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Who Needs Auto Insurance?
In most states insurance is a prerequisite to registering your car. So if you want to drive your own vehicle, you must be insured.
Auto insurance is divided into several different types of coverage:
Liability covers damage to other people's property and injuries you may cause while operating an automobile.
Collision covers damage to your own vehicle in an accident.
Other-than-Collision covers fire damage to your vehicle, break-ins, vandalism or theft, as well as natural disasters (earthquake, hail, hurricane, flood, etc. - unless the vehicle is overturned, then it is considered a collision).
Medical payments insurance guarantees emergency and related medical payments, usually in the range of $5,000 to $10,000, for you, your passengers and other parties, regardless of who is at fault. It also covers you and members of your household in any accident involving an automobile, whether you are on foot, in a friend's car, riding a bicycle, etc.
Uninsured motorist (UM) and underinsured motorist (UIM) coverage protects you and your passengers if injured in an accident with drivers carrying insufficient liability coverage.
Extra coverages include expenses for towing, labor, temporary replacement vehicles, etc. These are generally defined as add-ons or endorsements to your policy.
Your agent can offer you more information on the limits and types of coverage that will best suit your situation.
Do I always need to buy insurance when I rent a car?
Am I not covered by my own policy?
If you have fully insured your own vehicle, including collision and comprehensive coverage, and rent a vehicle for pleasure only (while on vacation, for example), you may not need to buy extra insurance from the rental company. In most states, your basic rental fee by law will include liability coverage for damage or injury to others. But different rules apply when you rent a car for business purposes, so check with your agent for details.
Saving Money on Auto Insurance
ALL AUTO INSURANCE CONSUMERS:
Talk with your insurance agent BEFORE you buy a car. Theft frequency, repair costs and passenger protection affect insurance rates. For information on a certain automobile’s “crashworthiness,” check the Insurance Institute for Highway Safety’s web page, located at: www.highwaysafety.org.
Always shop around. Using an independent agent — who sells insurance for an average of eight different companies — can save you time and money.
Use higher deductibles to lower premiums. Insurance is bast designed to protect consumers from major financial losses. How catastrophic a $500 loss is depends largely on a consumer’s income level or savings. Certain consumers should consider the cost-benefit of a higher deductible — the amount for which you accept responsibility before the insurance company pays anything. The savings can be used to increase liability coverage limits that protect you from claims made by others. Choosing a higher deductible of $500 to $1,000 can reduce your premium by 10 percent or more, but may not be feasible for those who cannot afford to cover the higher cost.
Buy a low-risk car, one that is not a top theft target. Consumers can check the auto theft losses by make and model through the Highway Loss Data Institute’s web page: www.carsafety.org.
Take advantage of discounts. Most, if not all, agents and companies offer premium discounts, and 85 percent of auto insurance consumers say they take advantage of them. Depending on the insurance company, consumers can often lower their rate by 5 to 35 percent.
Below are some of the most popular discounts listed by percentage of auto insurance consumers who say they use them:
Good driver/accident-free (62%)
Multiple cars on one policy (49.3%)
Anti-lock brakes (40.1%)
Airbags (40.3%)
Multiple policies with one insurer (37.8%)
Passive restraints (31.8%)
Anti-theft devices (24.5%)
Drivers’ education (19%)
Good student (16%)
Senior citizen/retiree (2.4%)
Non-smoker/non-drinker (1.0%)
Other (2.5%)
- Defensive driver course
- Low annual mileage/car pool driver
- Student away at school
Keep a clean driving record. Avoid tickets and at-fault accidents.
Consider where you live. Rates vary widely by state, even county. Theft and vandalism rates, police response time, local road and traffic conditions, the quality and cost of medical care as well as litigation rates are factors that may affect the cost of auto insurance in a particular area.
Regularly review your auto insurance policy to make sure you are not overinsured or underinsured. One in every four auto insurance consumers has not reviewed his or her auto insurance coverage in the last year.
FAMILIES WITH TEEN DRIVERS:
Young drivers are expensive to insure because, statistically, they are involved in more accidents than any other age group. But that doesn’t mean parents and teens can’t take some simple steps to reduce their auto insurance premiums.
