Little-Known but Important Car Insurance Issues

Even though you've done your research and insured your vehicle, there's still more to know when it comes to the wonderful world of car insurance. Below, we look at some not so commonly discussed, but important, issues about insurance that can benefit you tremendously when managing your automotive coverage.

Switching Auto Insurance Companies Relatively Painlessly
You may choose to terminate your auto insurance policy for any number of reasons. Maybe you're moving to another state, getting rid of your car altogether, or maybe you're just dissatisfied with your existing company's service. Beware, however, that if you don't give your insurer sufficient notice, it could end up costing you money, or negatively affecting your credit history.
Standard practice for most insurance companies is to allow you to cancel your policy at any time during the policy term by sending written notice stating the date of cancellation. Your car insurance policy does not necessarily terminate at the end of each policy term, so it isn't safe to assume that you can just cancel by failing to pay your next bill. If you don't send notice of cancellation, your insurance company will automatically bill you in advance for the next term's premium payment. If you don't pay it, they'll cancel your policy and it will go on your credit report.
Don't expect this information to be made explicit in your policy; while insurers are quick to inform you that your coverage will terminate at the end of the policy period if you don't pay your next premium, they don't always inform you of the repercussions you may face for not giving formal notice of your policy termination.
Another thing to keep in mind is that allowing your car insurance policy to be canceled may hurt your chances of obtaining auto coverage in the future. A cancellation in your insurance history may cause other companies to label you a high-risk applicant, thus giving them an excuse to charge you a higher premium. However, you can usually avoid this trap by officially terminating your policy in a timely manner.
Here's what to do: Call your insurer, let them know that you want to cancel your policy and give them an effective date. They will then send you a cancellation request form - review this form carefully before you sign and return it to your insurer.
If you're switching to another insurer, and you plan on driving your car throughout the process, you want to make sure there is no lapse in your car insurance coverage. Therefore, be sure to coordinate the effective starting date of your new policy with the termination date of your old policy. The last thing you want is to get in an accident during an uninsured interim - how stupid would you feel if that happened?
As long as you are considerate about giving your insurance company plenty of notice when you want to cancel your auto policy, and then go through the official termination process, you should avoid any negative repercussions.
Closing the Gap—With Gap Insurance
Just when you thought you knew everything about insurance — along comes gap insurance.
Though it may sound trivial, gap insurance is a must for leasing. And if you made a small down payment when buying a car, a gap policy can be lifesaver as well. But first, let's look at why it exists.
As the name implies, gap insurance covers what traditional auto insurance doesn't. In other words, it closes the gap between what your insurance company pays if your car is stolen or totaled and what you owe the finance company.
Let's take a test case. Say you bought your car two months ago for $25,000. You begin making payments at about $500 a month based on a 6 percent interest rate. Then, disaster strikes: a tree falls on your car and flattens it.
You call the insurance company and it looks into its crystal ball and decides at the time of the accident your car was worth only $20,000. The car may only be a couple of months old, but it has already lost 20 percent of its value. Unfortunately, the finance company still wants the full amount you owe them. With interest, tax and license fees, they figure that to be $27,000.
Yikes! There's a gap of $7,000 between the $20,000 that the insurance company is willing to pay you and the $27,000 the finance company is demanding. Most folks are going to be eating Spam dinners for the next two years, but if you have gap insurance you can safely order steak.
Apply the same scenario to someone who bought their car. If they left the dealer lot without putting several thousand dollars down, they likely owe more than the insurance company will pay if the vehicle gets totaled or stolen in the first few years. Once again, gap coverage can save the day.
And that's why gap insurance is a must for many drivers. In fact, gap insurance is usually mandated by lease contracts or included within them. If a gap policy is required but not included in your contract, you should shop around for this coverage (insurance companies sell it). If gap coverage is included in the lease, check to see how much is offered and how much you're going to be paying for it. (In some cases, lease contracts may include what is known as a gap waiver, which protects you from gap charges in the event that the leased vehicle is declared a total loss — eliminating the need for a gap policy.)
Is gap insurance necessary for people who finance their cars? Well, it depends on your coverage. If your regular insurance policy is written to pay off the fully financed amount, then you don't need gap insurance.
A few things to keep in mind when buying gap insurance:

• Although most people purchase it when a lease is initiated, some insurance companies will sell you a gap policy anytime during the lease term.
• You must be in compliance with all terms of the lease.
• Your gap insurance policy may not be honored if you don't have collision and comprehensive insurance coverage. Further, lease contracts generally require that you carry collision and comprehensive at all times.

