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How do "points" affect insurance rates, and when do insurance companies check driving records?
In most states, the motor vehicles department has a "point" system, which is used to track accidents and violations that affect your driving record. Insurance companies order a copy of your driving history in order to confirm the information that you provided in the quote and on the application. They may also check your driving record when your policy is scheduled for renewal.
Each insurance company has its own method of evaluating applicants, so the points on your driving record may or may not have a direct impact on the rates you pay for auto insurance. And, you should know that only "moving violations" will affect your insurance rates. Parking tickets and other non-moving violations are not used by insurance companies.
If a review of your driving record uncovers negative information, there's a chance your insurance rates will increase. Insurers typically use their own "point" system to determine the amount of the increase (if any).
What information do I need to get a quote?
Your current policy is the best starting point for information like your current coverage and vehicle information. It might also help you remember the dates of any traffic tickets. Here's what we'll ask:
General
Information: Address
and contact information, including email address.
Vehicle Information: Make and model, annual mileage and ownership.
Your Vehicle Identification Number (VIN) is helpful but not required for a
quote.
Driver Information: Age, education and occupation for each driver
in the household.
Incidents: This includes accidents, violations and claims in the
last 5 years.
Coverages: Name of current insurance company, policy dates and
amount of coverage you wish to purchase.
Why do auto insurance applications include questions asking for credit information?
A person's financial responsibility simply reflects the way they pay their bills. Studies indicate that financial responsibility is a good predictor of future insurance claims. This means that, by using financial responsibility when evaluating applications, insurance companies are able to more accurately understand the risk involved.
When insurance companies use financial responsibility, they don't actually look at the credit report. They are only concerned with the financial responsibility grouping that the customer falls into based on the information collected by the credit reporting service. Rating software interprets the information and reflects it in the rate offered. The rating goes on behind the scenes and the system does all the work.
I heard that some companies cancel people's insurance if they have just one claim. Is this true?
Actually, it's very unlikely that any type of insurance would be canceled after you file a single claim. However, filing a claim could increase your premium on certain types of insurance.
For example, your auto insurance premium will almost certainly increase after an accident, especially if you're at fault. The reason for this is simple: statistical evidence indicates that people who have had accidents in the past are more likely to have accidents again in the future. This means the insurance company could see another claim from you someday, so there is a logical reason to charge you more for insurance coverage.
The big question is how much your premium will increase. This is more difficult to anticipate, because insurance companies can use different formulas to calculate rate increases. In most cases, your auto insurance policy will not be canceled unless you have a certain number of at-fault accidents within a given period (e.g., two or three in one year).
Is a broken windshield covered under my auto policy deductible?
Broken windshields and other glass are typically covered under the comprehensive coverage of an auto insurance policy. Comprehensive generally provides coverage for physical damage to your vehicle not caused by a collision with an object or another vehicle, but by a variety of other specific situations, such as fires, floods, or hitting a deer. So, if your windshield is broken but you don't have comprehensive coverage, the cost of replacing it will not be covered by your auto insurance.
If you do have comprehensive, the cost will be covered, and in the state of Florida there is no deductible towards replacing a broken windshield. Any other type of comprehensive damage would be subject to a deductible. Most drivers purchase comprehensive coverage with a deductible, in which case you would have to contribute a certain amount out of your own funds toward the cost of any other comprehensive damage other than replacing your windshield. For example, if you have a $250 deductible, you'll end up footing half the cost when you hit a deer.
My car was totaled in an accident. Is there anything I can do to get it back or at least get a larger settlement amount?
An auto insurance company's decision to declare a car a total loss is based on two factors:
- The value of the car
- The amount it would cost to repair the covered damage
Basically, if the cost of repairs exceeds the car's value, the insurance company will declare your car totaled and give you a cash settlement rather than pay for the repairs. So a relatively minor accident could be enough to total an older or inexpensive car, while a very serious accident may not cause a more expensive model to be totaled.
When your car is totaled, the insurance company has an obligation to "make you whole," as that is defined in the policy. This essentially means you have to be left in approximately the same financial position you were in before the accident. To accomplish this, the insurance company will typically write you a check for the actual cash value of the vehicle, minus any deductible on your policy. After the settlement is paid, the damaged car goes to a salvage yard, where it is typically auctioned to the highest bidder and used for parts. The insurance company keeps the proceeds of this sale.
What is Bodily Injury and Property Damage Liability coverage?
In states where the person who caused the accident is held responsible for paying for damages, Bodily Injury and Property Damage Liability coverage pays for those injuries or damages. If you are legally liable for an accident, bodily injury liability coverage pays for any injuries to people involved in the accident other than yourself. This coverage will also pays for legal defense costs if you are sued. Similarly, property damage liability coverage pays for damage to property, such as another car, a mailbox or a streetlight, that results from the accident you caused. Legal defense costs are also covered if you are sued.
