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Auto Insurance F.A.Q.s (consult your State DMV for most recent laws and regulation)


AUTO INSURANCE BASICS

What is auto insurance?
What is covered by a basic auto policy?
Can I drive legally without insurance?
What if I lease a car?
Do I need insurance to rent a car?
What are the driving laws in my state?
Is there a difference between cancellation and nonrenewal?

BUYING A POLICY & SAVING MONEY

How do I choose an insurance company?
Where can I buy insurance?
How can I save money?
How much coverage do I need?
What determines the price of my policy?
What does my credit rating have to do with purchasing insurance?
What information do I need to give to my agent or company?
What can I do if I can't find coverage?
How do I insure my teenage driver?
Should I purchase an umbrella liability policy?
Will my insurance cover a rental car after an accident?

HELP! I HAVE TO FILE A CLAIM

How do I file a claim?
What should I do if I am having trouble settling my claim?
If I file a claim, will my premium go up?
How are the value of my car and the cost of repair determined?
What are my rights when filing a claim?
Can my insurance company require me to use certain types of auto repair parts?

SAFETY TIPS

Air Bag Safety
At the Scene of an Accident
Avoiding Deer / Car Collisions
Car Breakdown Safety
Cell Phones & Driving
Child Safety Seats
Driving in Bad Weather
Elderly Drivers
Preventing Carjacking / Theft
Road Rage
Shopping for a Safe Car
Teenagers & Safe Cars

There are many insurance companies, so choosing between them can be a challenge. Here are the main points to keep in mind when selecting an insurance company: Licensing Not every company is licensed to operate in each state. As a general rule, you should buy from a company licensed in your state, because then can you rely on your state insurance department to help if there’s a problem. To find out which companies are licensed in your state, contact the state insurance department. Price Many companies sell insurance policies and prices vary greatly from one to another, so it really pays to shop around. Get at least three price quotes from companies, agents and from the Internet. Your state insurance department may publish a guide that shows what insurers charge for different policies in various parts of your state. Financial Solidity You buy insurance to protect you financially and provide peace of mind. Select a company that is likely to be financially sound for many years, by using ratings from independent rating agencies. Service Your insurance company and its representatives should answer your questions and handle your claims fairly, efficiently and quickly. You can get a feel for whether this is the case by talking to other customers who have used a particular company or agent. You may also want to check a national claims database to see what complaint information it has on a company. Also, your state insurance department will be able to tell you if the insurance company you are considering doing business with had many consumer complaints about its service relative to the number of policies it sold. Comfort You should feel comfortable with your insurance purchase, whether you buy it from a local agent, directly from the company over the phone, or over the Internet. Make sure that the agent or company will be easy to reach if you have a question or need to file a claim.

	Your auto policy may include six coverages. Each coverage is priced separately.
	1. Bodily Injury Liability This coverage applies to injuries that you, the designated driver or policyholder, cause to someone else. You and family members listed on the policy are also covered when driving someone else’s car with their permission. It’s very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.
	2. Medical Payments or Personal Injury Protection (PIP) This coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.
	3. Property Damage Liability This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hit.
	4. Collision This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000—the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you'll also be reimbursed for the deductible.
	5. Comprehensive This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer. Comprehensive insurance is usually sold with a $100 to $300 deductible, though you may want to opt for a higher deductible as a way of lowering your premium. Comprehensive insurance will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible. States do not require that you purchase collision or comprehensive coverage, but if you have a car loan, your lender may insist you carry it until your loan is paid off.
	6. Uninsured and Underinsured Motorist Coverage This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver. Underinsured motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian.

Can I drive legally without insurance?

