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When the first U.S. automobile insurance
policy was purchased in 1898, there were barely 100 cars nationally.
Horses and carriages ruled the roads and the main concern
for both insurers and auto drivers was any injury those noisy
new machines might do to horses.
Today, auto insurance is the most widely
purchased of all property-casualty insurance, yet few drivers
are familiar with the details of their particular policy.
Though this guide does not represent the
provisions of any particular policy, it should serve as a
starting point on your road to finding the best policy for
your needs.
Nebraska Auto Insurance 101 Questions and Answers
Why do I need auto insurance?
Your car is likely one of the most expensive
things you own. Insurance protects your investment and guarantees
you a way of coping with the expense of accidents, vandalism
or theft. It also secures your financial responsibility to
the institution lending you money to buy your vehicle.
When you drive you are responsible for
the safety of your passengers, your fellow drivers, other
people's property, pedestrians and yourself. Insurance helps
ensure your ability to cover the costs of potential damages
or injuries.
You are also required to be financially
responsible by state laws, which are best satisfied through
your insurance coverage. In most states insurance is a prerequisite
to registering your car. So if you want to drive your own
vehicle, you must be insured.
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What are the different types of policies
and what do they cover?
Auto insurance is divided into several
types of coverage:
- General liability
covers damage you cause to other people's property and injuries
to the people themselves.
- Collision
covers damage to your own vehicle in an accident.
- Comprehensive
(i.e., fire, theft and other non-collision damage) covers
fire damage to your vehicle, break-ins, vandalism or theft,
as well as natural disasters (earthquake, hail, hurricane,
flood, etc.--unless the vehicle is overturned, then it is
considered a collision).
- Medical payments insurance,
usually in the range of $5,000 to $10,000, covers medical
expenses for injuries. This "good-faith" coverage
guarantees immediate medical payments for you, your passengers
and other parties, regardless of who is at fault. It also
covers you and members of your household in any accident
involving an automobile, whether you are on foot, on a bicycle,
in a friend's car.
- Uninsured motorist (UM) and
underinsured motorist (UIM) coverage
protects you if you are injured in an accident with others
who themselves carry insufficient or no liability insurance.
- Extra coverages include expenses for
towing, labor, temporary replacement vehicles, etc. These
are generally defined as add-ons or “endorsements”
to your policy.
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Why and how are policies priced for different
drivers?
Drivers are grouped according to the level
of risk each one poses—i.e., the amount of loss incurred
by insurers within categories of policy holders. For various
reasons, drivers are categorized by:
- Sex—Men have more accidents on
the road than women.
- Age—Drivers under 25 (and, for
some insurers, under 30) are considered at higher risk of
having an accident.
- Marital Status—Married drivers
tend to have fewer accidents than single drivers.
- Personal Driving Record—Years of
driving experience, accidents, speeding tickets and drunk-driving
offenses are all factors in determining how much of a risk
you pose as a motorist.
- How You Use Your Vehicle—If you
commute by car during rush hours, you're at greater risk
of having an accident than if you only drive for errands
and recreation on the weekends. Drivers who use their own
vehicles for business also are considered to be at greater
risk.
- Type of Vehicle—The value, size,
weight, age of your vehicle, even the cost of replacement
parts, are essential to determining the price of your insurance.
Larger, heavier vehicles are considered at lower risk than
smaller, lighter ones. Plus, more expensive cars are costlier
to have repaired than economy models.
The cost of your insurance policy is based
on the average cost of covering actual losses, spread out
over your particular "rating group" as a whole.
Of course, you may never have an accident or have your car
stolen, and therefore will never need to be compensated. But
others in your category may not be so lucky. Your premium
will help to pay for their losses, just as their premiums
would help to pay for yours.
For example, if you are a 23-year-old man
and you park your new sports car on a downtown street in a
large city, you will likely pay more for insurance than a
37-year-old woman who parks her four-wheel-drive in the suburbs,
simply because, based on average losses, you have a greater
chance of having an accident or being the victim of auto theft.
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How does where I live affect my premium?
Where you live (or, more precisely, where
you keep your car) has a bearing on your chances of having
an accident or becoming a victim of theft or vandalism. That's
why a vehicle owner in Brooklyn, New York, pays a higher rate
than the owner of an identical vehicle in Casper, Wyoming.
Other factors affecting regional insurance
rates include time and efficiency of police response and law
enforcement, local road and traffic conditions and the quality
of local medical services. Insurers even factor in the litigation
rates in a given area, that is, how many lawsuits are filed,
go to trial, are settled out of court and for how much.
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Why are rates different for different
cars, even if the cars cost the same?
