Compare prices. Here lies your single biggest shot at saving money. In any city or any zip code, some insurers charge twice as much as others for exactly the same coverage.The Search for the Best and Cheapest Auto Insurance
If you hold your car for four years or so and
have a teenage driver, it can cost you more
to insure the car than it did to buy it.
Auto insurance is a toll bridge over which every honest driver has to pass. Policies cost the most in cities and suburbs. That’s where most of the cars are and, as night follows day, most of the accidents. But even in the wide-open countryside, the price of coverage is steep.
Insurance is expensive for a lot of reasons:
New approaches to risk evaluation are reclassifying many drivers. People who once would have been “preferred risks” now are labeled “standard risks” and charged a higher premium. Many formerly standard risks are dropping down to substandard, where they must pay even more.
Some companies consider your level of education and type of occupation as part of their underwriting. This raises rates for people in certain types of jobs (the list isn’t publicized) and with less formal training. That’s a nasty approach, in my opinion, and unfair to good drivers who didn’t finish school or land a job that the insurer doesn’t approve of, but it’s legal.
Insurance premiums follow cycles. For a few years, underwriting standards loosen; premiums are flat and sometimes fall. Then profits get dinged and all the companies tighten together. Rates may shoot up for two or three years, then settle into a new plateau.
The good news, at this writing, is that insurers are competing for the very best drivers, in the statistically safer parts of the country, by reducing their rates. There are ways to reduce your auto insurance costs, about which more below. But how you insure against an auto accident—and what you yourself can expect to recover—depends on where you live.
If you live in a “fault” state and are hurt in an auto accident that is the other driver’s fault, you collect from his or her insurance company. That presumes that the other driver has insurance, which may not be the case. Many of the country’s most reckless road hogs don’t bother with coverage, even in states that supposedly require it. Tens of thousands of drivers simply can’t afford it. You have to buy uninsured-driver coverage to protect against this risk.
If you luck out and the other guy does have insurance, the policy might be too small to cover all of your injuries. You can sue for a larger amount, but it won’t do you any good unless the driver is rich enough to pay. Moral: make sure that you’re hit only by a millionaire.
If you caused the accident, the other guy doesn’t have to pay. Your own liability insurance pays for the person you hit but not for any injuries you sustained. If you’re only partly at fault, state law dictates to what extent each policy pays.
The fault system does produce occasional huge judgments. You can sue not only for medical costs and the wages you lost while out of work but also for “pain and suffering,” which is where the big money lies. But it’s a lottery. You collect only if (1) the other guy has enough insurance and personal assets to cover a judgment and (2) the accident was at least partly his fault. Many injured people get much less than they deserve or nothing at all.
Lawyers love fault laws because they make so much money on lawsuits. But fault systems probably cost you money in higher insurance premiums and can’t be relied on to help you if you’re truly hurt. Pure no-fault is better, but whenever it threatens to be enacted into law, the lawyers spend huge sums of money to defeat it. They try to persuade the voters that fault laws are good for them. When that fails, they lobby to water down no-fault so it can’t achieve its goals. Most of us live in fault states.
If you live in a no-fault state* and are hurt in an auto accident, your own insurance company pays your medical bills and lost wages up to a certain ceiling. You collect even if the accident was entirely your fault. So everyone with auto insurance is protected, not just people who luck into the “right” kind of accident.
If your injuries are bad enough or your medical bills are high enough, you can also go to court and try for a pain-and-suffering award. There, fault rules apply: you don’t collect unless you can prove that the other driver was at least partly at fault.
Three states—Kentucky, New Jersey, and Pennsylvania—offer you a choice: either fault or no-fault insurance. If you choose fault, however, you have to pay more for it.
One state, Michigan, pays for property damage under its no-fault rules. The rest address only bodily injury. Consumer advocates consider Michigan’s law the best in the country. It combines unlimited medical and rehabilitation costs for an injured person with tough standards for limiting lawsuits.
No-fault can save money and slow down the rise in auto insurance premiums, but only if lawsuits are restricted to serious cases such as death, disfigurement, or severe impairment. Five states pursue no-fault seriously, in the view of Jeffrey O’Connell, the father of no-fault insurance and professor of law at the University of Virginia: Michigan and New York, closely followed by New Jersey, then Florida and Minnesota. In the rest, even people with modest medical bills are allowed to sue. The natural result: accident victims run up their medical expenses so that they can get into court, and no-fault’s potential savings don’t materialize.
