Posted : 10/06/2009
When searching for cheap car insurance, it pays to know the facts. Don’t rely on your neighbor or co-worker for insurance information. Here are the truths every driver should know.
No-fault car insurance varies by state, but usually requires your car insurance company to pay medical expenses and lost wages for injuries due to a car accident, regardless of who is at fault.
"After an accident, no-fault insurance lets all parties get payment for their immediate medical needs while their insurance companies are deciding amongst themselves which company is going to pay for the accident," says Michael Petrarca, an assistant vice president at Amica Mutual Insurance Co. in Lincoln, R.I.
If you caused the wreck, it doesn't mean you're off the hook. The insurance companies will decide who's to blame, and that party would be responsible for repairs and other damages, he says.
Auto insurance companies set rates based on the safety features of a vehicle and how much it costs to repair or replace the vehicle (among other factors about the driver). But the color of the car doesn't factor into the premium, says Petrarca.
"Some makes and models generate more claims than others, and they're rated accordingly, but the color of a vehicle means nothing," he says.
If you give someone permission to drive your car and that person crashes, it will be your insurance – not your friend's policy – that covers the damages, says Rebecca Doran, a senior corporate underwriter with Amica.
"For a personal auto policy, the insurance is generally going to follow the car, and not the driver. So if I lend a vehicle to my brother, and he gets in an accident, it would go through my insurance company," she says.
However, if your auto insurance coverage is maxed out, your friend's policy can be tapped for the remainder of damages, Doran says.
State regulations prohibit insurance companies from dropping you in the middle of your policy term unless the insurer has adequate grounds to do so, says Petrarca. Such grounds may include non-payment or fraud.
However, if you're paying your premiums on time and have a valid driver's license, you have little to worry about, he says.
"While there are reasons companies can cancel insurance policies, they can't necessarily do it at any time," he says.
Car insurance companies look at the “loss history” of your vehicle – meaning how many claims they’ve paid on that model—along with how much it might cost to repair or replace your car, not its sales price, when determining how much to charge you for collision and comprehensive coverage.
In fact, some mid-priced vehicles may have higher insurance premiums if they have a high loss history and cost more to repair than expensive ones.
"A $30,000 sports car could have costlier claims than a $50,000 SUV, so the sports car could cost more to insure," says Sal Orso, an assistant vice president of casualty underwriting for Chartis Insurance's private client group in New York.
A ticket doesn't automatically mean an increase in rates, Doran says. In fact, if the ticket was minor and you have an otherwise clean record, your premium may not increase, she says.
"It depends on the situation, and how many infractions you've had in the recent past. Ask your insurance company if you're unsure," says Doran.
In reality, many criminals are attracted to older, trustworthy, popular vehicles, such as a Honda Accord or Toyota Camry, says Doran. Because of the popularity of these cars, there's a large demand for their parts. When thieves steal the cars, they can strip the parts and sell them, she says.
"On the other hand, if you steal a $70,000 Mercedes, there wouldn't be as much of a demand for the parts," Doran says.
Personal property, such as a laptop or cell phone, isn't covered under an auto insurance policy, says Petrarca. Those items might be covered by home insurance, but a claim would be subject to your deductible.
Whenever you buy a new car, your insurance company will have to issue a new policy, regardless of when you paid for the previous policy, says Dick Luedke, a spokesperson for State Farm Insurance in Bloomington, Ill.
If you're hauling supplies or otherwise performing business duties in your vehicle, you have to insure your auto for business use, says Luedke.
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