What's included in Collision and Comprehensive coverages, and what should my deductibles be?
Collision
coverage:
If your car overturns or collides with a car or another object, collision
coverage pays for the damage to your vehicle or the cost to replace it, if it
cannot be repaired. Collision coverage includes a deductible, such $250 or
$500. This means that you are responsible for paying the amount of the deductible
in any loss, before the insurance company is responsible for payment. For
example, if the cost to repair your car is $1,500 and you have a $500
deductible, your company will pay $1,000 toward the repair costs. You are
responsible for paying the first $500 to the body shop when the work is
completed.
Collision coverage may also apply to a rental car when you are on vacation. Check with your company before you rent, so that you can decide whether you need to purchase additional coverage.
Comprehensive
coverage:
If your car is damaged by some event other than a collision or your car is
stolen, Comprehensive coverage will pay for the damage. Damages may result from
fire, windstorm, flood or vandalism. You will have a deductible for Comprehensive
coverage, as you do with Collision coverage. This means that you are
responsible for paying the amount of the deductible before the insurance
company is responsible for payment. For example, if the cost to replace your
stolen car is $10,000 and you have a $500 deductible, your company will pay
$9,500 toward the replacement cost.
Comprehensive coverage may also apply to a rental car when you are on vacation. Check with your company before you rent, so that you can decide whether you need to purchase additional coverage.
What
deductibles should I choose for Comprehensive and Collision coverages?
Choosing a higher deductible ($500 or $1,000) will help you save money. But,
it's a trade-off between saving money on your annual premium and having to pay
the deductible if you have a loss. Here's a way to think about it. If you
choose a $500 deductible instead of $250, you may save $60 a year in insurance
premiums. So, if you don't have a loss for 5 years, that's a total savings of
$300. However, if you have a loss during the 3rd year and you have to pay the
higher deductible of $500, you haven't saved anything.
What coverage should I buy? And how much?
Florida has mandatory coverages (such as Personal Injury Protection coverage or Property Damage Liability coverage) as well as optional coverages (such as Collision, Comprehensive and Medical Payments coverage). We've included definitions and links to each term in our FAQ section.
When deciding how much bodily injury liability coverage to buy, it's important to understand that this coverage protects your personal assets—your savings, your property and even your future earnings—if you cause an accident and are held legally liable for injuries to other people. This coverage will also pay for legal defense costs if you are sued. Similarly, property damage liability coverage pays for damage to property, such as another car, a mailbox or a streetlight, that results from the accident you caused. Legal defense costs are also covered if you are sued.
One way to think about how much to buy is to think about what you'd lose if you had to pay for an accident—without insurance:
No house, no dependents and not much in the bank? The state minimum limits of liability might be enough ($10,000 per person/$20,000 per accident). We believe these limits are too low and recommend buying at least $25,000 per person/$50,000 per accident coverage.
Starter house, a family and modest savings? You'll want to buy at least $50,000 per person/$100,000 per accident liability coverage. It may not cost much to increase to even higher limits ($100,000 per person/$300,000 per accident), which will protect you as your assets grow.
Bigger house, teen drivers, investments or other properties? Buy the highest limits available from your carrier, usually $250,000 per person/$500,000 per accident. And, if you have significant personal assets, consider buying an umbrella policy to protect you if an accident exceeds the limits on your auto policy.
A trip to the emergency room via ambulance or helicopter flight and a short hospital stay will cost tens of thousands. So, when you're buying car insurance, you're buying peace of mind—for the event you hope never happens.
If I have health insurance, should I buy Medical Payments coverage?
While Medical Payments coverage is optional, it might be a good idea to buy a small amount of coverage. Med Pay Coverage is available to pay for medical and funeral expenses for anyone covered by your policy, not just you, as long as the expenses were the result of an auto accident. Payments are made regardless of who was at fault for the accident.
Should I buy Rental Reimbursement coverage?
If your car is damaged and needs repair, Rental Reimbursement provides rental car coverage during the repairs, as long as your claim is covered by the Comprehensive or Collision coverage on your policy. Usually the daily rental amount covers the cost of a mid-size car. If you have several cars in your household, or you can carpool while your car is being repaired, you might want to save the cost of buying this coverage.
What is gap insurance and do I need it?
Whether you lease or finance your car, gap insurance can provide valuable protection during the early years of your car's life. As we all know, a new car's value drops the minute you drive it off the lot. And unfortunately, if your car is totaled five minutes after you buy it, your insurance generally only covers the actual cash value of the car. So, there's a good chance the insurance check isn't enough to pay off your outstanding lease or loan balance, unless your insurance company offers Guaranteed Replacement coverage.