In either type of state, your insurer will investigate the case, handle the settlement negotiations, defend you in a lawsuit, and pay any judgment against you up to the limit of your policy. If the judgment is larger, you have to cover the excess amount yourself.
It protects you if you’re sued for injuring someone in an accident, including pedestrians and passengers riding in your car. The policy pays the victim’s medical costs, loss of earnings, and pain and suffering. You’re also protected if someone is injured by a family member driving your car, a friend who is driving your car with permission, or a family member who is driving someone else’s car with permission.
How much liability coverage should you carry? That depends on how you look at it. I offer three angles of vision:
1. Protect your assets. That means buying enough insurance to cover your net worth, on a bet that you won’t be sued for a higher amount. If you don’t own much besides your car, you’d buy only the minimum that your state requires—maybe $20,000 for every person injured, up to a cap of $40,000 for the whole accident (expressed as 20/40). If you own a home, you might want $100,000 for each person injured, to a maximum of $300,000 per accident (100/300); or $300,000 per accident without regard to how many people are hurt. The wealthy might want $500,000 to $1 million worth of coverage or more.
But how good is this strategy, really? You can be sued for more than your insured amount, and you’re not off the hook just because the judgment exceeds your net worth. You can be ordered to pay out of future paychecks for years and years. Your earning power is an asset that needs to be protected too.
2. Protect yourself. If you’re hurt by a driver who’s uninsured or underinsured, you can be paid by your own auto policy, even above any no-fault limit. But only a handful of states let you purchase more protection for yourself than for the other guy. A $20,000 cap on your liability insurance (the maximum the insurer will pay the other guy) normally means a $20,000 cap on the amount of protection you can buy against uninsured motorists (the payment you and your family can receive). By pumping up your liability coverage, you’re also protecting yourself.
3. Protect the injured. Drivers have a social and moral obligation to everyone else on the road. If you damage a life, you should pay for it. That means buying a substantial insurance policy—at least $100,000/$300,000—even if you don’t have a lot of assets to protect. Higher liability limits may not even cost very much.
This pays for any damage you do to someone else’s property. Buy at least enough to cover a car—say, $30,000, or $100,000 if you’re tempted to veer into BMWs. But what if you hit a bus or a storefront? Costs can climb pretty fast. Some extra protection usually doesn’t cost very much.
This coverage picks up the medical and funeral bills of anyone injured in your car, without regard to who caused the accident. It covers your family if they’re hurt as pedestrians or while riding in another vehicle, including a taxi or a bus. It covers an elderly friend who stumbles while getting into your parked car and breaks her hip.
But it offers less protection than meets the eye. Your auto insurance will normally cover only the bills that your health insurance doesn’t pay, which may not be very much. Those injured in your car may also have health insurance. If they want more money, they’ll sue for it whether or not you have medical-payments insurance. Many people skip this coverage or buy $2,000 per person just to plug the deductible in a health insurance policy. If your health insurance is skimpy, beef up that policy, not this one. If you have no health insurance or limited insurance, however, medical payments coverage is a must.
In no-fault states, medical payments are tucked into your basic auto insurance policy.
You’re covered for (1) your own medical bills up to a stated limit; (2) part of your lost wages; (3) funeral expenses; (4) in some states, replacement services—for example, a babysitter hired while a mother is in the hospital.
How much you ultimately collect depends on your state. Often the ceiling is $10,000, but there are states above and below that level. There may be a low ceiling on each doctor bill. You can usually fall back on your health insurance if no-fault doesn’t pay enough of each bill, but that depends on your state. Ask if you can choose between using your no-fault and health insurance policies.
To lower the cost of your personal injury protection, see if your medical bills and lost wages can be paid primarily by your regular health and disability insurance. If so, you can buy less PIP. It becomes no more than a backup system for expenses otherwise unpaid. Some insurers also let you save a few dollars by signing up for a PIP managed care plan.
If you have no health insurance, or limited insurance, PIP is a must.