If your car is totaled, or stolen, carefully follow all requirements made by your insurance company. For example, some companies require you to continue making loan payments on your totaled car until the money from the gap insurance is paid out.
So when initiating a car loan or lease, always remember to ask your insurance agent or loan officer about gap insurance. If you have an accident you'll be glad you planned ahead.
OEM vs. Aftermarket: Decisions, Decisions... You've been in an accident, you're dealing with the nuisance of getting your car repaired, finding someone to chauffeur you around (unless your insurance covers the cost of a rental, which is always nice), and you've probably had to take some time off from work to recover and take care of the whole mess. Life couldn't get much more complicated, right?
Um...well, wrong.
Oh, did you think you could just turn your car over to the body shop and trust them to do the best job possible to make your car like new again? 'Fraid not, dear friend. You must decide whether or not to mandate that the repair facility use OEM (original equipment manufacturer) replacement parts, as opposed to aftermarket parts. What difference does it make, you ask? The answer is debatable.
According to non-OEM manufacturers and many insurance companies, the difference between OEM and aftermarket parts is negligible. And it's not surprising that insurance companies are such strong advocates of using aftermarket parts, seeing as how they are considerably less expensive than OEM parts. For that reason, many insurance companies will not reimburse 100 percent of your repair costs if OEM parts are used. Most insurers discourage the use of OEM parts by making the policyholder pay for the difference in cost between the non-OEM parts specified in the estimate and the OEM parts used. This can turn into a large sum of money, as OEM parts may cost nearly twice as much as aftermarket parts. For example, an OEM replacement hood for a '96 Ford Contour can cost close to $600, whereas an aftermarket hood can be had for about 300 bones.
A few insurance companies, such as Chubb Insurance Group, actually encourage their policyholders to use OEM repair parts, while not charging them a penalty. It should be noted however, that Chubb is one of the more expensive auto insurers.
The use of aftermarket parts can be called into question for two reasons. First of all, they decrease a vehicle's resale value. This should certainly be taken into consideration if you plan on reselling or trading in your car. Many dealers check the repair history of vehicles to see what kinds of parts were used. The trade-in value of a BMW with non-BMW parts can certainly be adversely affected. By the same token, using non-OEM replacement parts to repair a leased car could cost you all or part of your security deposit, because technically you would not be returning the vehicle in the same condition as when it was leased.
The other concern with aftermarket parts has to do with safety. Advocates of OEM parts claim that non-OEM parts aren't subjected to the same crash-testing procedures as OEM and therefore are not as safe. The Insurance Institute for Highway Safety (IIHS), however, contends that making cosmetic repairs with non-OEM replacement parts does not degrade the safety of a vehicle in a crash.
In the end, it's up to you to decide what type of replacement parts are used in your vehicle's repair. If you opt to save money and use non-OEM parts, you should make sure that they are approved by the Certified Automotive Parts Association (CAPA), which sets the standards that must be met in the manufacturing of non-OEM parts for collision repairs.
Obviously, you want to know your options before you turn your car over to a repair facility. If you are concerned with the depreciation of your car, especially if it's a high-end vehicle, you'll probably be wise to go with OEM parts at repair time, even if you have to foot part of the bill. But if your car's resale value isn't of extreme importance to you, and you'd rather not dig too deeply into your own pocket, you should consider allowing the body shop to use non-OEM parts.
Just make sure that you specify one way or the other with your repair facility - the last thing you want is to end up paying for OEM parts that you weren't concerned with using, or to get aftermarket parts put on the super-rare ride that you intend to keep in tip-top shape for the rest of your life. As long as you play an active role in choosing your body shop and then communicate clearly with both the repair facility and your claims adjuster, you shouldn't be caught off guard.
Deciphering Auto Insurance Lingo
Here's a glossary of commonly used auto policy terms.
Actual Cash Value
The cost to replace property minus the amount it has depreciated since the original purchase date.
Benefit
The amount an insurance company pays to you or your beneficiary when you file a claim.
Bodily Injury Liability
This covers medical expenses for injuries the policyholder causes to someone else.
Claim
The policyholder's request for the reimbursement of a loss covered by their insurance policy.
Collision
This covers damage to the policyholder's car from any collision. The collision could be with another car, a light post, parking curb, garage wall, etc.
Comprehensive
For damage to the policyholder's car that doesn't involve hitting another car. Covers damage resulting from fire, theft, falling objects, missiles, explosion, earthquake, flood, riot and civil commotion.
Deductible
The portion of losses that you agree to pay in the event of an accident. Higher deductibles lower premiums significantly, but will come back to haunt you in the case of an accident, especially if you're at fault.
Endorsements
These are changes to the original insurance contract, such as a different deductible or an additional car or driver.
Exclusions
Situations that are not covered by a given insurance policy; specific exclusions are listed on your insurance policy.
Extraordinary Medical Coverage
Sometimes included in Personal Injury Protection, this coverage protects you if you suffer accident-related injuries that require serious and/or long-term medical care and begins once you have exhausted the limit on your standard medical benefitscoverage.
Full Coverage
This indicates that you have all the minimum coverage for your state of residence; it does not necessarily mean you will always be fully covered.
Income Loss Coverage
Sometimes a part of Personal Injury Protection, income loss coverage takes care of you if you're unable to work due to accident-related injuries.
Indemnity
A predetermined sum paid for a covered loss.
Limits
The maximum amount of money your insurance company will pay out for your losses; many states have minimum required limits.
Medical Payments or Personal Injury Protection (PIP)
Covers the treatment of injuries to the driver and passengers of the policyholder's vehicle. At its most extensive, PIP can cover medical payments and the lost wages of those injured in an accident. It may also extend to covering the policyholder if he/she is injured while in another vehicle or is hit by a car while on foot.
No-Fault Insurance
A no-fault policy usually will not require that someone be assigned the blame in order for the policyholder to receive his/her money. In no-fault states, insurance companies are required to have this type of policy.
Property Damage Liability
Pays for damage the policyholder causes to someone else's property.
SR-22
A document that shows proof of financial responsibility in the case of a traffic violation.
Tort
A legal term that describes circumstances when someone is deemed legally responsible for injuring another person or damaging his/her property. Some states encourage you to make a tort provision, thereby reducing the cost of your premium by limiting your right to sue for non-monetary damages.
Uninsured/Underinsured Motorist Coverage
This is to pay for treatment and/or property damages of the policyholder in the event that he/she is injured in a collision with an uninsured driver. Underinsured motorist coverage is another policy option; it kicks in when an at-fault driver has auto liability insurance, but the limit of insurance is insufficient to pay for the victim's damages.
To delve even more deeply into the wonderful world of car insurance and find out your own minimum policy requirements, see the state-by-state table in our feature "How Much Auto Insurance Do You Really Need?"

Should Newlyweds Combine Car Insurance Policies?