Vehicles are also grouped into categories
according to their likelihood of being damaged, vandalized
or stolen. Insurers generally consider the size and type of
vehicle, as well as the value and the cost of repairs (which
can vary greatly, even on vehicles that cost roughly the same).
Thus, a new station wagon is expected to hold up better in
an accident than a sports car or a subcompact.
Putting insurance aside, safety is key
when buying an automobile. Your life depends on it! Some cars
are considered safer than others because of their performance
record in safety tests and real accidents.
That's why you should research insurance
coverage before you buy your car. It helps you to understand
the actual cost and indicates those vehicles with good safety
records. Your insurer will ultimately reward you for putting
safety first.
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What is "no-fault" insurance?
No-fault insurance is a system adopted
in some states that essentially bypasses the conventional
legal procedure which finds fault in an accident. (This is
the procedure by which you hire a lawyer, file suit and possibly
go to court to prove the accident was the other guy's fault.)
No-fault simply does away with the concept of one party or
the other being at fault. There are no lawyers, no court,
no judge, no jury, no lengthy lawsuits against the other party.
This is considered beneficial to taxpayers, because it eliminates
costly legal proceedings that the state must manage, and to
insurance policyholders, because it helps keep rates down.
If you are insured in a no-fault state
and have an accident, you don't go after the other driver.
You contact your own insurer and file a claim. Your own insurance
policy guarantees you immediate compensation for damages,
medical expenses, lost wages, etc.
The type and range of no-fault coverage
varies by state. What defines the limitations of no-fault
policies can differ in two critical areas:
- Threshold—The type of damage/injury
or the cost of repair/recovery that triggers the need for
legal action.
- Mandated Benefit Level—The package
of benefits (medical, wage loss, replacement services and
other expenses) your state requires you to carry.
The details of no-fault insurance can be
complicated. Contact your Trusted Choice® agent or your
state's insurance department for further information.
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Do all states require some kind of liability
insurance?
No. Some states, while not mandating auto
insurance, have "financial responsibility laws"
that require all drivers to be able to pay for any damage
or injury they may cause. However, carrying liability insurance
is still the best way for you to meet your state's financial
responsibility requirements.
UM and UIM policies are offered by law
in all states, including no-fault states. In fact, some states
require all motorists to carry this coverage to gain protection
from inadequate insurance coverage of other drivers.
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What happens if I have an accident with
an uninsured driver?
First, call the police to the scene to
be sure all pertinent information is properly recorded. Your
nerves will be shaken right after an accident, and it helps
to have a calm and knowledgeable person walking you through
the necessary details.
Then, contact your Trusted Choice®
agent immediately and ask about filing a claim. If you followed
all the recommended guidelines when you bought your policy,
you should be covered within the limitations of that policy.
Remember, your insurance policy is designed to protect you.
If the cost of your damages or injuries
exceed the amount your policy will pay out, it may be time
to take legal action against the other party. Even if you
have no-fault insurance, sometimes the only way to be compensated
is to place blame and responsibility where it belongs.
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Why would my insurer cancel my policy?
Technically, in most states your insurer
can cancel your policy only if:
- you fail to pay your premium;
- you lose your driver's license;
- you are guilty of material misrepresentation
during the application process (i.e., you fail to notify
your insurer of a recorded violation such as a drunk-driving
offense); or
- you fail to report a substantial change
of risk, such as buying a high-powered sports car to replace
a family sedan.
However, your insurer can choose not to
renew your policy for a variety of reasons.
Do you have a bad driving record? Have
you received a lot of speeding tickets? Have you ever been
caught driving drunk? Not only are these scenarios considered
unsafe and illegal, they are justifiable cause for your insurer
to label you a bad risk and refuse to renew your policy. (Some
insurers may feel compelled to cancel policies after only
one accident.)
Where do you live? Has the neighborhood
changed in the last few years? Have the accident or crime
rates risen noticeably? As regions are reassessed periodically,
their status could change and you could suddenly find yourself
living in a high-risk area where your insurer's rates may
not be adequate to cover losses.
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What do I do if my insurer cancels or refuses
to renew my policy?
Even "good" drivers can be dropped
by their carrier. Reasons range form a "drinking while
driving" violation or other serious violations (that
make you a high risk) to situations outside your control,
such as when insurers in your state are suffering severe business
losses. Overall rises in claims or losses can cause insurers
to become highly selective in determining whom they can afford
to insure.
If you are licensed to drive, by law, you
are eligible for insurance. However, your options for new
coverage may be limited. Each state has created and regulates
a market of last resort for those who cannot otherwise obtain
coverage. These groups have various names, depending on the
state you live in, such as “assigned risk” plans
or the “residual market.” Your Trusted Choice®
agent will know more about the particulars in your state.