This portion of your policy covers repairs to your own car, no matter who caused the accident. If you borrow the money to buy the car, as most of us do, collision coverage is mandatory. If the car is totaled, the insurance will repay the loan.
The price of collision insurance depends on the size of the deductible. That’s the amount you pay toward each repair before the insurance policy kicks in. Deductibles typically range from $250 to $1,000. The higher the number, the lower your insurance costs. If the accident wasn’t your fault, your deductible may be covered by the other driver’s policy.
Collision insurance is generally written to cover your particular car’s fair market value, defined as its book value (as determined by standard tables), minus any unusual wear and tear, minus a charge for unusually high mileage. The insurer won’t give you a penny more. So compare the premium you pay with what you’d get if the car were totaled. Drop coverage on cars so old or damaged that their value is nominal. What’s nominal? Any loss that leaves you philosophical instead of sore.
This pays for damage to your car from fire, earthquake, flood, vandalism, hail, pets chewing the upholstery, and the odd stone thrown up from the highway. It also covers theft and perhaps the use of a rental car after a theft. (Removable tape decks, CD players, and other expensive equipment might be covered by your homeowners policy or by a special rider to that policy.) Deductibles typically range from $100 to $1,000; the higher the deductible, the cheaper your insurance. Windshields may be insurable separately, with no deductible.
Comprehensive insurance covers the car’s fair market value, which generally declines with time. Many drivers keep their comprehensive coverage even after dropping collision, because comprehensive tends to be cheaper. Still, the insurer won’t pay anything more than the car is worth.
This pays the cost of your injuries and those of the passengers in your car if you’re hit by (1) an uninsured driver who’s at fault, (2) an at-fault driver whose small insurance policy won’t cover all your damages, or (3) a hit-and-run. It also covers lost wages. In some states, you might even be reimbursed for damage to your car. In no-fault states, uninsured-motorist coverage clicks in if you’re injured badly enough to sue. You can collect from this policy on top of your no fault personal injury protection.
Why bother with uninsured-motorist coverage (you might ask) if your life, health, and disability policies already protect your family, cover your injuries, and pay you an income if you’re disabled and cannot work? Because these policies rarely cover all your expenses. Uninsured-motorist coverage helps with the inevitable extra costs, such as support systems if you become disabled. It also gives you the right to sue for pain and suffering if you didn’t cause the accident or were clipped by a hit-and-run.
As a practical matter, most Americans have little or no disability insurance, insufficient life insurance, and limited health insurance. Under these conditions, it’s well worth spending money on uninsured-motorist protection.
If you have an accident or your car breaks down, you’re covered for the towing cost and the labor charges for repairs. You might also receive $15 to $20 a day to rent a car while yours is being repaired. Some policies now include these items as part of the regular premium you pay. If they’re extra, the cost is minimal. If you belong to an auto club, these benefits probably duplicate what you have already. Don’t cover yourself twice.
An umbrella policy covers liability judgments that exceed the limits of your auto and homeowners policies. Typically, you have to carry $250,000 worth of liability on your auto insurance and $300,000 or so on your home. After that, you can insure for up to $1 million or more. Umbrella insurance is generally priced according to the number of cars you own. Some companies will add a $1 million rider to auto and homeowners insurance.
Umbrella coverage may defend you not only against claims of damage or personal injury but also against libel and slander (unless you’re a professional writer or broadcaster), false arrest, invasion of privacy, and similar charges that spoil your day.
Compare prices. Here lies your single biggest shot at saving money. In any city or any zip code, some insurers charge twice as much as others for exactly the same coverage.
Insurers don’t advertise price, so you have to hunt for those that are lower cost. No single company always has the best rates. Each one prices differently, in different places, for different kinds of customers.
For quotes, begin online at sites such as InsWeb (www.insweb.com), Insure.com (www.insure.com), Esurance (www.esurance.com), and InsureOne.com (www.insureone.com). Enter the coverage you want. You may have to give your name, phone number, and e-mail address to get quotes, but it’s a convenient, easy way of getting a good range of comparisons. It helps to keep a special e-mail address for online shopping so that junk doesn’t pile up in your personal account. Some quotes come instantly, others a couple of days later. A few companies sell online with no call from an agent. Some familiar companies, such as Allstate, Amica, Geico, Progressive, and State Farm Insurance, aren’t on the Web comparison sites. You have to log on to them separately.