Chances are, car insurance wasn't the first thing you thought of after the proposal. In fact, you might not have thought about how marriage might affect your car insurance rates at all. But after the decorations have been cleared and honeymoon adventures logged, you'll want to consider adding "check on combining car insurance policies" to your newlywed to-do list. Car insurance is usually cheaper for married couples — with a few important caveats.
No Matter What, You'll Likely Save
Even if you do absolutely nothing, the sheer fact of being married is likely to have a positive impact on your rates once your policy is up for review. The Zebra, a car insurance comparison engine and digital auto insurance agency, projects a premium savings of 10-12 percent when all other factors remain the same.
Why is this the case? According to Frankie Kuo, an auto insurance specialist at Value Penguin, "Insurers find married people less likely to file a claim compared to single drivers of comparable profile, and so consider them less risky to insure."
When Combining Policies Makes Sense
To nab an even steeper discount, consider combining your car and your beloved's in a single policy. This makes the most sense if you both have spotless driving records and no recent gaps in insurance coverage, Esurance explains.
Remember, too, that in addition to lower rates, having two cars on the same policy can often earn you multi-car discounts from insurers. Moreover, even if your household only has one vehicle, you can still earn discounts for sharing a policy.
"Even if a family only has one car, we would still recommend a single policy that would cover both drivers, since it ensures that both drivers are insured without incurring the extra cost of a second policy," says Eric Madia, vice president of product for Esurance.
Finally, combining your auto insurance policy with existing homeowners' or renters' policies from the same company could lead to even greater discounts overall.
Take a Combined Policy Test-Drive
Many factors shape one's insurance premium, and driving is only one of them. In some states, insurance companies use credit scores as one element in determining rates. So you may have some choices to make, based on your separate driving and financial histories.
For example, what if your spouse has a decent driving record but a poor credit score? Or what if you're a great money manager, but your lead foot has recently scored you a speeding ticket?
You should first get a quote for adding your spouse to your insurance or vice versa, says Jean-Marie Lovett, president of independent insurance agency MassDrive Insurance Group in Boston. Asking for a quote doesn't obligate you to follow through with the change. (If your spouse is a champion speeding-ticket holder, however, you might have to list him or her as an excluded driver in your household. More on that in a moment.) Lovett says it's a good practice to first get quotes for two drivers on one policy.
If putting the policies together does not help you save on the premium, you can just list your spouse on your policy and defer them to their own individual insurance, Lovett says.
When it comes to credit scores, one of the smartest things you can do is place the person with the best credit score as the primary named insured. "Their credit is the one that will be portrayed to the insurance company," Lovett notes, "and will be the credit score that the insurance company will rate off of."
Keep in mind this is only true in states where it's legal to use credit scores as a rating factor. Some states, such as Massachusetts and California, do not permit the practice. In that case, Lovett explains, the person with the best driving record should be the primary insured.
Still unsure on whether to combine policies? It can help to know the value of your cars. "Maybe your spouse has a good driving record," Lovett says, "but a junker of a car."
"If you have a 1995-2005 vehicle, you should debate whether to have collision coverage, or increase the collision deductible to $1,000," she continues. "Cars that get over the 10-year-old mark tend to take a significant drop in value, and you want to weigh the cost of the collision coverage on the vehicle versus the actual value of the vehicle." She adds that in the event of an accident, having the $1,000 deductible "gives you the option to junk the caror make a claim while keeping your insurance premium manageable."
When Not To Combine Policies
Though you're now joined in holy matrimony, there are some cases in which it just doesn't make sense to bring that partnership to your car insurance. Esurance warns that if one of you has a truly poor driving record, separate policies could end up costing you less.
"Combining a low-risk driver's policy with a high-risk driver's will likely increase the low-risk driver's car insurance rates," according to Esurance. There's also the chance that your insurance company simply won't insure your accident-prone partner, no matter the cost. "If one spouse has more than three accidents, your insurance carrier may not accept the spouse," Lovett says.
Here's where the really bad news comes in: Even if you don't combine policies, simply living under the same roof as a high-risk driver could have a negative impact on your car insurance rates.
Esurance explains why: "Because insurance companies consider the driving histories of all family members living within the same household when underwriting policies, having a high-risk driver under your roof makes you riskier by association." Car insurance follows the car, so your policy would have to cover the damage if your spouse caused an accident on an errand in your vehicle, for example.
There may be a way around this, though. "In most states, you are required to list all drivers in your household on your policy," Lovett says. "However, you can 'defer' someone, meaning they have their own insurance policy."
Also called a driver exclusion, this is an easy way to keep insurance costs low, even if your spouse is high risk. Keep in mind that exclusion truly means excluded: If your spouse borrows your vehicle and gets into an accident, you're responsible for any and all damages.
The Bottom Line
"Nine times out of 10," Lovett advises, "it will be beneficial to merge the insurance" for a newlywed couple. And if it doesn't make sense right now, Kuo recommends doing what you can to mitigate your high-risk profile. Taking a certified defensive driving course may unlock an automatic discount, or at least facilitate a negotiation for lower rates.
"Having a spotty record is inconvenient, but people usually have a chance to get lower rates just by shopping around and comparing prices across companies," Kuo adds.
Additionally, Kuo points out that minor traffic violations usually do not haunt a driver's record for more than three years. Staying clean for that long can also remove a driver from the high-risk pool.
Even if you can't combine policies immediately, Kuo recommends taking another look at your insurance every now and then. If couples think it makes sense to combine their policies, they can meet with their agent for a review. "Many circumstances of life could change, such as work, age and even where they live," Kuo says. As always, obtaining quotes from multiple companies can help you get the best deal.

