Car Insurance FAQs #2

How does my driving record affect my insurance premium?

The premium you pay is a direct reflection of your driving record for the past three to five years depending on the insurance company. Insurance companies order driving records from the DMV of your residence state and from other states where you've been licensed. Statistics show that drivers with tickets and accidents are more likely to have accidents than drivers with clean records.

Why is it harder to get insurance if drivers in my household have bad driving records?

Many companies will not insure you if you live with a relative who has a poor driving record. If your teenager has a poor driving record, you may have trouble getting a preferred rate because he or she is defined as an "insured" under your policy.

Some companies will exclude this person by name from the insurance policy. Many companies will not insure anyone in the family unless every driver in the household meets their requirements.

My car was totaled and my policy did not pay what I think my car was worth. Why?

Most auto insurance policies pay the actual cash value (ACV) of a vehicle totaled in an accident. The ACV is equal to the market value of an auto immediately before the accident.

Insurers must use a fair and reasonable method to determine the value of your car. If you have concerns about their decision you may be able to negotiate with your insurer by telling them why your car may have had more value that what the insurance company originally determined.

What happens if my loan was more than my insurance company says my car was worth?

Sometimes the value of a car is less than the balance on your car loan. There can be several reasons for this. Interest rate changes may have increased the amount of your loan. Rebates may not have been applied to the purchase price, or poor maintenance of the auto may have reduced its value. The insurance company bases its payments on the actual cash value (ACV) of the car, not the amount of your loan. In some states you may be able to purchase a special type of insurance, known as guaranteed auto protection (GAP), when you buy a car. GAP insurance covers the difference between the ACV and your loan balance.

My teenager just got his license, but I do not allow him to drive my car. Does he need to be insured?

In most cases, yes. Automobile insurance policies require every licensed person in your household to be listed on your insurance policy unless they have a completely separate policy of their own. This includes a teenager who just received their licence or a college student who still uses your address as their residence and/or visits regularly on weekends, vacations, etc.

What do insurance companies consider when they decide whether to cancel or not renew policies?

Insurance companies evaluate the risks associated with each policyholder to determine if you are a "good risk" or if your policy should be canceled or not renewed. Insurance companies, among other factors, will primarily review your claims, driving, and credit history. It is most favorable that your policy will not be canceled if you don't have a history of filing frequent claims, have maintained a clean driving record and your credit history is good with no bankruptcy's.

Does everyone have to have auto insurance?

Yes, automobile liability insurance, or proof of financial responsibility is required in all fifty US states. Although each state sets their own limits on how much insurance is needed, these are only minimum limits and in most cases additional coverage is needed if you don't want to have to pay additional expenses out of pocket. If you have a lease or loan on your car you are usually required by the lender to have comprehensive and collision coverage in addition to the state required liability coverage.

Do I Have Insurance Coverage for a Rental Car after a Car Accident?

It would depend on your car insurance policy. In order to receive a rental car after you have had a car accident you would have needed to add that option to your car insurance polcy. If the coverage is on your car insurance policy then you should be able to have a rental car for up to 30 days while your car is being repaired. Even if you did not add the rental car coverage when you started your car insurance policy, your insurance agent may have put rental car coverage on your car insurance policy so just call your insurance agent to verify if you have the coverage or not.

Sometimes people unknowingly think that their motor club membership will provide them with a rental car if they get into an accident. Motor clubs typically provide emergency services such as towing and battery jumping and don't provide rental cars or rental care reinbursement if you needed a rental car while your car is being repaired. So, although being a part of a motor club is a good idea for extra coverage and they may even provide a discount on a rental car if needed, don't depend on your motor club to provide you with a rental car.

Do I Have Insurance Coverage for a Rental Car after a Car Accident?

It would depend on your car insurance policy. In order to receive a rental car after you have had a car accident you would have needed to add that option to your car insurance policy. If the coverage is on your car insurance policy then you should be able to have a rental car for up to 30 days while your car is being repaired. Even if you did not add the rental car coverage when you started your car insurance policy, your insurance agent may have put rental car coverage on your car insurance policy so just call your insurance agent to verify if you have the coverage or not.

Sometimes people unknowingly think that their motor club membership will provide them with a rental car if they get into an accident. Motor clubs typically provide emergency services such as towing and battery jumping and don't provide rental cars or rental car reimbursement if you needed a rental car while your car is being repaired. So, although being a part of a motor club is a good idea for extra coverage and they may even provide a discount on a rental car if needed, don't depend on your motor club to provide you with a rental car.