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Automobile Insurance

Owning and operating a car brings certain risks which increase with the number of drivers and vehicles on the road. Losses from property damage, medical and legal costs, and lost income add up to billions of dollars annually for automobile mishaps. As a result, automobile insurance plays an important role in protecting consumers from serious financial loss arising out of such accidents.

Table of Contents:

• Automobile Insurance In Your State; Two Things to Know
• 7 Steps to Choosing Your Coverage
• 7 Steps to Selecting your Insurer
• 10 Questions to Ask Your Agent
• 10 Ways to Save Money
• Words to Know
• Do's and Don'ts After and Accident

Automobile Insurance In Your State; Two Things to Know

1. Are you in a no-fault state?

In states with no-fault auto insurance, victims of auto accidents are covered by their own insurers, regardless of who was at fault in an accident. Victims can sue the other party under certain circumstances; the limitations vary among no-fault states. No-fault insurance laws vary widely, so you should check with your insurance commissioner's office or an insurance agent for requirements in your state. If part of your coverage is based on no- fault laws, find out if it covers you when you drive in other states.

2. What is your state's insurance-pricing policy?

Each state has its own insurance-pricing policy: (1) noncompetitive pricing requires all insurance companies in the state to charge the same price for the coverage offered; (2) prior approval pricing means that prices must be approved by an insurance commission--prices will generally vary only slightly; and (3) competitive pricing allows companies to charge whatever the market will bear.

Call your state insurance commissioner's office for answers to these questions and ask what other insurance information is available to consumers. All state insurance commissioners are located in the state capitals, and most have toll-free telephone numbers listed in local telephone directories under "state government."

7 Steps to Choosing Your Coverage

Needs for coverage vary widely among drivers. Learn as much as you can about your particular needs before shopping for insurance.

1. Know your basic financial responsibility as a driver.

Not all states require you to have automobile insurance, but all states do require you to prove that you can pay specified amounts if you cause bodily injury or property damage while driving. Your proof would be insurance or large amounts of cash or other security. Without one of these, you may lose your driver's license and registration.

You may be required to pay an uninsured motorists' fee when you purchase your license plates or tags. A driver rejected by insurance companies may apply for a policy through his/her state's insurance plan for assigned risk drivers.

2. Review the 6 basic types of coverage.

• Bodily Injury Liability. Pays your legal defense costs and claims against you if your car injures or kills someone. Covers family members living with you and others driving with your permission.
• Property Damage Liability. Pays your legal defense costs and claims against you if your car damages another's property. Does not cover your property, including your auto.
• Medical Payments. Pays medical expenses resulting from an accident for you and others riding in your car. Also pays for you or your family members injured while riding in another's car or while walking.
• Collision. Pays for repairs of damage to your car caused by a collision with another vehicle or any other object, regardless of who was responsible.
• Comprehensive Physical Damage. Pays for damages to your car resulting from theft, fire, hail, vandalism, or a variety of other causes.
• Uninsured or Underinsured Motorist. Pays for costs related to injuries or property damage to you or your family members and guests in your car caused by an uninsured, underinsured, or hit-and- run driver.

3. Always carry bodily injury and property damage liability insurance.

Carry uninsured motorist coverage at limits you feel the other driver should have. Generally, you should select a limit equal to that which you purchase to cover injuries you might cause to others.

4. Identify unclear areas in coverage choices.

Do you need medical payments coverage if you have health insurance? Not necessarily. On the other hand, it is inexpensive and can simplify certain situations. Medical payments coverage pays emergency medical expenses and other costs for anyone hurt while in, on, or around your vehicle, such as a neighbor's child who slams his fingers in the car door.

Does collision insurance cost more than your car is worth? If so, do you need it anyway as a sort of enforced savings assuring you of having some money if the car you depend on is damaged or destroyed?

5. List the elements of your personal profile.

This includes items like age, marital status, and driving record that may affect your coverage requirements and costs.

6. Know yourself.

What degree of coverage do you personally require for mental comfort-- minimal, maximal, or something in between?

7. Know the common ways of reducing costs on policies as outlined below under "10 Ways to Save Money."

7 Steps to Selecting your Insurer

You can learn a great deal about the choices available to you, and you can do much to prepare yourself for a meeting with an agent.

1. Decide on the extent to which shopping around will benefit you.

Generally speaking, it pays to shop around. Do prices vary much in your area? Does your driving record limit your choices? Can you save time by simply relying on the recommendation of a friend who is not only pleased with the cost and coverage but has had good service with claims? Does an experienced, trustworthy local agent who will advise you and represent your needs to the insurance company on a continuous basis mean more to you than cost-cutting?

2. Learn about the reputations of the companies you are considering

. Learn about the company s ratings on promptness in claims settlement and the cost of policies. Various consumer magazines publish this information each year. Call the public library's research service to find out what sources of information are available. Your state insurance commissioner's office may provide market ratings on insurance companies in your state. You can also find out whether or not complaints have been filed against a company by contacting your local Better Business Bureau or state consumer protection agencies.

3. List the questions you will ask your agent.

See "10 Questions to Ask Your Agent." Also, think about problems you have had in the past or have heard about from others, then turn your concerns into questions. For example, if you have waited too long for a claim to be serviced in the past, ask: What is your company's claims service rating?

4. Plan your first appointment with an agent.

Whether you are planning an office meeting or a telephone conversation, allow yourself enough time to get satisfactory answers to all of your questions. Be prepared to make notes

5. Think about your meeting afterwards.

Did the agent encourage you to ask questions? Were his/her answers as precise as possible? Did they really answer your questions? Review your notes.