Personal Factors That Affect Insurance Rates

A reporter recently asked Edmunds about the kinds of personal information that can affect the cost of car insurance. She also wanted to know whether people could do anything to address personal factors that were keeping their car insurance rates high.
They're good questions, and Edmunds was happy to help answer them. During the research it became clear that when it comes to car insurance, there's hardly anything that isn't personal. Here are five all-about-you factors that can affect your car insurance premium:
1) Your driving profile. Such factors as the number of miles you drive annually and your accident and ticket history are major elements in setting your insurance rate. The less you drive, the less risk of an accident and a claim. Safer driving — meaning a history free of accidents and moving violations — also points to someone who's less likely to file a claim.
2) The car you drive. Car insurance premiums are based in part on the car's sticker price, the cost to repair it, its overall safety record and the likelihood of theft, according to the Insurance Information Institute. The cost of fixing a brand-new $225,000 2010 Ferrari 458 Italia is going to be a lot more than the repair costs for a used $17,000 Nissan Altima. The premium will reflect this.
3) Your essential personal information, including your age, occupation and where you live. Each of these things factors into the process of setting your insurance rate because insurance companies base their premiums on actuarial information about drivers. They look for patterns of claims activity among people like you. A teenage boy is likely to have a higher insurance rate than a middle-aged driver, because statistically, teenage boys have more accidents than do 40-year-olds.
Your occupation can play a role if it affects how much driving you do. Work that involves lots of miles on the road, such as an outside sales job, can affect rates. From the insurance company's point of view, the more miles you drive means more risk of an accident.
Insurance companies also look at where you live. They track local trends of accidents, car thefts, lawsuits and the cost of medical care and car repair, according to the Insurance Information Institute.
4) The coverage you choose. The more coverage you elect and the lower the deductible you set, the more you'll pay.
5) Your credit score. Some insurance companies use credit scores as a factor in setting rates. This practice is coming under attack, however, with seven states in 2010 passing regulations regarding the use of credit information in insurance. In 2011, several other state legislatures introduced bills to regulate the practice.
Actuarial studies show that how a person manages his or her financial affairs is an accurate predictor of the number and size of insurance claims he or she might file, according to the Insurance Information Institute.
If you want to lower your insurance costs, you can't change your age, or easily change your job or hometown. But there are some personal changes you can make:
1) Consider pay-as-you-drive insurance. It's a paradox, but the more personal you get, the better your rates might be. Pay-as-you-drive programs offer better rates because they're tailored to how you personally drive — as opposed to the people who are similar to you in terms of age or other unchangeable factors.
This means that a teenager who is an excellent driver — who doesn't speed, doesn't drive at night and doesn't drive many miles — can get a better rate than the average teenager, whose actuarial profile pegs him as a greater risk, based on the accident history for people his age.
Pay-as-you-drive plans have different configurations, depending on the insurance company and state. Some require that you install a telematics device that transmits information about your actual driving (such as speed, mileage and braking patterns) to the insurance company. Others, such as plans permitted in California, only are based on the number of miles you drive, not how you drive.
2) Be a calmer, more careful driver. If you've had speeding tickets in the past, resolve to change from being a speedy, aggressive driver to a calm one. A side benefit is that you'll save money on gasoline. Edmunds testing has also shown that a calm driving style gets you 35 percent better fuel economy.
3) Choose a car with a lower cost of ownership. Edmunds has a True Cost to Own ^® (TCO) tool that lets you size up cars when you're shopping. It takes into account eight components — depreciation, interest on financing, taxes and fees, insurance premiums, fuel, maintenance, repairs and any federal tax credit that may be available — and tells you what your cost would be over five years. It's a way to get a preview of what your insurance premiums might be. Also, talk to your insurance company when you're car shopping to get a quote on how your choice will affect your insurance. If you wait until the deal is done, you've lost a chance to manage your costs.
4) Change your coverage. Don't go for every bell and whistle in an auto insurance policy. If you're willing to pay a slightly higher deductible, you can wind up saving big on your rates. Going from a $250 to a $1,000 deductible could save you 25-40 percent on your policy. Set aside a portion of these funds to cover your costs in the event of a claim.
If you have an older car with comprehensive and collision coverage, you might find yourself paying more in insurance than the car is worth. One tip: Take your comprehensive and collision premiums and add those up. Multiply by 10. If your car is worth less than that amount, don't buy the coverage. If you're worried about being left overexposed, consider this: The typical policyholder makes a claim only once every 11 years, and reports a total loss only once every 50 years.
5) Explore discounts for which you might be qualified. The options available include discounts for low-mileage drivers, for seniors and for cars with anti-theft devices and certain safety devices. It's a lengthy list — just ask your insurer about any discounts, and go from there.
6) Clean up your credit. Keep it in good shape by paying bills on time and by regularly checking that there are no items on your history that do not belong to you.
Is there personal information that doesn't matter? Gender, one expert told us. Insurance companies don't care if you're female or male as long as you're a safe driver. And it's a myth that red cars have higher insurance rates than those sporting more sedate shades, according to the Insurance Information Institute. Ultimately, insurance companies care about how likely it is that a particular driver would end up making or causing a pricey claim against them. Green is the only color that matters.

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A Total Loss???