Encourage teen to keep a clean driving record. A history of tickets or at-fault accidents is the biggest culprit when it comes to sky-high insurance premiums for teen drivers.
Ask about formal agreements not to drink and drive. The availability of a discount for signing such an agreement varies among insurers and states.
Insure teen as an additional driver on parents’ policy to take advantage of multi-car discounts. It is generally not economical for a teen to purchase a separate policy.
If possible, assign teen to the least valuable car. Generally insurers will allow consumers to do this only if the number of automobiles equals or exceeds the number of insured drivers on a policy. Otherwise, the teen will generally be insured as a part-time driver of the most expensive car.
Take advantage of young driver discounts. Many insurers offer premium discounts for good students (who maintain a grade average of B or better), those who take approved drivers education courses, and those who limit their driving hours.
Check out group offers. Check with your credit union, employer, alumni club or other organization to which you belong to see whether they offer group discounts through a particular insurer.
Drop unnecessary coverages. Save money by dropping rental reimbursement, glass, towing and replacement cost coverages. Towing coverage already may be covered as a benefit of membership in an automobile club or other organization.
Raise deductibles and pay for minor damage out of your own pocket if you suspect you may have to file multiple claims over the next few years.
If buying a car for a teen, take insurance costs into account. Consider purchasing a less expensive auto that is less expensive to insure. Remember: If you can’t afford the insurance, you can’t afford the car!
Ask about ‘away at school’ premium discounts. Some companies reduce premiums when students leave home for school and leave the car at home, assuming that the young driver will use the car only when home on break.
THOSE WITH A HISTORY OF TICKETS OR ACCIDENTS:
Under state law, all insurance companies are required to offer coverage to anyone considered a “good driver.” Generally this means that a driver has not had more than one at-fault accident or moving violation in the last three years. According to IIAA’s survey of auto insurance consumers, this includes approximately 90 percent of all drivers.
The approximately one in 10 drivers with multiple “strikes” often find their options fewer and prices higher when it comes to insuring their automobile. Those consumers with the most violations may find their only options in the nonstandard auto insurance market or in their state’s assigned risk plan.
The good news is that within a few years, even those considered the highest risk can work their way back to good driver status and back into standard market.
Be honest. Don’t hide your driving record. Report all speeding tickets, moving violations and at-fault accidents within the last 3-5 years to your agent or insurance company. Keep accurate records of all violations and damage dollar amounts.
[If an agent or company discovers a series of undisclosed violations, you may be subject to hefty premium increases or non-renewal. If you are honest about your record, however, rarely will your driving record subject you to cancellation. Only about 7 percent of auto insurance consumers report ever being dropped by their insurance company.]
Consider higher deductibles. Work with an agent to maintain your current coverage through higher deductibles. If you are in danger of being dropped or non-renewed, an agent or company may work with you to maintain current coverage if you will absorb some of the previous losses through higher deductibles for a certain period of time.
Stay with standard companies. Non-standard insurers often are viewed by standard insurers as insurers of last resort and therefore reflect on your desirability as a customer.
Clean up your driving and credit records. Many insurance companies use this information as an underwriting tool when evaluating acceptable risk.
Explore safe driver courses that offer ticket or accident forgiveness. Some companies also offer accident forgiveness for long-time customers.
Take advantage of discount opportunities. Those in high-risk categories can offset some of their premium costs by taking advantage of discounts offered by insurers for defensive driving courses and alarm systems.
Use an agent. Agents can guide you through the process of finding the right insurance. Independent agents in particular, since they do not work for any one company, can provide leverage with your company during the claims process. Your agent can also help you evaluate and manage your risks. And, if you are dropped by your company, independent agents can place you with another insurer.
NEW GRADUATES AND YOUNG ADULTS:
The period of time following graduation is one of transition. Chances are you’ll get a new job and maybe a new car. And a new car means you have to think about auto insurance. The bad news is, even though you’re not a teenager anymore, you may still have to pay higher car insurance rates until you are age 25 or married. After meeting these thresholds, your insurance bill will generally come down because insurers view you as being less risky.