Regardless of the reason you were dropped,
you need to act immediately to get policy. Under no circumstance
should you drive your vehicle without insurance. Call your
Trusted Choice® agent to help you find new coverage. If
you do find yourself in the residual market, the price may
be higher but it may be your only alternative in maintaining
your freedom to drive.
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How do I keep my insurance company from
canceling my policy?
The most obvious way to maintain your low-risk
status is to keep a clean driving record. If you've been in
an accident, consider taking a defensive driving course. Even
those of us who have been driving for years rarely know the
simple tricks to preventing accidents through defensive driving.
Also, look into purchasing special safety and security features
for your car, such as anti-lock brakes and an alarm system.
Your Trusted Choice® insurance agent can give you further
tips on how to convince your insurer you're a safe driver.
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What steps can I take to reduce my rates?
Insurers often discount their rates for
good drivers and those who take of safety and security precautions.
Depending on the insurer, you can often lower your rates from
5 to 35 percent.
Sometimes the investment you make in your
vehicle is worth the discount, and sometimes it's simply worth
some peace of mind. For example, the purchase of anti-lock
brakes merits a discount from nearly every insurer, but the
discount probably will not pay for the brakes during the normal
life of your vehicle.
Insurers generally offer discounts for:
- Safety Features— Anti-lock brakes,
air bags and passive restraint systems (i.e., automatic
seat belts).
- Defensive Driving— Clean violation
record, driver's education courses for teenagers and defensive
driving or accident prevention courses for adults (insurance
discounts for the latter are required in some states).
- Security Systems— Alarms, electronic
locks and disabling devices.
- Changing Driving Habits— Commuting
by public transit, using a company vehicle for work-related
travel and car-pooling.
- Formal Agreements Not to Drink and Drive—
The availability of a discount for signing such an agreement
varies among insurers and states.
- Buying Home Owners and Auto Policies
from the Same Company—If you own a home and an automobile
and you are insured by two different companies, check into
the cost of carrying both policies by one insurer. Your
Trusted Choice® agent can give you guidance as to which
insurers offer discounts.
You can also lower your insurance rates
by requesting higher deductibles (the amount of money you
pay before you make a claim). Increasing your deductibles
on collision and comprehensive coverage from $100 to $250,
or even $500, will bring your rates down. Moreover, you may
not need collision and comprehensive coverage if you drive
an older car. Ask your Trusted Choice® agent which discounts
are available to you.
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How does adding drivers to my policy affect
my rates?
The more people you allow to drive your
vehicle on a regular basis, the greater the chances of your
vehicle being in an accident. Teenagers are especially expensive
to insure because they are the least experienced drivers.
A driver's education course can help ease
the burden of insurance costs since it teaches your teenager
defensive driving techniques. If your child's high school
does not offer driver's education, try to find one offered
by another school or a private firm in the area. After all,
the cost of driver's education could be cheaper than the extra
cost of your insurance. (Many insurers offer "good student"
discounts as well.)
An adult's driving experience can also
affect your rates significantly. Don't assume that every adult
you know has been driving since age 16 or is a competent driver
with a clean record. Again, taking a defensive driving course
is a good way for adults to prove they are responsible drivers,
thus lowering their risk and their insurance rates. (This
is a great solution for new couples who are jointly insured
but unmatched in their driving skills or experience.)
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Who's watching the insurance companies?
With few exceptions, your insurance company
does not set its own rates (unless you live in Illinois).
It requests the right to charge appropriate rates from your
state's insurance department, which responds with legal approval
and authorization, provided the requested rates are fair.
Every state has some sort of department,
administration or agency that regulates and monitors every
insurer operating within the state's borders. In addition
to approving rates, your state's insurance department is involved
in all insurance matters on behalf of private citizens and
businesses. It also issues operating licenses to insurance
companies and agents, based on their ability to meet the state's
requirements for conduct and knowledge about insurance issues.
Your insurance company works closely with
your state's insurance department to make sure you are getting
the best and fairest possible service within the state's guidelines.
Contact your state's insurance department if you wish to know
more about how it serves your interests.
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Do I always need to buy insurance when
I rent a car? Am I not covered by my own policy?
If you have fully insured your own vehicle,
including collision and comprehensive coverage, and rent a
vehicle for pleasure only (while on vacation, for example),
you do not need to buy extra insurance from the rental company.
In fact, in most states your basic rental fee by law will
include liability coverage for damage or injury to others.
But different rules apply when you rent a car for business
purposes, so check with your Trusted Choice® agent for
details.