You're OK. Your kids are OK. You have much to be thankful for.
As for your car, well, there's not a lot left. The last time you saw it, it was being hoisted heavenward with two limp, deflated airbags dangling from the dashboard and broken glass littering the footwells. The front-end sheet metal resembled a rice-paper lampshade after a cross-country move. Questions start filling your head. Will you ever see it again? Should you start looking for a replacement? And at this point in time, is your auto insurance company a friend or foe? What if your car is rare or collectible? The following step-by-step guide helps answer these questions and more to help you survive the scrutiny of your car insurance company after you've survived a serious accident.
Step 1: Brush up on your car insurance policy, before an accident occurs.
Most of us know generally what kind of car insurance coverage we have — liability, comprehensive and collision, for instance. However, when it comes to the fine print, there are terms about which most of us have absolutely no clue (but that are sure to surface when it comes time for your insurer to shell out cash to repair or replace your damaged vehicle). So in order to make sure you are dealt a fair hand when the dust settles, sit down with your agent and learn what those big terms in the small font really mean. We advise doing this before a serious accident occurs, particularly since insurance agents tend to be far more pleasant to deal with when they're not in the middle of a messy claim.
If, however, you're reading this in the aftermath of a bad accident, it's crucial that you understand what you're entitled to moving forward. So when you're done reading this article, bite the bullet and talk to your agent about exactly what your policy covers (not just in relation to this accident, but everything else, too). And bring cookies.
Step 2: Get moving again.
If you have rental car coverage, rent the best car your coverage allows and get moving again. Having a rental car will at least help keep the rest of your life from falling apart while you get this matter settled. Depending on your coverage, you may not get as nice a rental as what you actually own, but at least you won't be stranded at home or burdening your friends and neighbors for rides while you deal with repairing or replacing your car.
Talk to your agent before you rent a vehicle, because you may still be liable for collision damage to the rental car as well. Policies vary in the way they cover this, so check the language of your policy before renting a car.
Step 3: Check your state's department of insurance for a list of your rights as an insured driver.
Every state regulates its car insurance companies to some degree in order to protect its citizens from being shortchanged or cheated after filing a claim. Some states are more closely involved with this process than others, so log on to your state's governmental Web site and search for its department of insurance to find more information regarding the fair settlement of insurance claims. You will often find a bounty of helpful information that will guide you as you move forward in this arduous task.
Step 4: Find out how much your car was worth before the accident.
Claims adjustors from your car insurance company use a combination of dealer surveys, value guide books, online pricing sites and actual private party sales to determine your car's actual cash value (ACV). They also factor in things like sales tax, registration and title costs of a replacement vehicle to determine this amount. Proprietary as they are, these determinants can vary from company to company and state to state. Ultimately, then, what one company comes up with may not match what another may find, or even what you'll come up with on your own, using consumer Web sites like Edmunds.com.
A bit of advice, then: don't just take their word for your car's ACV. Involve yourself in the evaluation process. Do some research on your own, because the higher your car's ACV, the bigger your check is going to be if they determine it's been totaled. A valuable tool for establishing the worth of your car is Edmunds' True Market Value Appraiser. The appraiser will adjust to price based on condition level, region, mileage and options. In some instances, such as if you have a particularly rare trim level, color combination or special edition of a vehicle, you may know without a doubt that your car is worth more than what the insurance company tells you. Don't be afraid to present your case and ask them to make an adjustment — if your argument is sound, companies will probably listen to you. In fact, your insurer is required by law to give you a fair price, and they won't want to fight you in court if it looks like you could win. But you may have to do the extra legwork of finding an independent appraiser and/or compiling research on your specific car to bolster your case.
Step 5: Agree upon a fair evaluation of the damage.
Auto insurance companies must do a visual evaluation of the damage to your vehicle to begin estimating the cost of repairs. It helps to be there with them when they survey the damage, so that you can point out anything they may overlook. Make sure that they see all damage in order to ensure a proper settlement.
Keep in mind, however, that the more damage they see, the more likely it is that your car will be declared a "total loss." Here's where it gets hairy, since, depending on how much you love or hate your car, the concept of total loss can be a bad or good thing. First, a definition of the term "total loss."
According to the Insurance Consumer Advocacy Network (I-CAN), a self-help Web site for consumers run by a former insurance adjustor, insurance companies define a "total loss" as:
"The cost of repair plus projected supplements plus projected diminished resale value plus rental reimbursement expense exceeds the cost of buying the damaged vehicle at its preaccident value, minus the proceeds of selling the damaged vehicle for salvage."
Huh? Simply stated, if compensating you for repairing the car, renting something in the meantime and paying you what your car has lost in value costs more than what they'd shell out to just buy you a replacement and then sell your wreck to a salvage yard, you're not going to get your car back, but a check instead.
If the estimate your insurer comes up with is questionable to you, check your policy for an "Appraisal Provision" that would allow you to get an independent appraisal of the damage, which would then be reviewed by an "umpire" jointly selected by your appraiser and that of your auto insurance company. If the two appraisers can't agree on an amount of your car's ACV and damage, the umpire steps in, basically to take one side or the other to help resolve the issue. While you have to pay for your appraiser, and share the umpire's fee, it may be worth the expense if you really feel that your auto insurance company is trying to give you short shrift.
However, given the sizable expense of fixing a damaged car, compensating you for lost resale value, rental car costs and so on, it's easy to understand why insurance companies often throw up their hands long before the repair bill exceeds the car's ACV. For example, some companies consider a wrecked vehicle a total loss when the total cost to repair it exceeds just 51 percent of the vehicle's ACV. Others don't give up until the repair bill hits the 80-percent mark.
This explains how a company can send an older car to the scrap yard after a minor fender bender, then turn around and call for a very damaged late-model vehicle to undergo extensive surgery. It can be helpful to know beforehand how your company deals with this kind of thing, even though it may not change the outcome of a claim in the long run. This way, at least you're not in for a shock when they come back and tell you ol' Bessie the Buick's not coming home. Also, be sure to ask how your auto insurance company deals with any aftermarket additions, such as custom wheels, that you may have installed on your car.
Step 6: Decide if you want the car back.
After a really serious accident, many people are inclined to go ahead and find a comparable replacement (or even take the opportunity to upgrade to a nicer car) rather than get their car fixed, since repairs sometimes cannot return it to its original quality. And even if a car can be repaired to "like new" condition, it will still have lost a significant portion of its resale value simply because it has been in a major accident (you can sometimes get back some of this lost value if you file a diminished value claim). Further, a new car can also make it easier for a family to move on psychologically after a traumatic experience like a serious accident.
But if your sentimental attachment to your car is so strong that you just can't imagine life without it, you can take the money and apply it to repairing her on your own, which, depending on the extent of the damage, could get quite expensive. Furthermore, the check your insurance company cuts you will be reduced by the amount it feels it would have gotten from the salvage yard, a check that's already been reduced by your deductible, whatever that is. So if ol' Bessie is, say, a 14-year-old Le Sabre, that's going to leave you with a pretty small check. You also may have to file a salvage title with the DMV.
That said, consider this little bit of irony: a car's "total" value is almost always less than the sum of its parts — literally. Indeed, parts are what salvage yards are interested in, since they make their money by selling what's left of your car, piece by piece. If you are likewise inclined to sell it off for parts, you may actually make money. But keep in mind that you will have to arrange for the legal dismantling, advertising and sale of those parts on your own. Not to mention the fact that the rusting, rotting carcass of your old car will be living somewhere on your property for the foreseeable future. And even if you're OK with that, consider also that dead old cars become dangerous playpens that neighborhood kids find hard to resist. Need we say more?
In any case, if you want to hold on to a car that's been considered totaled, inform your agent as early as possible in the process, since the longer you wait, the closer your car gets to being auctioned off to the highest bidder at the salvage yard.
Step 7: Move on: get your car repaired or get it replaced.
Depending on how long your rental car agreement provides you with transportation, you may have to start looking for a replacement car very soon if you car has been totaled. It may behoove you to be thinking about that even before the auto insurance company has determined whether it will repair your car, or how large a check it will write you.
Remember also that if your car has been totaled, your settlement must include taxes, title and license fee for a comparable replacement. Likewise, the settlement must make clear the value of any deductions taken on account of salvage matters if you're keeping your totaled car.
One final bit of advice: If your vehicle was not totaled, do not let the auto insurance company dictate which repair shop you use. They can make recommendations, sure, but definitely find out why they recommend a particular shop. Compare their recommendations to those you get from friends and colleagues.
Dealing with car insurance matters after an accident is no fun. Just keep in mind that the sooner you take care of all of this, the sooner you and your family can put this whole thing behind you.

