Auto Insurance

If you drive, you must show that you can pay for accidents you cause. Most drivers do this by buying auto liability insurance. State law requires a minimum coverage. However, basic coverage might not be enough if you are held liable for an accident. You should consider buying more than the basic limits. When you buy an auto policy, your insurance company will send you a proof-of-insurance card. You will have to show proof of insurance when you:

• are asked for it by a law enforcement officer
• have an accident
• register your car or renew its registration
• obtain or renew your driver's license
• get your car inspected.

State law provides severe penalties for violating the state's financial responsibility laws.

State law requires you to have basic liability coverage. The other coverage's are optional, but if you still owe money on your car, your lender will require you to have collision and comprehensive coverage. The following describes the eight types of coverage available.

1. Liability Coverage

Pays: Other people's expenses for accidents caused by drivers covered under your policy, up to your policy's dollar limits. These may include the other person's

• medical and funeral costs, lost wages, and compensation for pain and suffering
• car repair or replacement costs
• auto rental while their car is being repaired
• punitive damages awarded by a court.

Covers: You, your family members, and other people driving your car with your permission, even if they don't have their own liability insurance and are not named on your policy. You and your family members also are covered when driving someone else's automobile - including a rental car - but not a car that you don't own but have regular access to, such as a company car.

Who qualifies as a family member?

Your auto policy covers your spouse, blood relatives, in-laws, adopted children, wards, and foster children living in your home, even if not named on the policy. Family members attending school away from home and a spouse living elsewhere during a marital separation also are covered.

2. Medical Payments Coverage

Pays: Medical and funeral bills arising from accidents, including those in which the victim was a pedestrian or a bicyclist. Covers: You, your family members, and passengers in your car, regardless of who caused the accident.

3. Personal Injury Protection (PIP) Coverage

Pays: Same as medical payments coverage, plus a percentage of lost income and the cost of hiring a caregiver for an injured person. Covers: You, your family members, and passengers in your car, regardless of who caused the accident.

4. Uninsured/Underinsured Motorist (UM/UIM) Coverage

Pays: Your expenses from an accident caused by an uninsured motorist or if the other driver did not have enough insurance to cover your bills, up to your policy's dollar limits. Also pays for accidents caused by a hit-and-run driver if you reported the accident promptly to the police.

• Bodily injury UM/UIM pays without deductibles for medical bills, lost wages, pain and suffering, disfigurement, and permanent or partial disability.
• Property damage UM/UIM pays for auto repairs, a rental car, and damage to items carried in your car.

Covers: You, your family members, passengers in your car, and others driving your car with your permission. Insurers must offer UM/UIM coverage, but you can reject it in writing.

5. Collision (Damage to Your Car) Coverage

Pays: The cost of repairing or replacing your car after an accident, regardless of who was driving or who was at fault. Payment is limited to your car's actual cash value, minus your deductible. Actual cash value is the market value of a car like yours before it was damaged.

6. Comprehensive (Physical Damage Other than Collision) Coverage

Pays: The cost of replacing or repairing your car if it is stolen or damaged by fire, vandalism, hail, or another cause other than collision. Comprehensive coverage also pays for a rental car or other temporary transportation if your car is stolen. Your policy won't pay for an auto theft unless you report it to the police. Payment is limited to your car's actual cash value, minus your deductible.

7. Towing and Labor Coverage

Pays: Towing charges when your car can't be driven. Also pays labor charges, such as changing a tire, at the place where your car broke down.

8. Rental Reimbursement Coverage

Pays: A set daily amount for a rental car if your car is stolen or is being repaired because of damage covered by your policy.

Your policy won't pay for tapes, compact discs, cellular phones, citizen band radios, or stereo equipment not permanently installed in your car. However, you can buy endorsements to your policy that provide separate coverage for these items for an additional premium.

Auto rental agencies offer collision damage waivers as well as liability policies. The collision damage waiver is not insurance. It is an agreement that the rental company will waive its right to recover the costs of the damage to the auto from the renter with certain exceptions, regardless of who is at fault. If you have an auto liability policy, your policy already covers damage to a rental car. Your coverage limit, however, might be less than the value of a rental car. If you rent cars often, it might cost less to raise the liability limit on your auto policy rather than buying collision damage waivers each time you rent. If you don't own a car, but borrow or rent cars often, you can buy a non-owner liability policy. A non-owner policy pays for damages and injuries you cause when driving a borrowed or rented car but not for damage to the auto you are driving.

