19 things you need to know about auto insurance
are mama never sat you down for that little talk -- the one about liability,
collision, comprehensive and deductibles.
Still, if you drive a car, you need to know the auto insurance
facts of life. And better you should learn it here than on the street -- after
an accident. Here are 19 pearls of motherly wisdom to help you get the most
coverage for the least money:
1. Spend your insurance dollars wisely.
"Shift the money around to the things that could wipe you out," says
Jack Hungelmann, an agent/consultant with Corporate 4 Insurance Agency of Edina,
Minn., and author of Insurance
While most people could cover a $500 deductible, a $500,000 lawsuit
would be a different matter. So why do so many consumers pay extra for low deductibles
and carry close to the minimum on liability coverage?
Instead, Hungelmann says, raise your deductible (and bank that
amount for emergencies) and increase your liability coverage. Your premiums
should remain roughly the same
Hungelmann's rule of thumb in a society where critical care bills
can easily cost six digits: "Nobody should carry less than $500,000 per
person," he says.
The good news: Taking your total liability coverage from the standard
$300,000 to $500,000 will only cost about $60 a year for two cars or $60 for
one car if you're a younger driver.
"But younger people who have a fairly low net worth don't
need hundreds of thousands in liability coverage," says Bill Feldhaus,
associate professor of risk management and insurance at Georgia State University.
Best bet: Talk to a professional you trust and come to a decision
on deductibles and liability coverage that works for you.
"You always want to look at the trade-offs -- what do I save
in premiums vs. how much risk do I take on?" Feldhaus says.
Another place to shave some money from the premium, says Hungelmann:
personal injury protection, also known as medical payments coverage. If you
already have health insurance for yourself and your family, that would cover
your medical bills after an accident, he says. Why pay twice?
2. Don't just look at your total liability
-- also look at your coverage per person.
Many insurance policies specify that the company will pay up to $300,000 in
total liability coverage if you are found liable for an accident, but only $100,000
for each person injured. That means if you are at fault in an accident that
leaves someone with a $200,000 lawsuit, you will be on the hook for half --
even though you thought you had $300,000 worth of coverage.
Instead, says Hungelmann, have your agent write the policy, so
the total amount paid per accident and per person are the same. That way $300,000
in coverage means $300,000 in coverage -- no matter how you divide it.
3. Consider buying an umbrella policy.
If you have considerable assets or are likely to have them in the future, consider
an umbrella policy that would cover both your home and auto. Umbrella policies
usually start at $200 to $300 a year for up to $1 million worth of coverage.
4. Seek out good advice.
Your brother-in-law may be a great guy, but do you really want to take his advice
on auto insurance? If you think you have to buy from a friend or relative, get
some advice from a neutral, credentialed professional. For a few hundred dollars,
you can hire a pro to look at your specific family and financial situation and
recommend an insurance plan.
If you're shopping for an agent, ask about experience. In many
places, agents need only a week of training before they can sell insurance,
says Hungelmann. His recommendation: Seek out a pro who has gone back to school
to earn industry credentials. Designations to look for include: CPCU (Chartered
Property Casualty Underwriters), which requires about 1,000 hours of extra
classes; CIC (Certified Insurance Counselor), which requires about 100 extra
hours; and the AAI (Accredited Adviser in Insurance), which also requires about
100 hours of study.
5. Keep a good credit rating.
Many insurance companies use your credit rating to determine whether to insure
you and how much to charge.
6. Make your insurance company pay for a
rental after an accident.
If you don't have an extra car in the garage, make sure your policy covers the
cost of a similar-sized rental should your car have to go into the shop after
a wreck. While a week may seem like the blink of an eye to a body shop, a one-week
rental could add hundreds to your out-of-pocket costs after an accident.
7. Shop around.
"You can pay more than double for the same insurance, so it does pay to
shop around," says Bob Hunter, director of insurance for the Consumer
Federation of America.
Some states offer price guidelines for various types of coverage
in different areas, and a few states even put the information online. Call your
state insurance department, and ask if they have pricing information available.
If you call around for quotes, include a few brand name companies
as well as a few independent agents who will shop more than one company for
you. And don't assume that you'll pay more for a well-known entity.
"Insurance companies with the best satisfaction often have
the best price," says Hunter.
Don't just ask for a quote. Give the agent exact numbers on the
coverage you need.
"You want to compare apples to apples," says Dave Hurst,
the public affairs liaison with State
Farm Insurance Companies. "And the only way you can get that is to
8. Take advantage of every discount.
If you've gone a certain number of years without an accident or ticket, store
your car in a garage or drive less than a certain number of miles each year,
your company will probably give you a discount. Ditto if your car has safety
features like airbags or anti-lock brakes, or anti-theft devices like a tracking
system or alarm. You often get breaks if you have more than one car on your
policy, if you buy your policy through the same company that insures your home
or if you pay your premium annually.