How to Choose the Right Insurance Company

If you've read our "10 Steps to Buying Insurance" article, you should have a pretty good idea of how much car insurance to buy and how to find a low-cost policy. But how do you make sure that the company you sign on with is going to be reliable? When we say "reliable," we're talking about how the insurer treats you, the customer. Most importantly, how will the company deal with you when you file a claim?
To help answer this question, we consulted two insurance experts: Dennis Howard, director of the Insurance Consumer Advocate Network (I-CAN) and a retired insurance adjuster, and Doug Heller, a consumer advocate at The Foundation for Taxpayer & Consumer Rights, a California-based consumer advocacy group. Both had several ideas for consumers determined to make sure their car insurance investment is directed toward a trustworthy company, one that will pay on time and in full.
1) Visit your state's department of insurance Web site. Although you may not be familiar with it, your state, and every state, has a department of insurance. Most departments have Web sites, and many publish "consumer complaint ratios" for all of the insurance companies that sell policies in their state. This ratio tells you how many complaints a car insurance company received per 1,000 claims filed.
Both experts recommended that consumers use complaint ratios to screen prospective insurers. "Just because they're a big name doesn't mean that they'll be a 'good neighbor' or that you'll be 'in their hands,'" Heller noted.
If you've done your homework, you should already have a list of car insurance companies with the lowest premium quotes. Now jot down the companies with the lowest (or best) complaint ratios. Then, compare your two lists — the companies that rank best on both lists merit your strongest consideration.
If you can't find complaint ratios for your state, Heller recommends examining the complaint ratios published by other states. Keep in mind that a single insurance company's practices can vary significantly from state to state — a subpar ratio in one state doesn't necessarily mean the situation is the same in your state. But watch for general trends. If an insurer is getting a lot of complaints in several other states, you probably don't want to get involved with this company. The I-CAN Web site provides links and contact information for every state's department of insurance.
Also note that insurance department Web sites often provide basic rate comparison surveys. These can give you a rough idea of which insurers might interest you on a financial basis without the hassle of typing in all your personal information (as you must when you use one of the online quote sites).
2) Find out which insurers body shops recommend. One of the best ways to identify reliable insurers, according to Howard, is to contact local body shops that you trust and ask for their recommendations. Body shop managers have a unique perspective to offer, since they regularly interact with insurance adjusters. They know which companies have the smoothest claim processes, which affects how quickly the work can be completed on a damaged vehicle. And they know which companies are pushing aftermarket parts, in lieu of genuine original equipment manufacturer (OEM) parts, to cut costs.
3) Check the J.D. Power Ratings. J.D. Power and Associates collects data from individual policyholders nationwide and rates them according to coverage options, price, claims handling, satisfaction with company representatives and the overall experience. A quick visit to the J.D. Power Consumer Center will give you a feel for how the major carriers stack up. J.D. Power also publishes an annual survey of major auto insurers — Amica and Erie have finished at the top for the last three years. These are also companies that Howard recommends: "Erie is sold by independent agents, who are very knowledgeable about the product. I like their claims handling approach. Almost all other companies look at a claim and find a way to not pay it. Erie and Amica will look at it and try to find a way to cover it."
4) Consider insurers' financial strength ratings. As a final check, you can take a look at the A.M. Best and Standard & Poor's ratings. Both companies publish financial strength ratings for all insurance companies — these "measure" an insurance company's ability to pay out a claim (they have nothing to do with the way a company treats its customers).
For the general consumer, looking up these ratings is only a formality, since most of the well-known carriers are going to be a safe bet. Moreover, independent agents would be unlikely to recommend a company with dubious financial standing. Still, if you're considering a smaller, unfamiliar insurance carrier, you might consider this research time well spent. Insurance companies often provide this information on their Web sites, but if not, you can run a search at the A.M. Best and Standard & Poor's sites.
The A.M. Best rating is expressed as a letter grade from A++ (the highest) to D. Some companies may be assigned ratings of E (indicating regulatory action regarding the company's solvency), F (in liquidation) and S (suspended). In any case, you should only work with companies that have at least a B+ rating.
The Standard & Poor's ratings range from AAA (the highest) to CC. Additionally, some companies receive ratings of R (under regulatory supervision) and NR, which means "not rated." The letter grades might be modified by a plus or minus mark. Consider only those companies that have at least a BBB rating.
5) Still confused? Consider working with an agent. It used to be that everyone purchased auto insurance from an agent, but now, car insurance companies like Esurance, Geico and others allow you to purchase insurance directly — over the phone from a customer service representative or online. Still, many of the major players have preserved their national networks of local agents — even if you use State Farm's or Allstate's Web site, you will still be assigned a local agent.
There are two kinds of agents:

• a) the captive agent, who represents only one insurance company (major carriers like AAA, Allstate and State Farm sell policies through captive agents).
• b) the independent agent, also known as a broker, who represents several insurance companies and therefore does not have a vested interest in selling you a policy from one particular company.

