Frequently Asked Questions on Auto Insurance
Written by Tina Phu, Yun Yang   



1. What is the difference between comprehensive insurance and collision insurance?
Comprehensive insurance will cover your vehicle for any damage that occurs. This includes road accidents, fire damage, damage caused by hail, and even damage caused by falling trees. Collision insurance on the other hand only covers your vehicle if it is involved in an accident. When you are financing a vehicle it is normally a requirement of most lending institutions and banks that you purchase both the comprehensive and collision insurances. A certain amount of collision insurance is required by each state. This amount varies by state so be sure to check on this.

2. Will any out-of-state tickets I have received show up on my insurance and raise my policy rates?
This will all depend on which state you are living in. States that are part of the driver's license agreement DLA will share your DMV records with other member states. If the state you live in and the state in which you received your tickets are part of the DLA, then yes all of your ticket information will be passed on. If this happens then your insurance company will have access to your DMV records. This will mean that your insurance premium will be higher depending on the number of tickets you have received.

3. What is a deductible?
A deductible is the portion of a covered loss you have to pay before you insurance company will pay the rest of the covered loss.

4. What happens if I don’t have auto insurance?
If you are pulled over by a patrol officer and you can’t show proof of insurance, you will receive a ticket and be fined. Depending on the state, after the first offence, if you are caught again driving without proof on insurance, you will be fined an even higher amount of money, your car may be impounded, and you may have your driver’s license suspended. If you get into an auto accident and you are at fault, you are responsible for all bodily injuries and property damage. This may cost you tens of thousands of dollars. If you can’t pay the amount you owe, you may be sued

5. Will my insurance company cover the costs of a rental car if I get into an accident?
Yes, if rental car reimbursement is under your policy. Rental car reimbursement is recommended since it costs a few extra dollars per term to have it as part of your coverage, while the costs of rental car may be as high as several hundred dollars.

6. Do I file a claim if the deductible is more than the loss?
Filing a claim could protect you if injuries or other damages are discovered later. If you become involved in litigation because of a covered accident, your insurance company could help you by providing legal. If you file a claim, you can take advantage of your insurance company’s auto inspection and repair options.

7. Should I file a police report if my car experiences damage or theft?
Yes, it is always a good idea to file a police report in these situations.

8. Do I need to file a state motor vehicle report?
Do this only if it’s required by your state. Ask your claim representative.

9. How do I know I’m being sued?
You’re probably being sued if you receive a legal “Summons” or “Complaint.” Contact your claims representative immediately and forward all related correspondence as soon as possible.

10. How long does it take for my company to handle my claim?
This depends of the severity of the damage, and the number of parties involved, and other factors. The more severe the damage and/or the higher the number of parties involved, the longer it will take. To speed up the process, provide your claims representative with as many details as possible about your claim.

11. Will stolen items from my vehicle be covered?
This depends on whether you purchased other optional coverage such as tape/CD coverage or sound system coverage. If CDs or your radio were stolen, those items will be covered. Anything else will not be covered under your auto policy. Items stolen from your vehicle should be covered by your homeowners or renters insurance.

12. What happens if my vehicle is totaled?
Whether or not your vehicle should be repaired depends on your state law, the severity of the damage, age of the vehicle, and other info. If the estimated repair cost is more than your vehicle’s value, your insurance company will pay the cash value of your vehicle minus your deductible.

13. If I lend my car to someone, are they covered under my auto policy?
Although there are typically one or two names listed under “Named insured”, as a general rule, insurance follows the vehicle, not the driver. Auto insurance providers normally provide coverage if your car is being driven by you, your spouse, any children, blood relatives, and anyone you lend your vehicle to.

14. What is the difference between life insurance and auto insurance risk?
The major difference between auto insurance risk and the risk associated with life insurance is that, while you can only die once, you can have many auto accident claims. And the details can be far more varied, with losses for things like liability, medical payments and physical damage.

15. Must I have auto insurance?
Most states have laws in the books that require basic auto insurance coverage for every driver. A few states ask only that you demonstrate “financial responsibility.” For more details, see this thread.

16. Is automobile insurance available for everyone?
Yes. Since most states require auto insurance of all drivers, the states have assigned risk plans to assure coverage if you are unable to find an insurance company willing to accept you. The exact type of plan varies from state to state, but assigned risk policies are usually relatively expensive. Why? A bad driving record makes you a bad risk for any insurer – even if they must accept you.

17. What is assigned risk?
If your state requires you to have auto insurance in order to drive, you may be faced with a dilemma if insurance companies won’t accept you. Most states, therefore, have some sort of assigned risk plan to assure that you can get coverage. The cost of insurance under the assigned risk plan may be high, but the plan must accept you.

18. Does bodily injury damage coverage apply even if I drive someone else’s automobile?
No. Bodily injury liability insurance covers damage resulting from an accident involving any of your covered autos, for which you are responsible. Members of your family and others with permission to drive your car are also covered. Likewise, if you are driving someone else’s car, their liability policy would normally provide the coverage.

19. If I already have health insurance, do I need to carry medical payments insurance on my auto policy?
If you are not in a no-fault state, you are probably not required to have medical payments insurance. Medical payments insurance pays medical expenses that result from an auto accident, regardless of who is at fault. No-fault states have a form of medical expense coverage called Personal Injury Protection (PIP). In addition to medical bills, PIP covers lost wages, certain services (such as child care) that the covered individual is unable to perform, and some funeral expenses. Some no-fault states allow you to make your health insurance your primary medical coverage, reducing your premiums for PIP significantly. If you have adequate insurance for life, health and disability, you should consider saving money by not taking medical payments insurance (if your state allows) or minimizing medical payments insurance/PIP coverage. For more information about no-fault state, PIP and the requirement of each state, please refer to this thread.
Last Updated on Sunday, 26 December 2010 21:00