With these prices in hand, ask an independent insurance agent if he or she can do better for you. Sometimes the agent can turn up a lower rate, perhaps from a regional company or a company that’s especially competitive for drivers of your age and sex. At the very least, the Web quotes tell you whether your agent is offering a competitive price.
Good drivers who live in New Jersey should try New Jersey Manufacturers Insurance Company in West Trenton. If you’re 50 and up, check the AARP (formerly American Association of Retired Persons) in Washington, D.C., which offers coverage to members, spouses, and certain driving-age children through The Hartford insurance group (at late ages, you may have to pass a medical exam). Anyone connected with the United States military should try USAA in San Antonio, Texas (800-531-8722). USAA insures present and former military officers, including their spouses, widows, and widowers. Their grown children can buy from a USAA subsidiary, which charges somewhat higher rates. Active-duty enlisted personnel and their families qualify too.*
Most of these insurance companies will check your credit score before they’ll provide you with a quote, whether you inquire through an agent or online. That won’t affect your credit score. The scorekeepers ignore all insurance-related inquiries.
Rate isn’t everything, of course. You also want your claims handled promptly, fairly, and without any hassle. Amica, in Providence, Rhode Island, for example, which sells by phone to better risks, may not be the cheapest in your zip code but is widely considered to give excellent service. Ask your friends how they like their own insurers. Some states publish data on customer complaints. You’ll also find it on the website of the National Association of Insurance Commissioners (www.naic.org; click on “Consumer Information Source”).
When you find a good company that’s substantially cheaper than the one you have now, consider a switch. But don’t leave for penny-ante savings. Insurers may give special treatment to their longtime policyholders. For example, after an accident, they may be less likely to increase your premium. If you do switch, don’t let your old policy run out until you’ve held the new one for 60 days. Sometimes an insurer will accept you as a policyholder, then reject you later—perhaps after finding something on your credit report that it didn’t like.You don’t want to get stuck.
Check your credit score (page 265). Fix any errors that might be pulling it down. Insurers charge at much as 50 percent more to people with poor scores.
Tell your insurance company or agent about any changes that could lower your rate. For example, you should pay less when (1) the young driver in your family graduates from college and leaves home; (2) you retire and stop using your car for commuting; (3) you start carpooling or move closer to your place of work; (4) you install an antitheft device; (5) you move to a city that’s less accident prone or from the city to the suburbs or the country; (6) you have a birthday—some insurers reduce rates for people 55 and up who take a defensive driving course; (7) you marry; (8) you divorce, and your ex-spouse (who has all the speeding tickets) stops using your car.
Reshop for a policy every couple of years. Any of the changes in the circumstances just listed may get you a better rate from a different company than your current one. It doesn’t cost anything to check around and could save you hundreds of dollars a year. But don’t think that approaching one or two agents constitutes “shopping around,” says J. Robert Hunter, director of insurance for the Consumer Federation of America. You’ll miss many good companies that don’t work with agents, such as Amica, Geico, and USAA.
Your state may have an auto insurance buyer’s guide showing what various auto insurance companies charge. To find your state’s insurance Web site, go to www.naic.org/state_web_map.htm. The guides give you a start but can be misleading, due to the complexity of auto insurance pricing.
Don’t buy your collision and comprehensive coverage from the lender who finances your car or any insurer he or she recommends. That’s going to be high-cost insurance. Count on it.
Raise the deductible on your collision insurance from $250 to $500 or from $500 to $1,000. You’ll pay 10 percent less for the policy if you eat the smaller bills yourself. Odds are, you’ll save more in premiums than you’ll ever pay out-of-pocket in costs.
Drop collision insurance on an older car. The insurer won’t pay any more than the car is worth (page 510). Get an appraisal from an auto dealer.
Buy a car that’s cheap to repair. Your insurance agent can tell you which cars are money eaters and which aren’t.
Buy a safe car. Safety ratings are listed for many models by the Highway Loss Data Institute, part of the Insurance Institute for Highway Safety (www.iihs.org). In general, more claims are made on smaller cars than on large ones.
Don’t drink or smoke. Some insurers give discounts to clean-livers.