Meanwhile, how do you ensure that you’re getting a good deal on you auto insurance? Follow these money-saving tips:
Shop around, but start with your parents’ insurance agent and company when purchasing your first auto insurance policy. An agent or company who is familiar with your family may rate you more favorably.
Pick and stick with an insurer. Creating a long-term relationship with an insurer will save you money through multi-policy discounts, even accident forgiveness, down the line, but don’t forget to regularly review your coverage and always keep your eye open for better deals. If you find one, tell your agent or company. They may match the offer rather than lose your business.
Use premium discounts offered by insurers for such automobile safety features as anti-lock brakes, air bags and passive restraints.
Combine auto insurance policies when you marry. This may qualify you for a multi-car discount.
Notify your agent of life changes, such as the birth of a child or a major purchase. These events will drastically change your insurance coverage needs.
Don’t buy more coverage than you need. Save money by dropping rental reimbursement, glass and towing coverages and replacement. Towing coverage may already be covered as a benefit of membership in an automobile club or other organization.
Check out college connections. Check with your alumni club or other organizations to which you belong to see whether they offer group discounts through a particular insurer.
SENIORS:
For older Americans, driving and maintaining a car can be expensive. And as seniors age, their auto insurance rates can climb. While insurers recognize that, compared with younger groups, fewer seniors are licensed to drive and drive fewer miles overall, as they grow older they are also increasingly liable to be involved in serious or fatal accidents. Motorists age 75 and older have a higher rate of fatal motor vehicle crashes than drivers in all other age groups except teenagers.
The number of motor vehicle deaths among those 75 and over has steadily increased over the last decade — up an alarming 31 percent between 1986 and 1996 — while the number of fatalities among drivers age 44 and younger decreased overall during the same time period, according to the National Safety Council.
Seniors age 75 and over were the only age group to experience an overall increase in motor vehicle death rate over that same ten year period during which the nation experienced an overall decrease in the motor vehicle death rate.
With such daunting statistics, how can seniors save money on auto insurance and prevent insurance companies from discontinuing their coverage? Some suggestions:
Be honest and realistic about your risk. Seniors need to decide whether a pattern of accidents reveals a loss of driving aptitude. Insurers look carefully at accident frequency patterns in determining risk.
Be loyal: stay with one agent or company. Those who are 65 and over should be careful about moving their insurance from company to company or agent to agent, as they are statistically harder to insure as they grow older. A long-term relationship with one company or agent will provide you more leverage in the claims process, especially if a pattern of accidents or claims appears. However, do not rule out the advantages of shopping around, even if you do not have a perfect record. Ask friends for advice and use an independent agent who can shop around for you.
Choose carefully when shopping for a car. Some of the models particularly popular with seniors also are, unfortunately, popular among thieves, too. While one model may be less expensive than another, it may cost more to insure it if its theft rate is higher. Do your research.
Take advantage of special senior discounts for retirees and mature driver education courses.
Take advantage of multi-policy discounts. Many insurers offer discounts to consumers who have maintained several types of policies with one company (i.e., homeowners coverage, life insurance, auto coverage).
Low mileage and higher deductibles can reduce premiums. Ask your agent or company if they offer discounts for those who drive infrequently. Raise your deductible to save on your premium.
The benefits of membership. Membership in certain groups may offer special insurance deals for seniors or group rates with certain insurers.
Maintain good health. Many insurers ask for medical records that attest to seniors’ vision, hearing, and general wellness. Simply complying with that request allows many older policyholders to keep the same rates year after year.
EMPLOYERS:
Review employee driving records to accurately assess your risk.
Evaluate your personal auto policy. Depending on state law, full-time household employees (like nannies) may be required to be listed on the employer’s auto insurance policy. And for part-time help — like baby-sitters or home health care workers — who use the family car, employers should, at a minimum, make sure that their auto insurance policy extends coverage to additional drivers.
THE SELF-EMPLOYED:
Consider your employment category. Does your job require that you use your car for business frequently — pizza delivery or taxi, for instance? Your personal auto insurance policy may exclude coverage in these cases requiring you to purchase additional commercial auto coverage.