	NO! Almost every state requires you to have auto liability insurance. All states also have financial responsibility laws. This means that even in a state that does not require liability insurance, you need to have sufficient assets to pay claims if you cause an accident. If you don’t have enough assets, you must purchase at least the state minimum amount of insurance. But insurance exists to protect your assets. Trying to see how little you can get by with can be very shortsighted and dangerous. If you've financed your car, your lender may require comprehensive and collision insurance as part of the loan agreement. Below is an example of the state minimum limits for auto liability insurance. The first number refers to liability limits for bodily injury for any one person, the second to limits for all persons injured, and the third refers to property damage liability limits. For example, 20/40/10 means coverage up to $40,000 for all persons injured in an accident, subject to a limit of $20,000 for one individual and $10,000 coverage for property damage.
	State Insurance required  Minimum liability limits (1) Alabama BI & PD Liab 20/40/10 Alaska BI & PD Liab 50/100/25 Arizona BI & PD Liab 15/30/10 Arkansas BI & PD Liab, PIP 25/50/25 California  BI & PD Liab 15/30/5 (2) Colorado BI & PD Liab 25/50/15 Connecticut BI & PD Liab, UM, UIM 20/40/10 Delaware BI & PD Liab, PIP 15/30/10 D.C. BI & PD Liab, UM 25/50/10 Florida PD Liab, PIP 10/20/10 (3) Georgia BI & PD Liab 25/50/25 Hawaii BI & PD Liab, PIP 20/40/10 Idaho BI & PD Liab 25/50/15 Illinois BI & PD Liab, UM 20/40/15 Indiana BI & PD Liab 25/50/10 Iowa BI & PD Liab 20/40/15 Kansas BI & PD Liab, PIP, UM 25/50/10 Kentucky BI & PD Liab, PIP 25/50/10 Louisiana BI & PD Liab 10/20/10 Maine BI & PD Liab, UM, UIM  50/100/25 (4) Maryland BI & PD Liab, PIP (5), UM 20/40/15 Massachusetts BI & PD Liab, PIP, UM 20/40/5 Michigan BI & PD Liab, PIP 20/40/10 Minnesota BI & PD Liab, PIP, UM, UIM 30/60/10 Mississippi BI & PD Liab 25/50/25 Missouri BI & PD Liab, UM 25/50/10 Montana BI & PD Liab 25/50/10 Nebraska BI & PD Liab 25/50/25 Nevada BI & PD Liab 15/30/10 New Hampshire FR only, UM 25/50/25 New Jersey BI & PD Liab, PIP, UM 15/30/5 (6) New Mexico BI & PD Liab 25/50/10 New York BI & PD Liab, PIP, UM 25/50/10 (7) North Carolina BI & PD Liab 30/60/25 North Dakota BI & PD Liab, PIP, UM 25/50/25 Ohio BI & PD Liab 12.5/25/7.5 Oklahoma BI & PD Liab 25/50/25 Oregon BI & PD Liab, PIP, UM 25/50/10 Pennsylvania BI & PD Liab, PIP 15/30/5 Rhode Island BI & PD Liab, UM 25/50/25 (3) South Carolina BI & PD Liab, UM 25/50/25 South Dakota BI & PD Liab, UM 25/50/25 Tennessee BI & PD Liab 25/50/10 (3) Texas  BI & PD Liab 20/40/15* Utah BI & PD Liab, PIP 25/50/15 (3) Vermont BI & PD Liab, UM, UIM 25/50/10 Virginia BI & PD Liab, UM 25/50/20 Washington BI & PD Liab 25/50/10 West Virginia BI & PD Liab, UM 20/40/10 Wisconsin FR only, UM 25/50/10 Wyoming BI & PD Liab 25/50/20 (1) The first two numbers refer to bodily injury liability limits and the third number to property liability.  For example, 20/40/10 means coverage up to $40,000 for all persons injured in an accident, subject to a limit of $20,000 for one individual, and $10,000 coverage for property damage. (2) Low-cost policy limits for low-income drivers in the California Automobile Assigned Risk Plan are 10/20/3. (3) Instead of policy limits, policyholders can satisfy the requirement with a combined single limit policy. Amounts vary by state. (4) In addition, policyholders must also carry at least $1,000 for medical payments. (5) May be waived for the policyholder but is compulsory for passengers. (6) Basic policy (optional) limits are 10/10/5. Uninsured and underinsured motorist coverge not available under the basic policy but uninsured motorist coverage is required under the standard policy. (7) In addition, policyholders must have 50/100 for wrongful death coverage. *Minimum coverage requirements will increase to 25/50/25 on April 1, 2008 and to 30/60/30 on January 1, 2011. Source: Property Casualty Insurers Association of America; state departments of insurance.