Your policy automatically meets the financial responsibility requirements of other U.S. states and Canada. Mexico, however, does not recognize U.S. auto liability policies. Mexico does not require drivers to have automobile liability insurance. However, drivers can be held criminally and financially responsible for any auto accidents they cause. If you're in an accident that results in an injury, police in Mexico may detain you until they determine who is at fault. You will have to show that you either have insurance recognized by the Mexican government or the financial ability to pay any judgment against you. You can buy Mexican liability insurance from agents who specialize in it. Some U.S. companies provide a free endorsement extending your policy's coverage to infrequent trips of up to 10 days and as far as 25 miles into Mexico. You can buy coverage for longer stays, but it is valid only within 25 miles of the border. Telephone books in border towns list insurance agents that specialize in car insurance for travel in Mexico. Your agent also might be able to help you find coverage with a Mexican company. You also may be able to buy a limited Mexico "tourist" endorsement that extends your liability coverage to pay expenses exceeding those covered by a Mexican liability policy. This endorsement covers trips of any distance and any length of time. Ask your agent which endorsements your insurance company offers.

If you buy a new or additional car, your policy will automatically cover it, but there are certain limitations you should be aware of. An additional car automatically has the same coverage as the car with the broadest coverage provided by your policy. For example, if you have two cars - one with liability coverage only and one with liability, collision, and comprehensive - and you buy a third car, the third car will automatically have liability, collision, and comprehensive coverage. A replacement car automatically has the same coverage as the car it replaced. For example, if you trade in an older car that only had liability coverage, the new car will automatically have only liability coverage. Be sure to notify your insurance company as soon as possible that you have added or replaced a car and which coverage's you want. You could lose coverage on the new car if you wait longer than 30 days.

Rates vary widely among companies, so it pays to shop around. Following are some useful tips to help you find the best deal for your money:

• Decide before shopping what coverage's you need.
• Consider choosing a higher deductible. Your deductible is the amount you must pay yourself before the insurance company will pay. Higher deductibles will lower your premium, but remember that you'll have to pay more out of your own pocket if you have a claim.
• Because rates vary, ask several companies and agents for price quotes. Make sure the quotes you get are for the same coverage's.
• When getting a price quote or applying for insurance, answer questions truthfully. Wrong information could cause you to get an incorrect price quote or could lead to a denial or cancellation of coverage.

Consider factors other than price - including a company's financial rating and its complaint index. Financial ratings indicate a company's financial strength and stability, while its complaint index indicates a company's customer service record. Buy only from licensed companies and agents.

• Ask your agent whether you qualify for any discounts the company may offer.

State law requires rates for insurance offered to be reasonable, adequate, not excessive to the risks for which they apply, and not unfairly discriminatory. Auto insurance companies set their own rates and then file them for review. Companies do not have to receive prior approval before putting their rates into effect, but if it is determined that a company's filed rates are excessive, the company can be ordered to make refunds to consumers who were overcharged.

Companies may use a number of criteria to establish your individual premium. These include:

• Your age and, for younger drivers, your marital status. Male drivers under 25 and unmarried women under 21 have the highest rates. Drivers over 50 may get discounts.
• Your driving record and claims history. A good driving record can save you money. If you have accidents or tickets on your driving record, you'll likely be placed in a nonstandard company, which charges higher rates. In addition, companies can add penalties - called surcharges - to your premium for major driving offenses and accidents resulting in property damage of $1,000 or more. Surcharges are mandatory for rate-regulated companies and stay on your premium for three years.
• The county where you keep your car. Because urban counties have more accidents and auto thefts, their rates tend to be higher than those of rural areas.
• The type of car you drive. Collision and comprehensive rates are highest for luxury, high-performance, and sports cars. Rates may also be higher for cars that damage easily or cost more to repair than others.
• How you use your car. Rates are higher for cars driven to and from work or used for business.
• Your credit score. Companies may consider your credit score when deciding whether to sell you a policy and what to charge you. However, a company cannot refuse to sell you a policy or cancel or nonrenew your policy solely on the basis of your credit.
• Whether you drove uninsured. Companies can charge more if you drove uninsured for more than 30 days in the 12 months before you applied for insurance. However, a company cannot otherwise charge you a higher rate for liability coverage because of your prior lack of coverage.

Companies must file their underwriting guidelines and update them each time they make a change.

