19 things you need to know about auto insurance

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Chances 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 for Dummies.

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 be specific.”

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 and folds.

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 in writing.

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 rulings.

14. Call your agent as soon as you can after an accident.
“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 process.
“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.