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A Consumer’s Guide to...Personal Auto Insurance
A Publication of the Maine Bureau of Insurance
Mila Kofman
TABLE OF CONTENTS Shopping for Insurance ..............................................3 Information Needed To Apply for Insurance................4 Price Quotations..........................................................5 Discounts.....................................................................6 Types of Insurance Coverage Required by Law..........8 Coverage for Damage to Your Vehicle.......................10 Deductibles................................................................11 Other Optional Coverages.........................................11 Surcharges................................................................12 Billing Procedures and Fees.......................................13 Duties in the Event of an Accident.............................14
The Maine Bureau of Insurance regulates the insurance industry to protect and to serve the public.
Auto Brochure Published by: The Maine Bureau of Insurance 800-300-5000 (in state) September 2009 HOW TO USE THIS BROCHUREThis brochure is meant to be used only as a guide when you shop for auto insurance. We have tried to explain some commonly used insurance words to help you better understand the types of auto insurance you can buy, what coverages are required by law, and what each type of insurance covers should you have to file a claim. HOW DO I SHOP FOR INSURANCE? The key to comparison shopping is to know what insurance coverage you need before you start. Once you know what you want, you can find out how much the coverage will cost from different companies. Comparison shopping takes time but it will save you money. The only way you can make sure you are not paying too much is to shop around and find out what different companies charge for the same products and services.
Check the newspaper and yellow pages of the telephone book for companies and producers in your area. Also, ask your neighbors, relatives, and friends for recommendations on insurance companies and producers. Ask them about their experience with price and service. Ask them what kind of claim service they have received from the companies they recommend. INFORMATION INSURERS NEED WHEN YOU APPLY FOR INSURANCE When you shop for car insurance, premium quotations are useful to compare different companies’ products. When you ask for price quotations, make sure that you give the same information to each producer or company to get a fair comparison. Insurance companies look at many factors when they set the price you pay for insurance. Your premium is affected by your driving record; where you live; your age; your marital status; how much you drive; the age, make, and model of your car; and your car’s safety features, among other factors. Here is more information about some of these factors:
The policy application will ask about your driving record. Insurers will ask for information about accidents and traffic violations for any driver covered by the policy for the prior 3-5 years. Drivers with previous violations or at-fault accidents are considered to be a higher risk and may be charged a higher premium.
The claims experience of people in your area will also affect your rates. Applications include a question that asks for the address where the vehicle will be garaged. From this information insurers can tell a great deal about your risk of financial loss. Insurers know from their claims experience that more claims are made from city areas than country areas (busy traffic, thefts, vandalism, etc.).
Statistics show that males still have more accidents than females. For that reason, young men may tend to pay more for insurance than young women. Insurers also have statistics that show a higher number of claims for some age groups than for others.
Insurance company claims records show a lower rate of insurance claims among married policyholders.
If you have previously been cancelled for non-payment of policy premium, insurers want to know. If you have had insurance, your new insurer may ask your prior company about any claims you had.
On the application you will be asked about how often and how far you drive the vehicle you want to insure. Higher annual mileage will generally mean higher premiums because it creates a greater exposure to claims.
The type of car you drive will directly affect the cost of your automobile insurance. A make or model of car that has a high number of claims or higher repair costs will be charged a higher premium for comprehensive and collision coverage.
You will be asked to list all licensed drivers in the household. Insurers are not allowed to include drivers with a learner’s permit when they calculate your premium. However, they may want to know the ages of any individuals who may become drivers in the near future.
You will be asked to list any automobile claims that you or any family members or other drivers in the household have had during the past three to five years.
A company may also request your credit history to decide whether to issue a policy or use your the credit history to determine the premium to charge. However, if an insurer makes an unfavorable underwriting decision based on your credit history, it must tell you how you can request a copy of your credit report. When you receive your report, it is important to make sure that it is correct. Correct any mistakes that you find on the report.