Earn a discount by insuring all your cars with the same company and by buying your homeowners or tenants insurance there too. But shop first for the cheapest insurer. Even with a discount, high-priced policies are no bargain.
There may be additional discounts for young drivers who take driver education or an online safety course; teetotalers; nonsmokers; graduates of defensive driving courses; senior citizens; students with good grades; families whose teenage drivers go to school more than 100 miles away (so they can’t get at the car!); cars parked in a garage or off the street; low-mileage cars; drivers who carpool; cars with air bags; cars with four-wheel, antilock braking systems; and cars with antitheft devices. Geico offers discounts to active and retired members of the military in 40 states. AARP provides discounts to members.
Describe exactly how your car is used. A car driven for pleasure costs less to insure than a car used for everyday commuting. The insurer Progressive (www.progressive.com) offers a behavior-based option for people who drive safely, less often, and at lower-risk times of day. It monitors your habits through a small wireless device installed in your car.
In a no-fault state, people without a job—for example, retirees—may be able to drop the portion of their personal injury protection that covers loss of wages. Keep it, however, if your spouse has a job.
Pay the premium all at once. It costs more to pay in monthly or quarterly installments. Alternatively, set up automatic monthly payments through your bank. That should be cheaper than having to write a check once a month.
Drive safely. Your rates soar if your record shows convictions for drunk driving, “chargeable accidents” (meaning that they’re at least partly your fault), or a couple of speeding tickets.
Shop for the best risk classification you can get. Many insurers are effectively raising premiums by rating more drivers as standard risks rather than preferred risks. Standard risks pay anywhere from 10 to 60 percent more, depending on the company. Every insurer may rate you a little differently, however. If you have a good driving record, ask your agent to try for a company that will consider you a preferred risk. If you’ve been classified as substandard, look for an insurer that will take you as a standard risk.
If you’re turned down for coverage because of your driving record, look for a better option than your state’s high-risk pool. Many companies are taking a second look at substandard drivers. You might have had a speeding ticket in the past couple of years or an accident that was partly your fault. In the old days, that could have dumped you into your state’s assigned-risk pool for drivers who couldn’t get insurance anywhere else. Now, however, you might find private coverage at a lower cost.
Reform. If your bad driving record tags you with a higher premium or lands you in a high-risk pool, work at keeping your record squeaky clean. After three years, shop again. A different company might take you at a better rate. Sometimes, however, it takes seven years or more to escape your foolish past. A drunk driving conviction may not be escapable.
Look for group auto insurance plans. They’re offered through many large employers, teachers’ associations, credit unions, and others. You get premium discounts and may be able to pay by payroll deduction. (But compare prices at other insurance companies before signing up.)
Move. Low insurance rates give you yet one more reason to avoid big, crowded cities. You can generally save $1,000 or more by living in a small city, a suburb, or deep in the country. Your rates may go up, however, if you move from Wyoming to a country town in, say, Pennsylvania, because Pennsylvania’s rates are generally high all over.
Avoid gimmicks. If you buy “accident forgiveness” coverage, your insurer promises not to raise your premium the first time you’re in an accident that’s your fault. But ask the agent how much your regular premium would rise if you did indeed cause a crash. For careful drivers, the annual premium for the forgiveness insurance probably isn’t worth it. For sloppy drivers, the policy might not pay. You may have go accident free for three years before it’s possible to make a claim. Forget about “new-car replacement” insurance too. You’re covered only if the car is totaled.
Share your car with your teenager (if you can stand it). When teens have their own cars or drive your car more than half the time, they’re “principal drivers.” Your premium will rise by 50 to 100 percent. Teens cost less when they’re “occasional drivers,” using your car less than half the time. They also cost less if they drive a safe, older car with no collision insurance.
Tell your agent when your child is away from home and not driving the car. Your premium should drop if he or she is away at school and driving the car only during short vacations. But be sure to tell the agent when the child returns. You don’t want any arguments about coverage if there’s an accident.
If your child has his or her own car, consider insuring it in the child’s name instead of yours, even if that costs more money. It might save you from being roped into a big liability judgment if your child causes a tragic accident. The child’s name should also be on the title and registration.
