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Frequently Asked Questions

Table of Contents

How can I lower my car insurance costs?

If you’re trying to lower your auto insurance premiums, try using the following tactics:

  • Comparison shop
  • Take a higher deductible
  • Drop collision damage on older cars
  • Buy a low-profile car
  • Check insurance costs by community when you are planning a move
  • Do not duplicate medical coverage
  • Pay premiums annually
  • Inquire about discounts

What coverage should my auto policy include?

Everyone should have liability coverage for bodily injury and for property damage. These options will protect you if you injure someone else or damage property with your car. One thing to keep in mind is if you’re in an accident and your costs exceed your coverage limits, you are responsible for the additional amount. That’s why many motorists opt for more coverage than their state’s minimum requirements.

Most insurers recommend that you buy at least $100,000 per person with a $300,000 maximum for each accident to pay medical costs, loss of earnings, and pain and suffering. In addition, you should have at least $50,000 in coverage for property damage. Collision and comprehensive are essential for new cars but often can be dropped with an older car. They cover repairs to your car after an accident or in case of fire, theft, or vandalism.

Uninsured motorist coverage, which protects against hit and run and people without enough insurance, is required in some states. If your life, health, and disability policies already protect your family, you might want to pass, given the choice. The same is true of medical payments coverage, which pays you in the case of injury and disability. For people with substantial assets, umbrella insurance is a good idea. It will protect you against liability judgments in excess of $1 million.

Auto insurance is mandatory in every state, but coverage amounts vary among policies. At a minimum, however, the following areas should be covered:

  • Medical: This protects you against medical costs for injuries to you and other riders in the car.
  • Liability: This covers physical injuries to other people and compensation for expenses that might arise from such injuries. It also covers damage to other people’s property.
  • Comprehensive and collision: This covers damage to your car due to collisions or overturning, fire, flooding, and theft. There is usually a deductible.
  • Uninsured (or underinsured) motorist: If there is an accident and the other driver has insufficient insurance, this covers the expenses of the accident.

Note: In certain states with “no-fault” insurance laws, personal insurance protection coverage is required and there are some restrictions on liability lawsuits.

Your policy will show the total amounts of bodily injury, liability, and property damage coverage. For instance, a policy of $25/$50/$20 means that, in a single accident, you are covered for $25,000 for an individual injured, $50,000 for all persons injured, and $20,000 of property damage.

The amount of coverage you choose will depend on the state’s minimum requirements, the replacement cost of your vehicle, and how much medical coverage you already have under other policies.

How should I handle an auto insurance claim?

Here are some tips for making sure that you obtain a fair settlement and obtain payment on a claim as quickly as possible.

  • Start a file on the accident immediately after it occurs and put hospital bills, police accident reports, and copies of claims you have submitted into the folder.
  • Each time you speak to an insurance company representative by phone, write a follow-up letter or email summarizing what was said. Include the date of the conversation and the name of the person spoken to. Put a copy of the letter or email into the file.
  • If it is taking a long time to obtain your settlement, check your policy to see whether interim rental car expenses are covered. If so, rent a car. The insurer will be motivated to speed things along to avoid incurring this cost.
  • If you feel the company is being unreasonable and is delaying or not acting in good faith, then make a complaint to your state’s insurance regulator.
  • If you’re getting nowhere, consult an attorney.

Does it make sense to comparison shop for car insurance?

Don’t assume that every insurance company charges the same rates. There are several thousand different auto insurers and all of them are vying for your business. It’s possible to save as much as 30 to 50 percent by comparing costs.

Costs are usually based on factors such as age, gender, and driving record of the vehicle’s driver’s); state of residence; age and value of the vehicle; and frequency and purpose of the vehicle’s use.

First, contact the insurance regulating body in your state and find out whether they provide a free pamphlet that ranks insurers by price. Many state insurance departments do this. Obtaining this pamphlet will save you a lot of time on the phone asking for price quotes. If no pamphlet is available, then get quotes from independent agents (those who represent several insurance companies) or visit insurer’s websites.

You can also begin by comparing several insurers’ rates such as:

  • AMICA 800-24-AMICA
  • GEICO: Auto Insurance 800-861-8380
  • Erie Insurance: 800-458-0811
  • USAA: 800-531-8722 (Note: USAA is limited to active-duty and former military officers and their families.)

When calling an insurance company, ask if the insurer is a “mutual company”–one owned by its policyholders–as is the case with Amica. If so, ask what percentages of its premiums are returned to policyholders. You may find, for example, that Amica’s premiums are higher than those of some other companies, but that it pays annual dividends of 18 percent to 20 percent to policyholders. These dividends reduce your insurance costs.

It’s also important not to neglect factors other than price. Quality personal service may cost a bit more but provides added conveniences, so talk to a number of insurers to get a feel for the quality of their service. Don’t forget to ask them how you can lower your costs.

Tip: Check the financial ratings of insurance companies with Moody’s, and then supplement your review by calling your state insurance department for further information. Some state insurance departments will supply you with the number of justified complaints that have been made about insurers.

How much of a deductible should I take on my car insurance?

It may pay to absorb the cost of fender-benders yourself. In other words, get the highest deductible you can afford. The deductible is the dollar amount you agree to pay out-of-pocket before insurance kicks in. If you cover the cost of small claims and the insurance company covers the large ones, it makes a huge difference: raise your deductible from $100 to $500, for example, and you’ll reduce your premiums by 10 percent to 20 percent. Raise the deductible to $1,000 and you can save 25 percent to 30 percent.

Tip: Don’t file a claim for a minor accident when the cost to repair your vehicle is only a couple of hundred dollars. Picking up the cost yourself will more than offset the rise in your insurance rates that occurs when you file a claim.

Is it worthwhile to maintain collision coverage on older cars?

Collision coverage takes care of the cost of repairing your car if you’re in an accident, regardless of who’s at fault; comprehensive pays if your car is stolen or damaged by fire, flood, hail or wind. If your car isn’t worth much, why pay a premium for repairs on a vehicle you’ll probably replace if it’s badly damaged? Collision damage for an older car can cost more than the car is worth.

If your car is worth a few thousand dollars it may not be cost effective to pay for this coverage.

Tip: The rule of thumb–from the Consumer Federation of American group: Drop collision if your premium is equal to 10 percent or more of the value of your car. But remember that you generally can’t drop collision until your auto loan is paid off.

Tip: Check the value of your old car in the “National Automobile Dealers Association Official Used Car Guide,” known as “The Blue Book.” Auto dealers, banks and libraries have copies.

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