Maine law requires every auto insurance company to provide a discount for liability, medical payments, and collision coverages for drivers age 55 and older who have completed an approved motor vehicle accident prevention course. You may contact the Bureau of Highway Safety at 624-8756 for a list of approved courses and times. The discount may not be applied if either the insured or another member of the insured's household was involved in an at-fault accident or moving violation or has a license suspension during the previous three years. The discount applies for 36 months after the course completion. A new course must be completed every three years to continue the discount. The following describes some typical discounts:
Discounts are not only ways for companies to attract customers, they are also ways for companies to compete and keep business. So when you shop, don't just ask if a discount exists, but also ask how much you will save. Savings can differ from one company to another. In addition, you should make sure that you receive all the discounts for which you qualify. When comparing the price of insurance among different companies, compare the total cost after any discounts for which you are eligible. INSURANCE COVERAGE REQUIRED BY LAW Maine law requires every vehicle owner or operator to carry liability insurance, uninsured motorists, and medical payments coverage. To satisfy the financial responsibility law in Maine, you must buy a minimum of $50,000 for the injury to or death of any one person; $100,000 for one accident resulting in injury to or death of more than one person; and $25,000 for property damage. These amounts are usually shown as $50/100/25 on your insurance policy. A combined single limit (for bodily injury and property damage liability) of $125,000 is also acceptable. You cannot register your vehicle without proof that you have this minimum amount of insurance. A minimum of $2,000 for medical payments coverage is also required. Keep in mind that these minimum amounts may be too low for your situation and you may want to buy more coverage. You should base your decision on what you need to protect your assets from claims that may exceed the minimum amounts. However, remember that as you raise your coverage, your premiums will also increase. The extra cost of higher coverage tends to be relatively low. One way to have higher limits of liability inexpensively is to purchase a personal umbrella policy. An umbrella policy provides broad liability protection over and above the liability limit of your auto policy. It will also cover some exposure to losses that are not covered by your auto or homeowner’s policies. Most umbrella policies require you to have at least $250,000/$500,000 or $300,000 single limit on your auto policy. The umbrella policy or endorsement generally adds an additional $1,000,000 limit. What is Liability Insurance? Most auto liability insurance policies contain three major parts:
Uninsured/Underinsured motorists coverage protects you directly. This coverage pays if you are injured by a hit-and-run driver or a driver who does not have the auto insurance required by State law. This coverage includes protection if you are injured by a driver who is underinsured. Underinsured drivers are those who have insurance but whose limits are lower than the amount you purchased. If their coverage is not enough to pay for your injuries, your coverage will provide additional compensation. The minimum amount of uninsured motorists coverage that you must buy is $50,000 per person and $100,000 per accident. It covers your family members, and passengers who are injured while in your car. Uninsured motorists coverage does not cover injuries of the other driver and it does not cover damage to your vehicle. Maine law requires you to have uninsured motorist coverage equal to the amount of liability that you have on your policy unless you specifically elect to buy uninsured motor vehicle coverage with lower limits of liability for bodily injury or death. You must sign a rejection form provided by the insurance company before the effective date of the policy to reject the equal limits. However, if you decide to request a limit lower than your liability coverage limit, the limit cannot go below the minimum required amount of $50,000 per person and $100,000 per accident. Medical payments coverage pays for the medical and funeral expenses incurred by you or others hurt or killed in an accident while riding in or driving your car. Claims against this coverage include all reasonable hospital, surgical, chiropractor, X-ray, dental, professional nursing, prosthetic, and funeral expenses. It will also cover you and family members of your household for injuries resulting from another vehicle while walking or biking, or while riding in another car. This coverage will pay for your medical and funeral expenses even if you cause the accident. Usually, only expenses incurred within a specified period of time after the accident are included. Medical payments coverage is also required by Maine law. As of January 2008, you must have at least $2,000 in medical payments coverage on your policy. COVERAGE FOR DAMAGE TO YOUR VEHICLE The coverages previously discussed are the basic coverages required by law. However, when you buy auto insurance you will have to decide if there are other insurance coverages that you would like to add to your policy. In addition to the basic liability coverages described previously, the other most common coverages are collision and comprehensive.
If you have an older car worth less than $2,000, you may not want to buy collision coverage, because you are likely to pay more money in premium than you would ever receive because of a claim. Auto insurance policies only require the company to cover the cost of repairs or value of the car, not to replace your vehicle. When an accident involves an older car, the cost of fixing the car can quickly exceed the worth of the car. If that happens, insurers will "total" the car and pay you what the car is worth instead of fixing it.