6. Consider writing a letter to the agent.

In this letter, summarize your discussion and state that unless you hear otherwise within two weeks, you will assume the information in your letter is correct.

7. Ask for a sample policy.

Take it home and read all the sections before you sign the application and pay for the coverage. Typically, the first section (the policy jacket) describes the basic policy. Some of the items listed here may not be included in your particular policy (collision coverage, for example). This section also includes definitions of the terms used and lists most exclusions.

The middle section (the policy declarations) lists the exact items of coverage to be purchased, the amounts to be paid, and other details particular to you. Read carefully to be certain that only the items you want to purchase are listed and that the figures are correct.

The third section (the endorsements) contains amendments to the basic policy made to fulfill state requirements or changes in requirements made since the original policy was written.

See "Words to Know"for more help on reading your policy and understanding insurance terminology. You can also ask your agent to explain any terms about which you have questions.

10 Questions to Ask Your Agent

1. Under what conditions can the cost of my insurance be increased or the policy be cancelled?

2. How do I contact the company to make my claim? Will I be speaking to an agent in my area or to a central office?

3. What is the average length of time before a claim adjustor contacts the insured once a claim is reported? How soon can one expect all parties to be paid? Do you know how your company compares with others for promptness in claims handling?

4. What are the requirements with respect to qualified repair shops and pre-inspections? Is there a good choice of shops within a reasonable distance of my home?

5. If pre-inspections are required, how quickly can they be done?

6. Exactly what information does the company require when an accident occurs? May I have a copy of the company's accident form to keep on hand?

7. Exactly what expenses are covered as part of the policy? What about expenses incurred as the result of an accident such as child care costs, lost wages, or rental car costs?

8. What discounts might I qualify for in the categories of lifestyle, multiple policies, car model and safety features? May I have a list of the discounts that the company offers in my state?

9. What are the deductibles on my policy? How would choosing higher/lower deductibles affect the cost of premiums?

10. Does the collision coverage have a clause allowing me to reject a claim settlement I feel is unsatisfactory?

10 Ways to Save Money

1. Do not buy collision insurance if its cost is out of proportion to the market value of your car.

2. To reduce the cost of premiums, choose higher deductibles.

3. Consider buying coverage for services such as towing, replacement cars, and battery recharging from specialized providers, rather than from your insurance company.

4. Consider not purchasing medical payment coverage if you and your regular passengers are covered by health insurance. The "no-fault" laws in some states may provide for benefits similar to medical payment coverage.

5. Insure all of your cars with the same company or purchase your automobile insurance and homeowner's policy or other insurance policies from the same company. Multi-policy discounts are common. Ask about long-term policy holder discounts.

6. Ask about discounts for airbags, automatic seatbelts, anti-lock brakes, and other safety features.

7. Ask if the company offers discounts for specified models of cars.

8. Look for lifestyle-related discounts such as those for non-smokers, non-drinkers, good students, or children at school away from home.

9. Ask about discounts for good driving records, completed courses in drivers education and defensive driving, or driving patterns (such as car-pooling) that reduce mileage.

10. Look for discounts related to age and status such as those for mature (over 50) drivers, retirees, female drivers ages 30 to 64 who are the sole drivers in their households, or married men under 30.

Words to Know

• Conditions. Explanations in the policy of your responsibilities and the company's; for example, how claims are to be filed and what proofs you must submit with your claim.
• Coverage. Description in the policy of the specific circumstances in which you can receive benefits.
• Declarations. Listing of the details of your particular coverage, such as the policy number, kinds of coverage and amounts of money provided by each, your name and address, a description of your vehicle, the premium, and the time period of coverage.
• Exclusions. Descriptions of the situations under which you and your car are not covered.
• Supplemental Payments. Court costs, bail bonds, expenses related to a lawsuit including defense, or any other specific payments your insurance provides which are not specifically listed in other parts of the policy.
• Deductible. The amount of a loss or claim you must pay before you can collect from the insurance company.
• Liability. Your financial responsibility incurred because of an accident.
• Rating. The process by which the price of your insurance coverage is determined. States are divided into rating territories. Your insurance company bases part of the price of your policy on the claims history of all the drivers it insures in your territory. Other factors such as your driving record and age also affect the rating.
• Premium. The cost of the insurance policy (usually periodic payments).
• Premium notice. Reminder (a bill) mailed to policy holder before a premium payment is due.

Do's and Don'ts After and Accident

• Do always have on hand your company's claim service card with your agent's name and phone number, and your policy identification number.
• Do notify police immediately. Get the police officer s name and badge number and the address and phone number of the police station. Ask the officer when the report will be filed and how you can obtain a copy.
• Do review the copy of your insurance company's filing procedures, which you should keep in your glove compartment as a reminder about the information the company requires.
• Do notify your insurance company or agent as soon as possible.
• Do keep in mind your insurance company's policy in relation to qualified repair shops and preinspections.
• Do get the names of the other drivers, their addresses, work and home telephone numbers, vehicles, license plate states and numbers, drivers license numbers, insurance companies, names and telephone numbers of their agents, and policy numbers.
• Do obtain the names, addresses, and work and home telephone numbers of all passengers and witnesses.
• Do make notes describing the accident, the vehicles involved, their approximate speeds, the setting, the weather, the traffic signs and signals, the road conditions. Take photographs if possible; or draw simple diagrams of the roads and the accident.
• Don't make any oral or written statements as to responsibility or blame.
• Don't tell others involved in the accident how much liability insurance you carry.
• Don't discuss the specifics of the accident with others involved.
• Don't accept offers to settle for payment on the spot without thinking about it carefully. You may be held liable later for the same damages.

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