If you do not have your own insurance,
be aware that many car rental liability policies cover you
only at the state's required minimum. Also, you should buy
the collision and comprehensive coverage offered by the rental
company for your own protection. Plus, do not buy a collision
damage waiver (CDW) from the rental company assuming it is
insurance. A CDW simply releases you from financial responsibility
if you damage the vehicle you are renting, provided you comply
with the terms of the rental contract. But those terms can
vary considerably, and CDWs are not state-regulated, which
means they are technically not insurance.
It's always a good idea to review your
policy before renting a vehicle and, if necessary, contact
your Trusted Choice® agent for clarification.
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What happens when I loan my car to someone?
Is that person covered by my policy? Am I still covered?
Yes. Liability and coverage for physical
damage (i.e., comprehensive and collision) always follow your
car. So, if a friend borrows your car and has an accident,
you're still protected against the cost of damages or injuries.
Plus, if the driver of your car is insured, his/her policy
will also be available to cover the cost of damages and injuries.
The same rules apply when you borrow someone
else's vehicle. Your own insurance follows you no matter whose
car you are driving. But the vehicle owner's policy is the
key coverage if you have an accident.
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Am I covered for natural disasters or "Acts
of God?"
Comprehensive insurance, which covers you
for fire and theft, generally covers you against damage by
flood, earthquake, hail and other natural perils, except when
your car is overturned (which is technically considered a
collision). If you have special concerns about the safety
of your vehicle in the face of Mother Nature's wrath, contact
your Trusted Choice® agent for information on catastrophic
coverage.
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What should I make sure my policy includes?
Do I really need to read all the fine print?
While you don't need a law degree or an
agent's license to understand your policy, you should read
it thoroughly. After all, it is a binding legal contract.
If there is anything you don't understand, ask your Trusted
Choice® agent to explain it to you. You have the right
to know what's in your policy.
If you wish clarification beyond your agent's
explanation, or if you want to be certain that the policy
is completely valid, contact your state's insurance department.
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How can I challenge my insurers if they
refuse to cover a claim?
Usually, insurers that refuse to cover
a claim have a strong legal reason for doing so—even
if you disagree. First, contact your Trusted Choice® agent
if you feel you are being treated unfairly because your Trusted
Choice® agent is your strongest advocate in insurance
matters. But if it is a legal problem, you may have to hire
a lawyer.
Talk to your Trusted Choice® agent
if you have a problem with your insurer, and talk to your
state insurance department if you want more specific information
on state regulations and legal precedents.
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What actually happens when I report an
accident?
After an accident, you should call your
Trusted Choice® agent as quickly as possible, to help
you complete a claim form, determine what exactly happened
and evaluate any damages or injuries. Your Trusted Choice®
agent then will contact your insurer's claims adjuster—usually
within an hour of your report—whose job is to work with
you to fix the problem. While compensating you for auto repairs
or medical expenses is easy and immediate, determining liability
is more complicated. The adjuster will begin the settlement
process, the length of which will depend on the cooperation
of the other party.
The amount of compensation for your loss
can vary according to the adjuster's analysis of the damage.
You do not have to accept the first amount of money you are
offered, if it is lower than the cost of your repair or recovery.
While you may have to do some homework to prove your reported
loss is valid, it's worth it to be certain your insurer lives
up to the provisions of your policy.
Remember, negotiating with an adjuster
is just business. Insurers simply want to settle claims fairly
in light of possible fraud. While it is your insurer's responsibility
to root out false claims, you pay the price in the end. In
fact, you spend nearly a dime on every dollar of your premium
to cover the false claims of others. So, try to keep an open
mind when working with your adjuster to settle on a price
that's fair to both you and your insurer.
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Do I need special insurance for a classic
car?
You should always talk to your Trusted
Choice® agent about coverage of rare and valuable property.
Since a classic car usually cannot be replaced, you'll probably
want ample compensation if it is lost. A classic car, because
it is rare or unique, may indeed require a special insurance
policy.
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Under what circumstance do I not need certain
types of auto insurance?
While most drivers today are generally
insured for collision and theft, this coverage may not be
necessary for every vehicle.
Liability insurance, as mentioned earlier,
is essential and in many states required. But if you drive
a clunker—an older car that isn't worth much money—you
may be able to do without collision insurance. If you have
an accident, repair costs could easily be higher than the
value of your vehicle, thus "totaling" it. This
means your insurer will pay you the total book value of your
vehicle, and that could be far less than the cost of your
vehicle's repair. So, collision insurance may not cover your
loss adequately.
Since it depends on special circumstances,
ask your Trusted Choice® agent for guidance.
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