Gap insurance was created for just such a situation. If a "total loss" occurs (the car is stolen, costs more to repair than it's worth, etc.), gap insurance will pay the difference between the actual cash value of the car and what you owe on your loan or lease. Some lenders and leasing companies actually require you to carry gap coverage until the outstanding loan/lease amount drops below the value of the vehicle.
Gap insurance is typically not very expensive, since the coverage amount is relatively small. However, the cost will vary depending on the type and value of the vehicle you purchase, and from one insurer to another.
What is Personal Injury Protection (PIP) coverage?
In a "no-fault" state such as Florida, Personal Injury Protection is the basic coverage that pays for your own medical, hospital and funeral expenses, as well as those of your passengers and any pedestrians. Lost wages and other accident-related expenses may also be covered. PIP payments are not based on who is driving the car, nor who is at-fault for the accident.
Should I buy Uninsured Motorists coverage? And Underinsured Motorists coverage?
While these are optional coverages in most states, it's a good idea to buy them. Here's why. If you are injured as a result of an accident caused by a driver who does not have insurance, Uninsured Motorists (UM) coverage will pay for your medical and hospital bills and other related expenses. If you have health insurance, some of these expenses may be covered, but you would still be responsible for deductibles and co-payments. And, of course, if you have no health insurance coverage or have selected a high deductible plan (also called catastrophic health insurance), you will be responsible for all or most of your expenses.
Underinsured Motorists (UIM) Coverage works the same way. If you are injured by a driver who has insurance, but your injuries are greater than the amount of insurance they purchased, your own policy will pay your unpaid medical bills up to the amount of UIM coverage you chose to purchase (minus the amount the other driver's insurance pays).
I go away for the summer to my home up North and don't bring my car. Can I get my auto insurance suspended to save money?
Of course, everyone wants to save as much as possible when it comes to auto insurance. But it's important to remember that auto insurance is not just coverage for accidents that happen while your car is being driven. Different parts of your auto insurance policy serve different purposes, so the question is really more complicated than it appears.
Collision coverage, liability coverage, uninsured/underinsured motorist coverage, and medical payments coverage are what most people think of when they hear the phrase "auto insurance." Each of these coverages protects you against some aspect of a potential automobile accident. But comprehensive coverage is another important part of your auto insurance policy. Comprehensive coverage insures you against damage to your vehicle caused by events other than an accident—for example, fire, theft, flooding, or vandalism. Any of these things can happen to your car, even when it's not being driven. The risk of certain occurrences, such as theft and vandalism, may be heightened if your vehicle will be parked outside an unoccupied house for any length of time. So, the basic answer to your question is that you are able to suspend part of your auto insurance if your car won't be driven for an extended period of time, but it would be unwise to cancel your policy entirely.
One more important consideration: if you have an outstanding car loan on your vehicle, the terms of the loan probably require that you keep the car fully insured with comprehensive and collision coverage. Check your loan documentation carefully before you take steps to suspend your insurance coverage.
I forgot to pay my auto insurance premium last month. Will my policy be canceled?
If you fail to pay your premium on time, your insurance company has the right—after providing you with the legally required notice—to cancel the policy. If you are sent a notice of cancellation, it will inform you of the date and time the cancellation will take effect
It may also be possible for you to reinstate coverage after the effective cancellation date by paying the overdue premium and perhaps an additional sum. However, it is likely that you will not be covered for any accidents between the effective date of cancellation and the date of reinstatement.
I am buying a used car that is worth only a few hundred dollars. Do I need to insure it?
A standard auto insurance policy is a package of different kinds of coverage. You generally have some flexibility in terms of both the types and amounts of coverage you select. However, practically every state has enacted insurance laws that require drivers to carry at least some auto insurance. Many states even require that you present proof of insurance before you register a car. So the short answer to the question is that you will need to insure your car, regardless of its value.
Florida requires that drivers carry Property Damage Liability insurance and Personal Injury Protection (PIP) coverage. The liability coverage section of an auto insurance policy provides financial protection from liability claims against you when you (or certain other people) cause an accident that results in bodily injuries to other people and/or damage to their property. The rationale behind such laws is that at-fault drivers should be able to compensate victims who suffer accident-related losses. But the required minimums don't even come close to covering the costs of a serious accident. Consequently, if you wish to be adequately protected from liability claims, your liability coverage should probably exceed the $10,000 minimum requirements.
Other coverages are optional. Medical payments coverage and uninsured/underinsured motorist coverage are two such coverages. Medical payments coverage covers medical expenses incurred by you, your family members, and your non-family passengers. Uninsured/underinsured motorist coverage covers losses you and others suffer as a result of an accident caused by a driver who either has no insurance or insufficient insurance.