Senior drivers can get a discount for taking a defensive driving
course. Likewise, teens can shave a little off the premium by maintaining good
grades or taking drivers ed.
9. If your teen is away at college, take
him off the auto policy.
According to industry professionals, teen drivers add anywhere from 50 percent
to 500 percent to a premium. If children are going to school more than 100 miles
from home, you can take them off the policy and save a serious chunk of money,
according to Loretta Worters, vice president of communications for the Insurance
Information Institute, an industry organization. Two caveats: The kids can't
drive at school unless they get their own insurance, and if they come home for
a break, don't loan them the car.
10. If you drive an older car, consider
dropping collision insurance.
This is one of those cost-saving measures where you have to do the math, and
also make sure the idea meets your gut-check test. This is how it works: If
you are driving a 12-year-old car worth $2,000 and the car is totaled, the most
you will get from the insurance company is roughly $2,000. Would you rather
bank the money you're paying in collision insurance? The critical questions
to ask: How much of your premium is collision insurance? And could you lay your
hands on $2,000 if you needed a new car tomorrow?
11. Shop service, as well as price.
Unlike homeowners insurance, most people will file an auto claim at one time
or another. So you need a company that is responsive and responsible.
"Some companies view the policy holder as a member rather
than sort of an enemy, and will help you get a claim settled at a reasonable
amount, and some don't," says Hunter.
Your state insurance department and the National
Association of Insurance Commissioners keep records of the numbers of complaints
and will share the information.
After a major claim, a good agent will also act as a coach, says
Hungelmann, advising you on the way to present the best case to the adjuster
and helping you in a dispute if the adjuster makes a bad call. With an Internet-based
company or one you can reach only through an 800-number, you may sacrifice personal
service just when you need it most.
You can also check with companies like A.M.
Best Company Inc. and Standard
& Poor's Insurance Ratings Service to research a company's financial
solvency. Cheap coverage does you no good if the company takes your premium
12. Understand the claims process when you
buy your policy.
Make your agent walk you through the claims process upfront. Will your insurance
pay for brand name or generic parts to fix your car after an accident? Will
you be limited in your choice of mechanics or body shops? If the language in
your contract is unclear, have your agent put anything you don't understand
13. Ask about "diminished value."
This is a hot button in the insurance industry, and the subject of lawsuits.
The big debate: Is a car worth less after an accident? If so, should the insurance
company have to fix the car and pay you the difference? Ask your agent, and
call your state insurance department to find out about current regulations and
14. Call your agent as soon as you can after
"Most insurance companies have time limits, usually 48 hours," says
Worters. If you want to be certain the company will cover your accident, make
that call a priority.
15. If you have a claim, start a diary.
After an accident, put everything in writing -- names, dates and what was said.
Depending on the laws of your state, you may also want to record phone conversations.
Save receipts and get a copy of the accident report.
16. Do what you can to further the claims
"The best bet is for you to take the initiative," says Worters. "Shop
around and get estimates."
17. Include everything in your loss estimates.
For instance, if your car is totaled, you may be entitled to recover the sales
tax and registration fees for your replacement car. Contact your agent and your
state insurance department to find out what you should include in your estimates.
18. Give an adjuster the benefit of the
doubt -- but press on for what you need.
Adjusters are human. "And like referees, they might make a bad call once
in a while," says Hungelmann.
You'll get further if you keep your temper and work your way up
the food chain. If a claim is denied or if you think the amount the company
offered is not enough, get the adjuster to put the reasons in writing. Compare
the explanation the company gives with what's written in your policy.
Enlist your agent to make calls on your behalf. Talk to the manager
of the claims department, and ask to have the matter reviewed. You can also
file a complaint with the state insurance department.
If that doesn't work, consider arbitration. You pay half the associated
costs, but you get an answer more quickly than if you go to court. Things to
check first: Do you have any recourse if you're unhappy with the outcome? And
what's the record on consumer satisfaction with this company's arbitration hearings?
As a last resort: sue.
19. If you switch insurance companies, notify
your old company.
Tell your old company in writing that you are canceling your auto policy and
have obtained new insurance. Make sure that the new policy picks up immediately
without any gap.
If your old company goofs and reports to the state that you are
driving without insurance, some states begin steps to suspend your driver's
license. If you get a warning letter from the state, address the situation immediately.
Otherwise, your next routine traffic stop could be anything but routine.
Dana Dratch is a freelance writer based in Atlanta.
-- Posted: April 6, 2004