What are the rules where you live?
One of the first things you should do when searching for auto insurance is research a few questions through your state or province’s insurance department. In the U.S., you can contact the National Insurance Consumer Helpline at 800-942-4242 or visit the National Association of Insurance Commissioners. In Canada, you can contact the Insurance Bureau of Canada at 844-2ASK-IBC for guidance.
When researching, you will want to find out:
- Do we have no-fault insurance?
- What is our insurance pricing policy?
- What insurance does the law require?
No-fault insurance
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 and limitations vary. You also want to find out if your insurance covers you when you drive in other places or if your coverage extends to rental cars.
Insurance pricing policy
Different jurisdictions have different policies:
Noncompetitive pricing requires all insurance companies to charge the same price for the coverage offered
Prior approval pricing means that an insurance commission must approve prices and prices will generally vary only slightly
Competitive pricing allows companies to charge whatever the market will bear.
Insurance requirements
Many jurisdictions require you to carry some level of liability insurance. If yours does not, it may require you to prove that you can pay specified amounts if you cause an accident resulting in bodily injury or property damage. Your proof would be insurance, large amounts of cash, or other security. You may also be required to pay an uninsured motorist fee when you purchase your license plates or tags. A driver rejected by insurance companies may apply for a policy through his/her state or province’s insurance plan for assigned risk drivers.
Types of auto insurance
Once you know the rules and requirements where you live, you can look at the specific types of insurance and decide what to buy. In most cases, car insurance follows the vehicle, not the driver. However, this depends on your insurance, where you live, and who is listed on your auto insurance policy. Take time to review your policy before assuming you are covered if you borrow a friend’s car or rent a car on vacation. Ask your insurance agent for details.
- 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. Most people should consider carrying this coverage.
- 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 or personal injury protection. Pays medical expenses that result 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, flood, or a variety of other causes. Note: theft of personal belongings in your car, like cell phones, may or may not be covered by your homeowners’ insurance. Study your policy or call your agent.
- Uninsured or underinsured motorist. Pays for costs related to injuries or property damage to you or other occupants of your car when caused by an uninsured, underinsured, or hit-and-run driver. Carry uninsured motorist coverage at limits you feel the other driver should have.
- Specialty coverage. Adding supplemental insurance coverage like towing and labor or car rental reimbursement to your basic auto insurance policy may save you money. For example, for a few dollars added to your monthly premium, you could get coverage that will pay for a rental car while your car is in the shop. You can also compare the costs for this coverage with rates you get from a specialized provider.
Choosing an insurer and policy
When shopping for auto insurance, be sure to get at least three quotes, and remember that the lowest is not always the best. When comparing policies, find out if there are any fees you will have to pay up-front on top of your monthly rate. Also, consider access to agents and prompt handling of claims when you make your choice.
Ask friends and family about their experiences with various companies and see if they have recommendations. Be sure to check out BBB.org for complaints and reviews of companies you are considering.
Ask agents at potential insurance companies these ten questions:
- Under what conditions can the cost of my insurance be increased or the policy be canceled?
- 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?
- 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?
- 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?
- If pre-inspections are required, how quickly can they be done?
- 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?
- Exactly what expenses are covered as part of the policy? What about expenses incurred as the result of an accident such as childcare costs, lost wages, or rental car costs?
- 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?
- What are the deductibles on my policy? How would choosing higher/lower deductibles affect the cost of premiums?
- Does the collision coverage have a clause allowing me to reject a claim settlement I feel is unsatisfactory?
Savings checklist
In addition to comparing policies from different companies, there are steps you can take that will affect the cost of your policy.
- Consider the deductible. See how rates change with different deductible amounts. Deductibles represent the amount of money you pay before your insurance company starts to pay. By requesting higher deductibles on collision and comprehensive coverage, you can lower your insurance costs substantially.
- Think twice about comprehensive and/or collision coverage on old cars. It may not be cost-effective to have collision or comprehensive coverage on cars worth less than a few thousand dollars. Check to see if claims you might make would substantially exceed your annual costs and deductible amounts. You can refer to the Kelley Blue Book or Canadian Black Book to determine the value of your car.
- Buy a “low profile, low maintenance” car. Expensive, high-performance cars are fun to drive, but they are costly to repair and attractive to thieves. The premiums of these cars can run two to three times higher than less expensive cars.
- Ask about discounts. Some companies offer discounts to motorists who drive less than a certain number of miles a year. You may also get discounts if you have automatic seatbelts, anti-lock brakes, and/or airbags. Discounts may also be given depending on your age, for no accidents in three years, driver training courses, anti-theft devices, good grades for students, long-time policyholders, and more.
- Combine policies with one carrier. Many insurance companies will reduce your premium if you insure more than one car with them. You might also save money if you bundle your homeowners’ or life insurance from the same company. Do not switch carriers unless the rates for the other policies are competitive.
- Keep an eye on your credit. Your credit score can impact the rate of your car insurance. The better your credit score, the lower the price of your insurance. If you need credit repair or debt relief services, learn who you can trust.
- Maintain a clean driving record. Your insurance premiums will likely rise in cost if you face traffic violations or are involved in auto accidents. Having a good driving record can help to maintain a lower price on your premium.
Understand your policy
Once you settle on an insurance company, make sure you read and understand every part of your policy. Insurance companies will only do what they are committed to doing, no more, no less. A policy is a contract and you should make sure you understand all clauses before you sign it.
Know what types of coverage you have, the length of the policy, your rate, and when payments are due. Also, know how to contact the company in the event of an accident and keep proof of insurance in your vehicle at all times.
Read carefully to ensure only the items you want to purchase are listed and that all figures and costs are correct.
Talk to your insurance agent or representative once a year to see if your policy needs to be updated. As your needs change, your coverage may also need to be adjusted.
For more information
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