Collision and comprehensive insurance is optional unless your vehicle is leased or financed. Your lender would require that you carry these coverages and (particularly leased vehicles) require certain coverage limits be covered. The collision and comprehensive section of your policy covers physical damage to your own vehicle resulting from collisions and a variety of other causes (e.g., fire, falling objects). It may also cover losses associated with theft. However, your car's value plays a big part in assessing your need for this type of coverage. It may not be cost-effective if your vehicle is worth less than $1,000 because you'll have to satisfy a deductible, and the most you'll receive (even if your car is totaled) will be its actual value (i.e., after depreciation). That's not much, especially taking into account the premiums you would have been paying for coverage.
If someone borrows my car, are they covered under my auto insurance?
As a general rule, auto insurance coverage actually follows the vehicle, not the driver. So if your car is involved in an accident, the car typically receives the full coverage provided by the auto insurance policy, regardless of who is driving.
Auto insurance policies normally provide coverage for your car if it is driven by anyone to whom you lend your car.
Your policy may require that certain conditions be met in order for other drivers to be covered under your policy. For example, anyone who drives your car must typically be a licensed driver. Additionally, most insurance companies require that anyone driving your car be doing so with your permission. This doesn't mean that you have to give explicit permission each time someone takes your car for a spin, but the person driving must have a reasonable belief that he or she is entitled to do so.
Because these conditions can vary, it is important to check your policy carefully and make sure you understand any limitations that might apply before you allow others to drive your car.
I'm moving to Florida, which is a state with "no-fault" auto insurance—what exactly does this mean?
The shortest explanation in broad and simple terms is that it means your car insurance company will pay you for your injuries or damaged property resulting from a car accident, regardless of who caused the accident. In that sense, "no-fault" insurance is different from "at-fault" insurance, in which the car insurance company will pay based on a decision about who caused the accident.
A more formal explanation is that most states have what is called a "traditional tort liability system," otherwise known as an at-fault system, for auto insurance. Under this system, fault is determined by the legal principles of "provable negligence." Thus, if you cause a car accident, you are legally responsible (liable) for the damages, hence the term "liability insurance."
In 12 states (FL, MI, NJ, NY, PA HI, KS, KY, MA, MN, ND and UT), people are either required or allowed to use a no-fault system. Under this system, in addition to payment irrespective of the determination of fault, the law places limits on the ability of people who are hurt in a car accident to seek monetary recovery from the owners or operators of other cars involved in an accident. For medical payments and lost wages, many no-fault systems only allow the person incurring those expenses to sue for damages that are not covered by their own insurance. For pain and suffering, most no-fault systems only allow the injured person to sue if they suffered "serious" injury.
The idea behind no-fault insurance is that it can lower premium costs by reducing lawsuits regarding the cause of an accident, and at the same time provide quick payments for injuries.
My child is heading off to college this fall. What auto insurance issues does this raise?
As you send your children off to college, you probably have a lot of things on your mind—whether they'll eat right and get enough sleep, how to pay the tuition bills, what to do with that empty bedroom, etc. For most people, insurance concerns are pretty low on the priority list. But there are some important issues you should consider.
If your child will be taking a car to school, make sure the car is properly insured. If the child owns the car, then the insurance policy must be in the child's name as well. If the child is "borrowing" a car from Mom and Dad, the child must be listed on the insurance policy. Some insurance companies may require the child to be listed as the primary operator, since the car is in the child's possession and not the parents'.
My teenager just got his license. How can I insure him without going broke?
As you have probably discovered, insuring a teenage driver can be very expensive. Drivers under the age of 25 pose the greatest risk to insurers because of their high level of at-fault accidents. The least expensive option would probably be to add your teenager to your existing auto insurance policy once he gets his permanent driver's license. Although this can still be an expensive prospect, your teen might be able to take advantage of certain discounts as a driver on your policy (e.g., Good Student, TeenSmart, if eligible).
If you drive an expensive vehicle, it will be even more costly to add your teen to your policy. In this case, you might want to help your son buy his own car (a safe but used economy model, of course. Older vehicles generally pose less risk to insurance companies, because repairs tend to be less expensive than repairs to newer models. Lower risk for the insurer typically translates into lower insurance premiums for you.
To determine your most cost-effective option, compare some vehicles online or contact your insurance company. If you're thinking about purchasing a used car for your teen, be prepared with the make, model, and year of the cars you're considering. This way, you can get accurate, comparison insurance quotes, to help you decide whether to purchase separate insurance for your son or add him to your policy; they may also help you decide which car to purchase, if you go that route.