 

If you lease a car, you still need to buy your own auto insurance policy. The auto dealer or bank that is financing the car will require you to buy collision and comprehensive coverage. You'll need to buy these coverages in addition to the others that may be mandatory in your state, such as auto liability insurance. Collision covers the damage to the car from an accident with another automobile or object. Comprehensive covers a loss that is caused by something other than a collision with another car or object, such as a fire or theft or collision with a deer. The leasing company may also require "gap" insurance. This refers to the fact that if you have an accident and your leased car is damaged beyond repair or "totaled," there's likely to be a difference between the amount that you still owe the auto dealer and the check you'll get from your insurance company. That's because the insurance company's check is based on the car's actual cash value which takes into account depreciation. The difference between the two amounts is known as the "gap." On a leased car, the cost of gap insurance is generally rolled into the lease payments. You don't actually buy a gap policy. Generally, the auto dealer buys a master policy from an insurance company to cover all the cars it leases and charges you for a "gap waiver." This means that if your leased car is totaled, you won't have to pay the dealer the gap amount. Check with the auto dealer when leasing your car. If you have an auto loan rather than a lease, you may want to buy gap insurance to protect yourself from having to come up with the gap amount if your car is totaled before you've finished paying for it. Ask your insurance agent about gap insurance or search the Internet. Gap insurance may not be available in some states.

	When renting a car, you need insurance. If you have adequate insurance on your own car, including collision and comprehensive, this may be enough. Before you rent a car: Contact your insurance company. Find out how much coverage you have on your own car. In most cases, the coverage and deductibles you have on your personal auto policy would apply to a rental car, providing it's used for pleasure and not business. If you don't have comprehensive and collision coverage on your own car, you will not be covered if your rental car is stolen or if it is damaged in an accident. Call your credit card company. Find out what insurance your card provides. Levels of coverage vary. If you don't have auto insurance, you have two choices: you can buy coverage at the car rental counter; or you can purchase a a non-owner auto liability insurance policy .
	Rental car counter insurance Rental car counter insurance can provide the following coverage: Collision Damage Waiver (CDW). Sometimes called a Loss Damage Waiver (LDW), this coverage relieves you of financial responsibility if your rental car is damaged or stolen. The CDW may be void, however, if you cause an accident by speeding, driving on unpaved roads or driving while intoxicated. This coverage generally costs between $9 and $19 a day. If you have comprehensive and collision on your own car, you may not need to purchase this coverage. Liability Insurance. This provides excess liability coverage of up to $1 million for the time you rent a car. Rental companies are required by law to provide the minimum level of liability insurance required by your state. Generally, this does not offer enough protection in a serious accident. If you have adequate liability coverage on your car or an umbrella policy on your home/auto, you may consider forgoing this additional insurance. It generally costs about $9 to $14 a day. If you don't own a car, and rent cars often, consider purchasing a non-owner liability policy. This costs approximately $200 - $300 per year. Frequent car renters sometimes find this more cost-effective than constantly paying for the extra liability coverage. Personal Accident Insurance. This provides coverage to you and your passengers for medical/ambulance bills. This type of insurance, usually costs about $1 to $5 per day, but may be unnecessary if you are covered by health insurance or have adequate medical coverage under your auto policy. Personal Effects Coverage. This provides coverage for the theft of personal items in your car. However, if you have homeowners or renters insurance, you may be covered for items stolen from the car, minus your deductible. You need to have receipts or other proof of ownership. This type of insurance usually costs about $1 to $4 per day. Some rental car companies combine personal accident and personal effects coverage together as one type of insurance, while others sell it individually. The cost of insurance at the rental car counter will vary depending on the rental car company, state, and location of the dealer and the type of car you rent. Some rental car companies may check your credit and driving history and may deny coverage. Check with the rental car company to find out its policy.
	Non-owned auto liability insurance Instead of buying liability coverage from the car rental company each time you rent a car, you can purchase a non-owner auto liability insurance policy from an insurance company for about $300 a year which might be cheaper if you rent frequently. In addition, if you're thinking of buying an umbrella liability policy, a non-owner auto policy may meet the underlying auto insurance policy requirements. Umbrella liability insurance provides high limits of liability coverage above basic policies. Most insurers will not issue an umbrella liability policy unless the basic policies meet certain dollar limits of coverage. A non-owned auto insurance policy covers you for damage you may cause to some else’s car and liability for injuries to its occupants, or to pedestrian, in the event of an accident. The policy will also provide medical payments coverage for you and your passengers, and under-insured and uninsured coverage. This pays for the cost of an accident involving a hit-and-run driver or a driver who has little or no insurance. However, non-owned auto insurance does not provide collision coverage. Collision coverage pays for damage to the car you’re driving if you crash into another car or object or the car rolls over. You have to buy this from the car rental company. However, some credit cards provide collision coverage if the rental car is paid for with the card—so check with your credit card company first.