The main advantage in having your own agent is that this person has a vested interest in keeping you happy. Accordingly, he can become familiar with your situation and guide you toward a suitable policy. Howard favors the use of agents and advised, "Don't rule out direct providers, but my personal preference is to have an agent, preferably an independent agent, write your policy for you.... An independent agent would become aware of less advantageous conditions with one company [and help you move to another]. You can change carriers without changing your agent. I encourage consumers to develop a relationship with their agent."
The prospect of good working relations with an agent may help you to make a decision: When Heller purchased auto insurance for the first time, two insurers gave him similar quotes, but he went for the slightly higher one because the agent had been highly recommended by a friend. "You shouldn't go direct without always checking out other options," he said.
But, he cautioned, "Never feel pressured by a broker or an agent. Take the time to talk with an agent or a broker as well as do your online research. You may not need an agent — you may find a better deal with a company that operates direct."
Independent agents sometimes charge a fee for their services, but you may be able to negotiate that. You should agree upon any fee in writing before making a purchase. Look for agents who are certified by Independent Insurance Agents of America (Big "I") or Professional Insurance Agents (PIA).
Of course, we know you have better things to do with your time than think about car insurance. Realistically, most people won't be able to do everything on this list before choosing an insurance carrier. But if you feel that you've been burned during the claims process in the past, consider at least one or two of these suggestions — you'll thank yourself if you're ever involved in another accident.

Young Drivers, Marijuana and Car Insurance

Marijuana, young drivers and serious car accidents are on a collision course. Fatal crashes involving drivers whose systems showed evidence of THC, the active ingredient in marijuana, nearly tripled in 10 years, rising from 4.2 percent in 1999 to 12.2 percent in 2010, according to a study released earlier this year by Columbia University's Mailman School of Public Health. In another four-year study, 43 percent of fatally injured drivers under 24 tested positive for cannabinoids. The percentage was lower for older age groups.
Now that marijuana is legal in Colorado and Washington and widely tolerated elsewhere in the U.S., parents may be on their own collision course with pot: They face steep car insurance hikes and even cancellation if young drivers on their policies are convicted of a DUI stemming from marijuana use. Here's what parents need to know about drugged driving and the effect it can have on insurance coverage.
Drugged Driving: A Growing Concern
Pot use behind the wheel is a subset of a category that law enforcement and the traffic safety community call drugged driving. Every state has laws addressing it. In many, the laws say if a driver is stopped and authorities can prove the individual drove under the influence of any substance that impairs driving ability, he or she could be convicted of a DUI. Nearly one-third of states feature "per se" laws. These more strict laws say that any amount of a controlled substance found in the driver's body is evidence of impaired driving.
The hazards of drunken driving are well known. A growing concern among researchers, law enforcement and those in the traffic safety community is the destruction wreaked by individuals driving under the influence of drugs including marijuana, cocaine and prescription and over-the-counter drugs. Conservative estimates put the cost of these accidents at 6,700 deaths and nearly $60 billion in costs each year.
The effects of marijuana use on driving vary from one person to the next. In the words of the National Highway Traffic Safety Administration (NHTSA), "It is difficult to establish a relationship between a person's THC blood or plasma concentration and performance impairing effects." Concentrations of the drug are "very dependent on patterns of use as well as dose."
Insurance Follows the Car
Driving while stoned is a serious matter for teen and twenty-something drivers, who risk death, injury, criminal prosecution and civil lawsuits. In addition to those outcomes, drugged driving also can have financial impacts on parents, who often own and insure the cars their adult children drive.
"Insurance follows the car, not the driver," says Loretta Worters, vice president of communications for the Insurance Information Institute, a national insurance trade association. A young person's drugged-driving conviction is likely to be treated like a drunk driving conviction, whether the recreational use of pot is legal in that state, says Bob Passmore, personal lines policy senior director with the Property Casualty Insurers Association of America.
"As with any DUI conviction, your insurance company could cancel your policy, ask you to take the individual off the policy, or keep him or her on at a much higher rate, depending on the rules in the state," Passmore says. "The individual with the conviction might need to get their own policy." That would come at a much higher rate than if the driver is on his parents' policy, he says.
Worters agrees. If a young person is convicted of driving under the influence, "insurance rates will jump astronomically, because driving under the influence is illegal," she says. "DUI convictions can result in multi-year jail terms. You're also putting the parents' assets at risk" if there are civil lawsuits in connection with the accident, she warns.
Not every teen uses pot, of course. In 2012, less than 8 percent of youths ages 12-17 had used marijuana in the past month, according to the 2012 National Survey on Drug Use & Health. And about 80 percent of teens say they disapprove of their friends using pot. Pot use increases markedly for young adults, however. In 2012, 18.7 percent of 18-to-25-year-olds had used marijuana in the past month.
If your child does use pot, you may need to take a tough stance when it comes to his or her use of your cars.
"Parents may want to consider either taking the car privileges away until they've cleaned up their act, or taking them off your insurance policy," Worters says. An insurance company may not be comfortable with a young driver continuing to be on the policy if they're "living in the same house, having possible access to the keys, even if they aren't driving," she says, "because that risk is always there."
Talk to Your Insurance Agent
Parents should consider contacting their insurance agent to assess their coverage, preferably before a teen drives under their car insurance policy, experts says. Parents also might want to review their liability limits and consider an umbrella liability policy. This will provide protection in case their child causes a serious injury and is sued.
"You want to make sure you and your child are protected," Passmore says.