Discounts can help you save money on your premium. Following is a list of some of the discounts commonly available:

• defensive driving and driver education courses for young drivers
• airbags and other passive restraints
• two or more cars on a policy
• your age and annual mileage driven
• policy renewal with a good claims and driving record
• anti-lock brakes
• a parent or family whose young driver is away at school without a car
• cars with automatic daytime running lights
• students with good grades.

If you have a poor driving record, you can expect to pay more for your insurance. Companies may add surcharges to your premium for the following:

• accidents (the more accidents, the higher the surcharge)
• moving violations (speeding, etc.)
• involuntary manslaughter
• driving under the influence
• criminally negligent driving
• driving without a license or with a suspended license.

Companies may cancel or nonrenew a policy for a variety of reasons. Cancellation means the company terminates your policy before it runs out. Nonrenewal means the company refuses to renew your policy when it expires. It's helpful to know your rights regarding cancellation and nonrenewal of your insurance. A company must explain in writing its reasons for declining, canceling, or not renewing your policy. This explanation must include

• the precise incident, circumstance, or risk factor that violated the company's underwriting guidelines
• the insurer's sources of information about the incident, circumstances, or risk factor.

An insurance company may not cancel an auto policy that has been in effect for more than 60 days unless

• you fail to pay your premium
• you file a fraudulent claim
• your driver's license or motor vehicle tags are suspended or revoked. This also applies to other drivers who live with you or customarily use your car.

However, during the first 60 days, the company may cancel a policy for any lawful reason, including a ticket or an accident. If the company cancels your policy because of an accident, it still must pay for covered damages resulting from the accident. The company must give you written notice at least 10 days before canceling your policy. If either you or the company cancels your policy, the company must refund any premiums paid in advance that did not buy coverage. This amount is called the "unearned premium." For example, if you paid a six-month premium of $600 and you cancel your policy after one month, the company owes you $500 in unearned premium. A company cannot refuse to renew your policy unless it has been in effect for at least 12 months. This means a six-month policy must be renewed to give you a full 12 months of coverage. The company must give you 30 days´ notice before not renewing your policy. An insurance company cannot refuse to renew your policy because of

• weather-related claims, including damage from hail, floods, tornadoes, high winds, and hurricanes
• damage from colliding with animals or birds
• damage from gravel and other flying and falling objects (the company can raise your deductible, however, if you have three such claims in 36 months)
• towing and labor claims (the company can refuse to renew your towing and labor coverage, however, if you have four such claims in 36 months)
• other claims or accidents that cannot reasonably be blamed on you, unless you have more than one of these claims in a 12-month period.

Sometimes an insurer will move you to another company in its company group. If a company moves you to another company within its group, it must give you 30 days´ notice that your original policy will not be renewed. If the company fails to give you 30 days´ notice, it is required that the company to renew your policy for another year in your original company. If you get a nonrenewal or cancellation notice, it's a good idea to start shopping for new insurance immediately. You'll need to make sure that you keep your liability coverage uninterrupted to satisfy the State's financial responsibility laws. Also, if you still owe money on your car, your lender will usually require you to maintain collision and comprehensive coverage's without interruption. If you cancel or lose these coverage's, your lender will buy single-interest automobile physical damage coverage and add the cost to your loan payment. It's expensive and protects only the lender. You may drop collision and comprehensive once you have paid off your car loan, but you should keep the coverage's as long as you owe money on your car.

An insurance company cannot deny, refuse to renew, limit, or charge more for coverage because of your race, color, religion, or national origin. A company also cannot deny, refuse to renew, limit, or charge more for coverage because of your age, gender, marital status, geographic location, disability, or partial disability unless the refusal, limitation, or higher rate is "based on sound underwriting or actuarial principles." This means the company would have to show valid evidence that you present a greater risk for a loss than others it is willing to insure. Also, a company cannot nonrenew your policy because someone in your family has reached driving age. In addition, a company cannot unfairly discriminate between individuals of the same rate or risk class in its rates, policy terms, benefits, or in any other manner unless the refusal, limitation, or higher rate is "based on sound actuarial principles." You may sue insurance companies for unfair discrimination, including denial of insurance. However, if the court finds the suit groundless, in bad faith, or brought for the purpose of harassment, you may be ordered to pay the insurance company's legal expenses.

• Several major insurer groups write coverage for high-risk drivers through one of their member companies.
• Keep shopping! Each company has its own underwriting guidelines for deciding whether to insure people.