DEDUCTIBLES
If you buy a new car with a loan, the financial institution loaning you the money may require you to buy comprehensive and collision coverage. This is because it wants to make sure you have the means to repair the car if it is damaged and to pay off the loan if the vehicle is totaled. The financial institution generally will require to be named on the policy as an additional interest. OTHER OPTIONAL COVERAGES CD Players, Tape Players, Radios and other audio or visual electronic equipment, tapes, compact discs and other media that is not necessary to the operation of the vehicle is generally excluded under collision and comprehensive coverages. However, most insurers offer coverage for this equipment for an additional premium. If you have additional stereo equipment, speakers, telephone and other devices installed in your car, you may want to buy this extra coverage. Rental Reimbursement Coverage This coverage usually pays $15 to $30 a day to rent a car while your car is being repaired from damage that is covered by the policy. Most policies specify a maximum of 30 days for the coverage. The premium varies from insurer to insurer, but is generally inexpensive.
WHAT IS LOAN/LEASE COVERAGE? If you bought your car with only a small down payment or with no money down and you financed a large part of the cost, you may owe more money than the car is worth. This gap exists because your insurance compensation for vehicle damage is based on the vehicle’s actual cash value (the cost to replace your vehicle less an amount for depreciation); not on what you paid for the car. Loan/lease coverage (sometimes called GAP coverage) can help cover this gap. It may pay the difference between the actual cash value of the car at the time of loss and the remaining balance you owe on the loan, depending upon the terms of the coverage. Portions of the balance involving interest for late payments, roll-over amounts from a prior loan, or additional purchases such as the cost of an extended warranty are generally not included. When purchased as part of your auto insurance policy, this coverage is generally inexpensive. Not all insurers offer this type of coverage. OTHER FACTORS THAT MAY AFFECT YOUR COST Surcharges (extra premium charges) Surcharges distribute the cost of automobile insurance among policyholders as fairly as possible. For example, a driver who has a clean driving record pays the lowest possible rates while a premium surcharge may apply for a driver who is at-fault in an accident or who is convicted of a moving violation. The amount of the surcharge is a percentage of your renewal premium. The surcharge is not a flat fee and is not designed to recover money that was paid out for any prior claims. Surcharges are usually applied for three policy periods following the accident or conviction. Canceling your Policy in the Middle of the Policy Term A short rate cancellation may apply when you decide to change to another company in the middle of a policy term. In most cases, your insurance company will keep 10% of the unearned premium when you request cancellation before the policy expires. This charge covers the expenses the company incurs when it issues a policy. Once the cancellation of the old policy has been processed and the short-rate cancellation charge is applied, the new policy may no longer be a "bargain." Companies generally allow exceptions to the short-rate cancellation if you no longer own the vehicle. BILLING PROCEDURES AND FEES Installment Fees Rather than paying the whole premium at the beginning of the policy period, most companies offer you the option of paying the premium in semi-annual, quarterly, or monthly installments. If you decide to pay the premium in installments, an installment fee may be applied. This fee covers the additional expense of sending you multiple bills and processing multiple payments. Fees for Insufficient Funds Companies may be allowed to charge a fee when checks given in payment are not honored by your bank or credit union. Late Fees or Reinstatement Fees Companies may be allowed to charge either a late fee or a reinstatement fee when your payment is not received by its due date. A late fee can be applied if your payment is received late. A reinstatement fee can be applied if your policy is cancelled for nonpayment of premium and then is reinstated. NOTE: There is no grace period for paying property and casualty insurance premiums. If you do not make a payment when it is due, your policy can be cancelled for nonpayment of premium. Mid-term Changes in the Policy Changes you make to your policy near a billing date will generally not show in the next bill. The amount shown as due should be paid; any adjustments will be made with the following bill.
You have the responsibility to comply with the specific duties that are outlined in your auto policy. (For additional duties not listed here, see the section in your policy titled “Conditions.”) Failing to comply with the specific terms and conditions listed in your policy could lead to denial of coverage. Please make sure that you know what your responsibilities are if you are involved in an accident. Although the Bureau can give general insurance information, and help when violations of insurance law have occurred, the Bureau cannot:
Other brochures and additional consumer information are also available on our website.
Maine Bureau of Insurance
Last Updated: February 24, 2010 |
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