the state's borders. In addition to approving rates, your state's insurance department is involved in all insurance matters on behalf of private citizens and businesses. It also issues operating licenses to insurance companies and agents, based on their ability to meet the state's requirements for conduct and knowledge about insurance issues.
Your insurance company works closely with your state's insurance
department to make sure you are getting the best and fairest possible
service within the state's guidelines. Contact your state's insurance
department (listed at the end of this guide) if you wish to know
more about how it serves your interests.
If you do not have your own insurance, be aware that many car rental liability policies cover you only at the state's required minimum. Also, you should buy the collision and comprehensive coverage offered by the rental company for your own protection. Plus, do not buy a collision damage waiver (CDW) from the rental company assuming it is insurance. A CDW simply releases you from financial responsibility if you damage the vehicle you are renting, provided you comply with the terms of the rental contract. But those terms can vary considerably, and CDWs are not state-regulated, which means they are technically not insurance.
It's always a good idea to review your policy before renting a
vehicle and, if necessary, contact your agent for clarification.
The same rules apply when you borrow someone else's vehicle--
your own insurance follows you no matter whose car you are driving.
But the vehicle owner's policy is the key coverage if you have
an accident.
Top of List
If you wish clarification beyond your agent's explanation, or
if you want to be certain that the policy is completely valid,
contact your state's insurance department.
Talk to your agent if you have a problem with your insurer, and
talk to your state insurance department if you want more specific
information on state regulations and legal precedents.
The amount of compensation for your loss can vary according to the adjuster's analysis of the damage. You do not have to accept the first amount of money you are offered, if it is lower than the cost of your repair or recovery. While you may have to do some homework to prove your reported loss is valid, it's worth it to be certain your insurer lives up to the provisions of your policy.
Remember, negotiating with an adjuster is just business--insurers
simply want to settle claims fairly in light of possible fraud.
While it is your insurer's responsibility to root out false claims,
you pay the price in the end. In fact, you spend nearly a dime
on every dollar of your premium to cover the false claims of others.
So, try to keep an open mind when working with your adjuster to
settle on a price that's fair to both you and your insurer.
Liability insurance, as mentioned earlier, is essential and in many states required. But if you drive a clunker--an older car that isn't worth much money--you may be able to do without collision insurance. If you have an accident, repair costs could easily be higher than the value of your vehicle, thus "totaling" it. This means your insurer will pay you the total book value of your vehicle, and that could be far less than the cost of your vehicle's repair. So, collision insurance may not cover your loss adequately.
Since it depends on special circumstances, ask your agent for
guidance.
Top of List
Click Here To Find Out How To List Your Law Firm On This Site
Traffic-Ticket.Com • 919-544-0000 • info@traffic-ticket.com
This is a JavaScript enhanced Website.
Copyright ©1998-2004 Traffic-Ticket.Com. All Rights Reserved.