• Move your car, if possible, to avoid blocking traffic and to protect it from further loss or damage.
• Call the police if somebody is injured or killed, if a vehicle can't be moved, or if the accident involved a hit-and-run driver. Your uninsured motorist coverage pays for a hit-and-run accident only if you report the accident to the police.
• Get the other driver's name, address, telephone number, license plate number, driver's license number, and insurance information. Give the other driver the same information about you.
• Record the insurance company name and the policy number exactly as shown on the other driver's proof-of-insurance card. Similar company names can cause confusion, so make sure you write down the correct company name.
• Get the names, addresses, and telephone numbers of any witnesses to the accident.
• Notify your insurance company as soon as possible. Your company probably has a 1-800 number to report claims. If not, call your agent. Some agents have authority to settle small claims. The agent or company will advise you about seeing an adjuster and getting repair estimates. Also, give your agent or company the names and addresses of any witnesses and injured persons.
• If you reported your claim by phone, be sure to follow up in writing as soon as possible to protect your rights under the States' prompt payment of claims laws.
• Send the company copies of the accident report and any legal papers you receive about the accident.
• Cooperate with the company's investigation. You might have to submit a proof-of-loss form and undergo a medical examination.

If the other driver refuses to tell you his or her insurance company, get a copy of the police accident report. The accident report will list the other driver's name and insurance company. If the police did not investigate the accident, you can report the driver's refusal to the police.
 

If you were in an accident caused by another driver, the other driver's insurance company should pay the following costs, up to the policy's limits:

• repair or replacement of your car
• car rental while your automobile is being repaired
• your medical and hospital bills
• wages lost because of an injury
• compensation for pain and suffering if anyone is hurt.

If the other driver's insurance won't cover all your medical bills, you should file a claim for the difference against your Personal Injury Protection (PIP) coverage, if you have it. For amounts over that, you can claim against your uninsured/underinsured motorists (UM/UIM) coverage or your health insurance policy. If the other driver's policy won't cover all of your auto repairs, file a claim against your collision or UM/UIM coverage for the difference (minus your deductible) between the damage to your car and what the other driver's policy will pay. The other driver's insurance company may ask you to sign a release to settle your claim and forgo future claims related to the accident. Don't sign a release until you are satisfied with your total settlement. Get a letter from your doctor estimating the cost and length of your future medical treatment. You might want to consult an attorney before accepting a settlement. Under State law, you have two years after an accident to either settle your claim or file a lawsuit. State law prohibits insurance companies from delaying payment on a claim as a means to pressure you to sign a release. If you believe an insurance company is delaying payment to you so that you will sign a release, you should file a formal complaint. If the other driver denies fault, his or her insurance company may refuse to pay the claim. Independent witnesses could make a difference in getting the company to pay. It's important to get names, addresses, and telephone numbers of any witnesses to the accident. Make sure the insurance company knows about the witnesses. If the company continues to refuse to pay the claim, you can file a claim against your own insurance or you may have to go to court to resolve the issue. Before filing a claim against your own company, it's a good idea to talk to your agent or your company's underwriting department about how a claim might affect your rates on renewal. A company can raise your premium because of at-fault accidents. Also, a company cannot refuse to renew your policy solely because you had one accident that was not your fault in a 12-month period. However, if the accident affected your driving record, your company may consider that in determining your rates, whether you made a claim on the accident or not.

Your insurance company will have an adjuster inspect your car and calculate an estimate for repairs or may ask that you provide repair estimates from mechanics and auto body shops. The insurance company will pay for repairs or replacement only up to the car's actual cash value. Actual cash value is the amount that your car would have sold for before the accident. An insurance company cannot require you to use a particular repair shop. In fact, insurance companies are required to notify you of your freedom-of-choice rights regarding auto repair shops and parts. On collision and comprehensive claims, however, your company is obligated to pay only for parts of "like kind and quality" to those that were damaged. If the repair estimates are more than your car is worth, the insurance company will likely "total" your car rather than pay to fix it. Insurance companies typically value your car by the National Automobile Dealers Association Used Car Guide or by a "market survey" showing average prices of various makes and models. The company's offer might not recognize your car's condition, special features, value on the local market, or may be less than what you owe on your car loan. In these instances, be prepared to negotiate with the insurance company to get what you believe is a fair deal. A company is more likely to raise its offer if you can show that your car would sell for a higher price in your area. Get written price quotes for a similar automobile from several used car dealers, or look in the classified section of your local newspaper for used car prices. Sometimes the insurance company may want to total your car, but you'd prefer to have it repaired instead. You can keep your car if you are willing to subtract its salvage value from the insurance settlement. First make sure the cost to repair the car will not exceed the car's actual cash value. To find out the salvage value, contact local salvage yards for estimates. Be sure to record the yard's telephone numbers and the names of the people you spoke with. If your insurance company totals your car but you can't reach an agreement on the amount to be paid, you can demand an appraisal. Appraisal allows you and the company to hire separate damage appraisers. The two appraisers choose a third appraiser to act as an umpire. The appraisers then review your claim, and the umpire rules on any disagreements. The appraisal decision is binding, but only as to the amount of the loss. If there is a dispute over what is covered, you can still pursue a settlement of the coverage issue after the appraisal takes place. You are required to pay for your appraiser and half of the umpire's costs. Appraisal is available only in disputes between you and your insurance company. It is not available if the other driver was at fault and you disagree with his or her company's offer.