Ask about policies targeted at the children of their adult policyholders. Fireman’s Fund Insurance Company, for example, offers a Youthful Driver program for kids who are buying their own insurance. Drivers up to 27 can piggyback on their parents’ policies, earning the same premium discounts that their parents have. State Farm provides discounts to drivers up to 25 who complete a Steer Clear safety program and complete a log of their driving habits. Safeco Insurance Company of America’s Teensurance program cuts the premium if you install a Safety Beacon GPS device in your child’s car that tracks the car’s whereabouts and can disable the engine if your child stays out too late or drives too fast.
Don’t change insurance companies when your teenagers are within a few years of driving age. You’re better off with the status of long-term policyholder, just in case the the kids have a fender bender.
Some claims generally don’t affect your premium. For example, you’re normally not held responsible for physical damage paid from your comprehensive coverage, such as a windshield broken by flying gravel or accidents caused by animals. Other small claims, such as a bumper dinged by an unknown driver in a parking lot, count against you, even though it wasn’t your fault. You might get away with one or two dings, but after that, your rate will rise. Insurers look more at the frequency of claims than how much they have to pay. Ask your company for a detailed statement, in writing, of which claims make your rates go up. That should ease your mind about reporting other kinds of claims. If you’ve decided not to report claims under $500 or $1,000, raise your deductible to that amount.
For rating purposes, insurers generally look at your record over the past 3 to 5 years. You might have loyally held the policy for 30 years, but two claims in 2 years might put up your rates anyway.
Not all insurance companies survive. Some go broke, sending their policyholders scrambling. The industry supports state insurance guaranty funds, to make sure that the claims of all policyholders will eventually be paid (page 521). But they’re not necessarily paid right away. A truly large bankruptcy might hold up claims for quite a while. So why tempt fate? Buy from a company highly rated for solvency (page 405).
Check a new policy for accuracy as soon as it arrives. A number of policies come through with mistakes: wrong amounts of coverage, a child left off the list of drivers, a discount forgotten. If you don’t catch the error, you won’t have the coverage you expected.
Don’t lie on your application! The insurer will run your name through the state motor vehicle department to check whether you’re licensed, what marks you have on your license, and how many licensed drivers live at your address. It will also check the Comprehensive Loss Underwriting Exchange (CLUE) in Atlanta or a similar service, where insurers report the claims you’ve made over the past seven years. If you say you’ve never filed a claim but CLUE turns up three, the door is going to be slammed in your face. The insurer can also check the claims record of every driver at your address.
If you’re turned down for coverage or charged a higher rate based on information from a claims reporting service, you have to be told and given the service’s name and address. Go to ChoiceTrust (www.choicetrust.com) to order a free copy of your record, to be sure it’s correct. (Click on “Review Your FACT Act Disclosure Reports.”) CLUE also wants to sell you an “insurance score,” but knowing your credit score (page 265) is enough. The report may show claims for a particular vehicle before you owned it. If you haven’t filed a claim against your auto or home owner’s policy in the past seven years, you’ll probably have a clear report.
Absolutely. Every six months, your policy normally comes up for renewal. At that time, the company might blow you off or shift your policy to a related insurer that accepts higher risks. Maybe you’ve had a couple of speeding tickets. Maybe you’ve put in one claim too many. Maybe the company is withdrawing from your state. If it won’t renew, see if another company will pick you up. Otherwise you’ll have to join the state’s high-risk pool, where your coverage will come at a much higher rate.
When you first apply for a policy, the insurer generally has 60 days to evaluate you. After that, you can’t be canceled before the policy’s renewal date unless you didn’t pay your premium, your driver’s license was suspended or revoked, or you made a deceptive statement on your insurance application.
All 50 states have assigned-risk pools for careless drivers. Your insurance agent can get you a policy. You’ll pay dearly for it, but the coverage is worth it. It will protect you from losing everything you have if you hurt someone seriously in a crash. You can work your way out of the pool by keeping your record clean.
Keep this list in your car’s glove compartment, just in case:
1. Attend to any injuries. Have someone call an ambulance and the police.
2. Move your car to a safer place, if it can be driven, in order to prevent further damage. Warn oncoming traffic away from the wreck.