How To Cut Teen Insurance Rates

Teens ages 16-19 are three times more likely than drivers older than 20 to be involved in a fatal crash (or any crash, for that matter) according to the Insurance Institute for Highway Safety. It's not too surprising, then, that teen drivers tend to have high insurance premiums. For parents, this can mean a big jump in insurance premiums once you add your teen driver to your policy. However, there are ways to reduce your costs right out of the gate, even for very inexperienced drivers. Here are some ways to keep policy costs at a minimum.
Choose the Right Car
It's simply a matter of economics. There are some cars that cost more to repair and replace than others. There are also some cars that are more likely to be stolen and others that protect passengers better in a crash. Combined, these three characteristics have a lot to do with how much you'll pay for the collision and theft portions of your policy, says David Goldstein, the author of Insure Your Car for Less: A Practical Guide to Saving Money on Automobile Insurance.
There are several ways to choose the least expensive car to drive. First, check the Insurance Institute for Highway Safety's Top Safety Pick awards and the National Highway Traffic Safety Administration's 5-Star Safety Ratings to see which cars scored the best in crashworthiness. You'll also want to check the National Insurance Crime Bureau's list of Hot Wheels: cars that are most commonly stolen.
Your insurance broker or company can also help you find the best rate for the cars you're considering, says Goldstein, who has worked as an insurance and claims adjuster. "If you're considering several cars, call and ask for a rate quote on each," he suggests.
Midsize family cars are generally the cheapest to insure, says Jeanne Salvatore, senior vice president and chief communications officer at the Insurance Information Institute, a nonprofit information service. "You want a car that's easy to drive and highly protective. Those are the cars that are going to keep your teen safe and cost the least to insure," she says.
You may also want to consider a car that doesn't need collision insurance, which will cut your rates considerably, says Salvatore, and either way, the age of your car may lead to more discounts.
"Some companies offer a utility discount for cars older than a 2002 model year," she says. That said, make sure any older car you purchase has a solid crash rating and all of the safety features that a newer car might have including airbags, an antilock braking system (ABS), daytime running lights and (for SUVs) electronic stability control.
Adjust Driver Assignments
When you call the insurance company to add your child to a policy, the representative will ask you to designate which car will be driven by each member of your family most often.
You can save money by designating and having your child drive the car that's the least expensive to insure. The trick is finding out which car that is, says Goldstein. "Driver assignment can really affect your rates," he agrees.
If you get someone on the phone who is willing to work with you, he or she can take you through all the different scenarios. "Occasionally, I'd quote rates for four people and four different cars: two parents and two kids. If we played around with it, we could often save money," Goldstein says.
Look for Alumni Discounts or Resident-Student Discounts
One of the perks of going to college is that many schools ink alumni deals with large organizations, such as insurance companies. While the discount is usually around 5 or 10 percent, it's still worth looking into. Geico, for instance, offers an 8 percent discount for DePaul University students and alumni. Liberty Mutual offers special rates to those who attend Arizona State University.
If your child goes away to college and doesn't take a car along, you can save a lot on your premium. Allstate, for example, offers a 35 percent discount off premiums for students who live at a school that is more than 100 miles from where their car is garaged. "There's an assumption that they are only going to be driving on weekends and school vacations," says Salvatore.
Finally, all full-time high school and college students who get good grades can benefit from their diligence. Most companies offer up to 25 percent discounts for good report cards. You'll also see rates drop as your child advances in school. Seniors in college have better rates than freshman, so if your child takes college credits over the summer or in high school, let your insurance company know when he or she reaches the next college milestone, says Goldstein.
Wait an Extra Year Before Licensing
Some teens may not like this idea, but you can save a lot of money simply by having your son or daughter wait an extra year to get a driving permit.
"Wait until they are as old as possible before they get their permit," says Goldstein. "For instance, in some states you can get your learner's permit as early as 16 but you're probably not going to be driving [without restrictions] until you're 18. Why pay for insurance those two years unless you have to?"
Delaying the process is more common than you may think, according to several recent studies. The AAA Foundation for Traffic Safety reports that just 44 percent of teens get their licenses within 12 months of the minimum age and only 54 percent get their licenses before they turn 18.
However, if you go this route, make sure teens know that they'll still need the practice and supervision that a graduated driver licensing program affords.
Tracking for Discounts and Better Driving Habits
In recent years new devices that connect to a car's computer and use GPS technology to track driving habits and routes have flooded the market. While they can be very useful for parents who want to make sure that their teen isn't speeding or driving outside an approved area, they're also being used by insurance companies to help set rates for drivers of all ages in an approach called use-based insurance.
Snapshot, a program by Progressive Insurance, is one such option that uses a pocket-size telematics device that transmits car data using cell-phone technology. The device plugs into a car's onboard diagnostic port and measures driving habits such as how and when someone drives, tracking behaviors like mileage, time of day and if the person performs hard braking maneuvers.
"Our Snapshot program gives all consumers, including teens, more control over their car insurance costs by offering personalized discounts based on their actual driving behavior," explains Jeff Sibel, a spokesman for Progressive Insurance. "People who drive less, in safer ways and during safer times of day are most likely to receive a discount."
Some companies are offering the device for parental tracking, but without an immediate insurance discount. Its use could result in lower rates going forward, says Rebecca Hirsch, a spokeswoman for insurer USAA. "We're offering the device for free and parents get the monitoring for a year free," she says. "Parents can get text messages if their teens are doing things like hard braking. It enables the parent and the teen to have a conversation around safe driving habits. The first few years are so critical. Anecdotally, we've seen that the devices help build better driving behaviors."
Take a Class
Adults and teens alike can save money by taking a six-hour driving safety course either online or in person. Some insurance companies are offering teen-specific courses that can help reduce the number of crashes that involve teens by providing realistic driving simulations.
Liberty Mutual, for example, offers something it calls teenSMART, a program that focuses on the six factors that most commonly cause teen car accidents. The company says teens who complete the program may get "special savings" on their auto policies, but doesn't offer any examples of what those savings might be.
State Farm offers a program called Steer Clear for drivers under the age of 25 or new drivers with less than three years of driving experience. It requires drivers to watch a video, sign a safe driving parent/driver agreement and complete a certain number of supervised trips of 15-30 minutes over the course of a month, filling out a log after each trip. By completing the program, drivers can get a discount of up to 15 percent on their coverage, says State Farm spokeswoman Rachael Risinger.
Finally, driver-training classes — so-called driver's ed — can also help lower your premiums by up to 10 percent, depending on your insurer.
Make Smart Choices
Even if they apply every discount imaginable, most people will find there's no getting around the fact that rates will go up with a teen driver on the policy — at least for a little while. And while it might be tempting to simply "forget" to inform your insurance company that Junior has his license, take note: Doing so can have serious consequences if your child is in an accident.
You'll also want to make sure you have enough insurance coverage. "Don't go for the minimum limits," suggests Burl Daniel, a former insurance agent and corporate risk manager who testifies as an expert witness in insurance cases. "You're exposing yourself to potential problems, if your kid does have a wreck and seriously injures someone. Don't take the bait now just to save a few hundred dollars when it could end up costing you a lot down the road."