If you have more than basic liability coverage or your accident was caused by another driver, you should be able to get a rental car while yours is being repaired:

• If the other driver was to blame, his or her liability insurance will pay for a rental car.
• If the accident was hit-and-run or the other driver was uninsured and at fault, your UM/UIM property damage coverage will pay for a rental car.
• If your car was stolen and you have comprehensive insurance, your company will provide a set amount each day, up to your policy's limit, for a rental car.
• If your car is being fixed or replaced for some other reason, your insurance company won't provide a rental car unless you have rental reimbursement coverage.

Once you have filed a claim, State law sets these deadlines for the insurance company to act:

• The company must respond within 15 days after receiving your claim in writing. It probably will ask you to document your loss.
• After you submit any requested documentation, the company has 15 business days to accept or reject your claim.
• Once the company agrees to pay your claim, it must send your check or draft within five business days.

A company that cannot meet these deadlines must send you a notice explaining why.

Young drivers must comply with the state's financial responsibility laws, just as older drivers do. Most young drivers, however, have the option of satisfying their legal requirements by being added to their parents´ auto policy. Adding a young driver to a parents´ policy can be expensive, but it's cheaper than taking out a separate auto policy. A parents´ policy covers children living at home or away at school, even when not named on the policy. Even though children are automatically covered on their parents´ policy, it's important that they be listed on the policy as soon as they reach driving age. Insurance companies are required to charge the correct rate, based on the classifications of the drivers in your family. If you don't have all of the drivers in your family listed on your policy and the company learns about them later - because of an accident claim, for instance - the company will bill you for the extra premium you should have paid. If you have children attending school away from home, tell your insurance company. Because rates are based on where a car is usually located, the insurance company may need to adjust your premium. If the school is in another state, it's a good idea to check on the financial responsibility laws in that state to make sure you have the appropriate coverage's. When you add your children to your policy, they may be rated on the most expensive auto in your household. The rules for this are complex and address a variety of situations, however. Generally, if a teen-teenager is the "principal driver" of a particular automobile, his or her rate will be based on that car. If not, the teen-age driver is assigned to the car (usually the most expensive) that produces the highest rate.

You may want to remove your children from your policy when they are no longer living with you. You'll probably have to prove to the insurance company that a young driver no longer lives at home, however. You can use documents like a driver's license, lease agreement, or utility receipts to prove that your child has moved. A remotely possible alternative would be a named driver exclusion added by mutual agreement between you and the insurer. It's probably not a good idea to remove your children from your policy who have moved because they are attending school away from home. An insurance company may require you to keep them on your policy, even if you would like to have them removed. Technically, you could remove your child from your policy with a "named driver exclusion" endorsement. Few companies will agree to this, however. Besides, it's risky to drop coverage when your teen-teenager might occasionally drive at school or when home on visits. You can sometimes remove a teen-aged driver from your policy by purchasing a non-owner policy. This usually is a bad idea. A non-owner policy merely provides additional liability insurance when driving a non-owned vehicle. If your teen-teenager has an accident while driving your car, neither your policy nor the non-owner policy will pay for your vehicle's damage. You might also be unprotected financially if held liable for an accident caused by your minor child. Finally, if the non-owner policy is rated properly, your teen-teenager's liability insurance might cost as much as or more than if he or she was on your policy.

Unfortunately, insuring young drivers is usually expensive. Some young drivers may qualify for discounts, however. If you are under 18, you must complete a driver training course approved by the state to obtain a driver's license. Many insurance companies give a driver training credit for teen-teenagers who complete driver education. Parent-taught drivers are eligible for the discount if the parent used a state-approved course. Some companies offer discounts to young drivers who make good grades in school or who belong to certain youth groups. Ask your agent about any discounts for young drivers.