3. Get the other driver’s name, address, phone number, license number, vehicle registration number, and insurance company, and give him or her yours. Look at his or her license to see if there are any restrictions that weren’t being observed (wearing eyeglasses, for example). If the car is registered to someone else, get that person’s name and address.
4. Get the names and addresses of witnesses and their statements of what they saw. This is especially important if you think you weren’t at fault. If they won’t talk, get the license numbers of their cars. Get the names and badge numbers of the police who arrive on the scene.
5. If you think the other driver was drinking, insist that you both take a breath test.
6. Jot down your recollection of how the accident happened, including the speed you were traveling at. Note weather conditions, time of day, and any hazardous conditions. Describe the area, writing down exactly where you’re located. Fresh impressions are compelling in court.
7. Don’t sign anything unless required to by the police. Don’t admit guilt or shared guilt. Don’t say that your insurance will cover everything. Don’t say how much insurance you have.
8. Ask the police whether you should report the accident yourself, and if so, how and where.
9. Call your insurance agent and tell him or her what happened. Summarize the evidence you have. Don’t rely on the other driver’s promise to pay; that might not last long. Report even small accidents if someone was injured. That injury might turn out to be serious. You risk losing coverage for that accident if you don’t report promptly.
10. If you or any of your passengers were injured in any way, even bruised, see a doctor.
11. Cooperate with your insurance company on filling in forms and making reports. But don’t make a quick, final settlement with your own company or with the other driver’s. Injuries that don’t seem serious at first may worsen with time.
12. If you’re struck by a hit-and-run driver, tell the police within 24 hours. If you don’t, you might lose your insurance coverage for that particular incident.
13. If you’re sideswiped and worry that the other driver is trying to force you over in order to rob you, keep going, if you can, and find a police department. Call your insurer from there. Normally, you shouldn’t leave the scene of an accident. But if you did so because you felt unsafe, your insurer will cut you some slack.
14. Keep records of all expenses connected with the accident, such as lost paychecks or the cost of renting a car until yours is fixed. In a no-fault state, your company might pay. In a fault state, the other person’s company should reimburse you if the accident was his or her fault.
15. If the accident was serious, talk to a lawyer about what happened to get a handle on your rights and what your damages might be. Beware of any offers from your insurer. They may be based on a computerized personal injury service called Colossus or a similar program. In theory, the claims agent enters the facts of your case into the colossal computer, which then spits out the “proper” settlement. Proper, my eye. You can’t expect fair treatment from a black box, especially a big one. Assume that the black box is lowballing and ask a lawyer to evaluate your case.
The following claims will be paid immediately without a lawyer’s intercession: in no-fault states, your own medical bills and lost earnings and those of everyone in the car with you; in fault states, only the medical bills that are paid through your own health insurer or through the medical-payments coverage you carry on your auto insurance; in both kinds of states, car repairs, if you carry collision insurance.
You will need a lawyer: in no-fault states, when the injuries are serious enough to warrant going to court; in fault states, when the accident was serious. You’ll want an evaluation of the settlement proposed by the insurance company.
The insurance company will defend you if you’re sued. But if you bring the lawsuit, you’ll need a lawyer of your own. He or she should have long experience in trying personal injury cases. At a first meeting (which might be free or might cost a flat fee), the lawyer will advise you whether the case is worth pursuing. Sometimes it is, sometimes it isn’t. If you go ahead, you typically pay the lawyer nothing if you lose and a fixed percentage (usually one-third, plus expenses) if you win. If the insurance company has already made you an offer, a lawyer might be persuaded to take one-third to one-half of anything extra he or she can get.
Collision claims are usually negotiated between you and your company without legal intercession. A good insurance company inspects the car, tells you to get an estimate of what it will cost to repair, and promptly pays its share of the bill. No muss, no fuss. If you have to use the insurer’s repair shop, don’t sign a release until your own mechanic has examined the work. If something was overlooked, the insurer should fix it.
And then there’s the other kind of insurer: a footdragger, a corner-cutter. Don’t blindly sign a piece of paper accepting the insurer’s estimate as the full cost of the repair. Get a second opinion from your own mechanic. And be sure to have your mechanic check the work. If the estimate or the repair was insufficient and the claims adjuster balks, invoke the arbitration clause contained in many auto insurance contracts. When it’s all over, find a better insurance company.