AUTOMOBILE FINANCIAL RESPONSIBILITY LAWS Most states require car owners to buy a minimum amount of bodily injury and property damage liability insurance before they can legally drive their cars. All states have financial responsibility laws. This means that people involved in an automobile accident will be required to furnish proof of financial responsibility up to certain minimum dollar limits. To comply with financial responsibility laws, most drivers purchase automobile liability insurance. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident since accidents may cost far more than the minimum limits mandated by most states. The chart below shows mandatory requirements for bodily injury (BI), physical damage (PD) liability, no-fault personal injury protection (PIP), and uninsured (UM) and underinsured (UIM) motorists coverage. It also indicates which states have only financial responsibility (FR) laws. SEAT-BELT LAWS Only 26 states and the District of Columbia have a primary seat-belt enforcement law, which allows law enforcement officers to stop a car for noncompliance with seat-belt laws. The other states have secondary laws; officials can only issue seat-belt violations if they stop motorists for other infractions. New Hampshire is the only state that does not have a seat-belt law that applies to adults. Seat-belt use reached 82 percent nationwide in 2007, a slight gain from 81 percent use in 2006. States with primary seat-belt laws had an average 87 percent usage rate, versus 73 percent in states with secondary laws. DRUNK DRIVING LAWS As of 2004 every state and the District of Columbia had lowered the limit defining drunk driving from 0.10 BAC (blood-alcohol content) to 0.08. OLDER DRIVERS “Older” drivers (age 70 and above) have higher rates of fatal crashes, based on estimated annual travel, than any other group except drivers under the age of 21, according to the U.S. Department of Transportation, in part because they are less likely to survive the trauma of an accident. Recognizing the higher fatality rates and the need for older drivers to retain their mobility and independence, some states issue restricted licenses. Depending on ability, older drivers may be limited to driving during daylight hours or on nonfreeway types of roads. In most states, restrictions such as these can be placed on anyone’s drivers license, regardless of age, if his or her medical condition warrants it. YOUNG DRIVER LAWS Young drivers account for a disproportionate number of motor vehicle crashes. States are increasingly adopting laws to help lower the crash rate. One approach has been to lower blood alcohol content (BAC) limits so those young drivers who drink even small amounts of alcohol will be penalized. Another has been to require a more rigorous learning period before granting young drivers the privilege of a drivers license. This requires young drivers between the ages of 15 and 18 to apply for a graduated drivers license (GDL) to help them improve their driving skills and habits before receiving full driving privileges. Graduated licensing as defined by the National Highway Traffic Safety Administration consists of three stages. Some of the requirements and recommendations included in Stage 1 (learners permit) are a vision test, a road knowledge test, driving accompanied by a licensed adult, safety-belt use by all vehicle occupants, a zero BAC level, and six months with no crashes or convictions for traffic violations. Stage 2 (intermediate license) includes the completion of Stage 1, a behind-the-wheel road test, advanced driver education training, driving accompanied by a licensed adult at night, and 12 consecutive months with no crashes or convictions for traffic offenses before reaching Stage 3 (full license).

There is a big difference between an insurance company canceling a policy and choosing not to renew it. Insurance companies cannot cancel a policy that has been in force for more than 60 days except when: You fail to pay the premium You have committed fraud or made serious misrepresentations on your application Your driver's license has been revoked or suspended. Nonrenewal is a different matter. Either you or your insurance company can decide not to renew the policy when it expires. Depending on the state you live in, your insurance company must give you a certain number of days notice and explain the reason for not renewing before it drops your policy. If you think the reason is unfair or want a further explanation, call the insurance company’s consumer affairs division. If you don't get a satisfactory explanation, call your state insurance department. The company may have decided to drop that particular line of insurance or to write fewer policies where you live, so the nonrenewal decision may not be because of something you did. On the other hand, if you did do something that raised the insurance company’s risk considerably, like driving drunk, the premium may rise or you may not have your policy renewed. If your insurance company did not renew your policy, you will not necessarily be charged a higher premium at another insurance company.

Information courtesy of Insurance Information Institute.