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Personal Auto Insurance

Back in 1898 when the first U.S. automobile insurance policy was purchased, there were barely 100 cars on the streets, nationwide. Horses and carriages ruled the roads, and the main concern then for both insurers and auto drivers was any injury those noisy new machines might do to horses.

Today a motor vehicle accident occurs every second. Auto accidents cause an injury every 14 seconds, and every 13 minutes a car accident results in a fatality. More than 31 million accidents occur per year, at an annual cost of almost $100 billion. Theft and vandalism are other major perils facing drivers, in fact, every 20 seconds another vehicle is stolen.

With more than 150 million drivers and 160 million registered vehicles on the road today, auto insurance is the most widely purchased of all property-liability insurance. Drivers buy personal auto insurance for economic protection against theft, vandalism, and other risks, but few are familiar with the ins and outs of their particular policy.

This guide was designed by the Independent Insurance Agents of America to make it easier for you to know your insurance needs and the many options available to you. 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.

Common Questions (Auto Insurance)

Your car has two unique qualities. First, it is probably one of the most expensive things, next to your home, that you own. Insurance protects your investment and guarantees you a way of coping with the expense of accidents, vandalism or theft, as well as securing your financial responsibility to the bank or other institution lending the money to buy your vehicle.

Second, when you drive, you are operating a powerful machine, weighing one ton or more and capable of moving at over 100 miles per hour. You are responsible for the safety of your passengers, your fellow drivers, other people’s property, pedestrians and yourself. Insurance helps you live up to that responsibility by ensuring 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 fact, in most states insurance is a prerequisite to registering your car. So if you want to drive your own vehicle, you must be insured.

Auto insurance is divided into several different types of coverage:

  • General liability covers damage you may 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, etc.
  • 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 coverage’s include expenses for towing, labor, temporary replacement vehicles, etc. These are generally defined as add-ons or endorsements to your policy.

Drivers are grouped according to the level of risk each one poses–i.e., the amount of loss incurred by insurers within various categories of policyholders.

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. In other words, you are investing a little today in case you need a lot tomorrow; your investment is pooled with others, and the pool pays for your loss.

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.

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. 

  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 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 agent for clarification.

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. 

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 agent for information on catastrophic coverage. 

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 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. 

Usually, insurers that refuse to cover a claim have a strong legal reason for doing so– even if you disagree. First, contact your agent if you feel you are being treated unfairly because your 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 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. 

After an accident, you should call your agent as quickly as possible, to help you complete a claim form, determine what exactly happened and evaluate any damages or injuries. Your 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.

You should always talk to your 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. 

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 agent for guidance. 

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Agent Contacts

Boston, NY

Phone: 716-648-3057

Thomas Doeing

ext. 242

Email: [email protected]

West Seneca, NY

Phone: 716-675-2100

Jackie Dietrich

ext. 140

Email: [email protected]