If your car is totaled or stolen, the insurer is supposed to pay fair market value. If the offer is too low, get signed statements attesting to your car’s actual value from auto dealers in your area. With those statements in hand, make a pitch for more. You never get what you don’t ask for.
If you think you’re being taken, go on the offensive. Complain to your insurance agent, the state insurance commissioner (copy to the president of the insurance company), and your local consumer office. Ask a lawyer to write a letter on your behalf to the insurance company’s president. Tell your insurance agent that you’re pulling all of your policies—auto and homeowners—out of the company. Sometimes pressure works.
If the accident was the other person’s fault, your company will go after his or her insurer and collect your property damage claim in full. You will already have been paid if you carry collision coverage, but your company will have subtracted the deductible. Once your insurer has been reimbursed, it owes you the deductible too. Don’t forget to ask for it.
Auto and homeowners insurance policies are covered by the National Conference of Insurance Guaranty Funds (www.ncigf.org). State limits vary, but you’re usually insured for up to the limits of the policy or $300,000, whichever is less. You’re protected only for claims in the pipeline. If your insurance company fails, your policies will be canceled. You will have to scramble for coverage somewhere else.
When you rent a car, the rental agency offers to sell you insurance to cover accidents on your trip. In many cases, you can decline it. You get the same or better protection from your personal auto insurance or perhaps from the rental car insurance attached to the credit card you use.
But there are holes in your personal or credit card coverage. If you don’t know the rules and decline the rental agency’s trip coverage, you may be driving uninsured.
You do want to decline that coverage if you can. It’s shockingly expensive. Take the collision damage waiver, which protects you if the car is damaged or stolen. It costs somewhere between $9 and $19 a day. Adding $1 million in bodily injury coverage if you hit someone, and modest amounts of property damage and medical payments, you might pay $133 to $266 for a one-week trip. And the coverage may be void if you caused the accident by speeding or driving drunk, or if you were on an unpaved road.
To avoid this expense, ask your auto insurance agent whether your personal policy covers you when you drive a rental car. If the answer is yes, ask about the limitations (and double-check them in the policy itself). For example, there may be no collision or theft insurance on the rental if you don’t carry it for your own car too. The policy might not pay if you’re on a business trip rather than driving for pleasure. You’re generally not covered in foreign countries. If you have coverage, it may last only for 15 to 31 days. If you have an accident on day 10 but don’t turn in the car until day 32, you’re not insured. For long rentals, see if the rental car agency has any special deals.
If you’re driving a rented car on company business, your employer probably insures you. Ask about it. The company might refuse to pay, however, if you have an accident while using the rental car for personal purposes.
If your personal or company policy doesn’t cover your rental car, you have another option. Certain credit cards will protect you against damage or theft for a limited number of days if you use that card when you pay for the rental. They may also cover any deductibles under your regular auto insurance.
But, again, there are limitations, and they vary, depending on the bank that issued your card. At this writing, Visa, MasterCard, and American Express permit rental car insurance only on gold cards and higher. You’re usually insured only for standard cars and minivans carrying up to eight passengers, not luxury cars, larger vans, or sport vehicles driven off road. American Express cancels your insurance if you’re two months behind on your bill.
If there’s an accident, you risk losing your credit card coverage unless you follow certain procedures. You must call the credit card company—not the bank that issued the card but the card company itself—within a limited period. There’s a special phone number, one for the United States, another when you call from abroad, which you should keep in your wallet.
If you don’t know your car insurance rules, call your auto insurer or credit card company and get a list of them in writing. Check back from time to time to see if they’ve changed. If there’s any doubt at all, buy the rental car insurance. You don’t want to be caught out.
If you don’t own a car, rent frequently, and don’t get much liability insurance from your credit card company, consider buying “nonowned auto liability insurance” from your insurance agent. Over the year, it may cost less than you’d pay if you bought from the rental company each time. This coverage pays only what you owe other people if you cause an accident that injures them or damages their car. You still have to buy the rental car company’s collision coverage, to protect yourself against the cost of paying for the car you’re driving if it’s stolen or damaged.
Spend your money on high-liability coverage so that any reparations you owe will be paid by the insurance company, not by you personally. Good auto insurance protects your personal assets and future income just as surely as a good investment plan does.