We don’t think that the ins-and-outs of the insurance business should be a black box. In fact, we know that the better informed our customers are, the happier (and safer) everybody will be. So we took some of the most common auto insurance questions to our claims expert, Steve Bentz.
Keep reading to understand the questions you should ask to get the best coverage. We’ve even included a handy-dandy glossary of those confusing insurance terms.
Answers to your most common questions about auto insurance from Steve Bentz, our Avinew claims expert:
1. What is auto insurance?
Auto insurance is protection for damage to your vehicle and protection for property you damage or people you hurt if you cause an auto accident. An insurance company assumes your risk based upon a contract between you and the insurance company. This contract comes with a premium that you must pay to the insurance company in exchange for them accepting the risk.
2. Why is auto insurance so complicated?
I believe people find auto insurance to be complicated for a few reasons. First, generally you get it and forget it. You usually don’t interact with your insurance company again unless you really need to. Often times we first learn about auto insurance from our parents, we get added to their policy when we start driving and then just sign up through the same agent when we get our own policy down the road. Secondly, it is about as typical for people to read their auto insurance contract as it is for them to read the owner’s manual for their car -meaning, it’s not very typical. Then, for those that do make an effort to read it, they find a lot of jargon. Sometimes insurance companies make it more complicated than it needs to be and with Avinew one of our goals is to simplify the entire process.
3. Describe auto insurance in 5 words:
Protection for when accidents happen.
4. What does the average person need to know in order to make the most educated decisions about their auto insurance?
First of all, learn and understand what you need to protect. The auto insurance needs of a younger apartment dweller with a single-vehicle are much different than that of an older homeowner with multiple cars and drivers in the household. So, while you can buy the state minimum coverage, it may not provide you the necessary protection should you, or someone in your household, cause a significant accident.
Secondly, think about how your daily life might change if you got into a car accident and your car was not drivable. How would you get to work? Do you have another car you could drive, a way to carpool or take public transportation? Asking yourself these questions can help you understand if you need to purchase rental car coverage for instance.
5. What are the factors that go into getting an auto insurance quote?
There are many factors that go into your quote but generally your age, gender, annual mileage, where you live, driving experience record and credit history to name a few. Your price is also determined by what coverage you choose and your deductible. The deductible is the amount you will need to pay out of pocket if your car is damaged or stolen.
6. Can you take me through how the claim process works from all sides?
I break the claims process into 4 steps that occur simultaneously, but these steps do not start until a claim is actually reported - this initial report is most often called the first notice of loss (FNOL) or loss report.
- First, a claim is reported,
- Second, the insurance company thoroughly reviews the claim and policy coverage. During this review the claims adjuster must answer questions like: has the premium been paid, was this vehicle and driver on the policy, and did the accident happen during the policy period? The facts of the incident are investigated to understand the circumstances and the claims personnel must check for any policy exclusions and determine who is at fault. During the investigation, the insurance company assesses the damages and/or injuries that have occurred.
- Third, once the details around coverage, fault, and damages have been finalized the insurance company makes payments for the claims that are owed.
- Finally, once payments are made, if any amount is collectible from the person who caused the accident the insurance company may demand that person or their insurer pay the money back, which is known as subrogation. It is in this process that an insurer may also ask the person “at fault” for the accident to pay back a deductible.
7. Is auto insurance mandatory? Why?
Yes, auto insurance is mandatory when it comes to liability coverage. The required liability limits vary by state and are designed to protect you in the event you cause an accident. This coverage is available to help ensure that all costs related to medical expenses, injury recovery, and auto repairs or auto replacements are paid following an accident. Insurance companies pool the money from customers together to resolve risk and damages that otherwise may not be affordable for an individual. Coverage for your car is also mandated by finance or leasing companies and this is done so they can protect the asset that you are paying for (your car) and their interest in that asset.
8. When do I need to use or show my proof of insurance?
Proof of insurance is provided by your insurance company when you purchase insurance or renew your policy. Proof of insurance can be in the form or a card that you put in your glovebox or can be a digital card that you keep on your phone. If you are pulled over for a traffic citation an officer will likely ask for your proof of insurance. Otherwise these cards are most often used to exchange information at the scene of a car accident with others involved and/or the police officer.
9. What should I do if you get into a car accident?
When you get in an accident it is important to gather everyone’s information. Today with smartphones the need to search for a pen and paper is gone. Use your phone and take a picture of the other person or persons insurance cards, drivers’ licenses, and vehicles, as well as your own car. In doing so you are preserving evidence as to who was involved and the damage noted at the scene. Get witness information as well. Contact your insurance company promptly to report the accident while all the information is fresh in your mind and then follow their instructions.
10. How do I get the most “bang for my buck” when I choose coverage?
In question #5, I touched on the factors that make up your quote. The best way to get the most bang for your buck is to buy the coverage you need. Decide if you need the extras like rental coverage. The higher the deductible you choose the lower your cost will be, but make a conscious choice around what you can afford to pay out of pocket in the event of an accident or other claim. Shop around and ask about discounts - some common ones are for a good driving record or for being a good student.
11. Are there any insurance “myths” that you can disprove?
There are many but here are the top three that come to mind.
- The color of your car affects your insurance rate. False.
Red and yellow cars do not necessarily cost more to insure and in fact, insurance companies generally do not ask the color of your car when they are giving you a quote.
- When someone else drives my car their insurance will pay. False.
Insurance follows the vehicle so think twice before you loan out your car.
- My personal auto policy covers my business use. It depends.
Business use is not covered by a traditional run-of-the-mill insurance policy. In some cases, you can buy extra coverage for limited business use but you need to clarify and confirm this with your insurance company at the time of purchase.
12. What insurance terminology does everyone need to know?
Premium: The price/cost of your insurance.
Liability coverage: Coverage to protect you if you cause an accident that results in property damage or bodily injury.
Comprehensive coverage: Pays to replace or repair your car if it’s stolen or for damage due to an event other than a collision.
Deductible: Your out of pocket payment if you make a claim for damage to your car. Subrogation: the process by which an insurance company attempts to collect money they have paid against the at-fault party in an accident.
Auto insurance: Is protection for damage to your vehicle or payment for property you may damage or people you may hurt if you cause an auto accident.
Bodily injury liability coverage: Pays for the medical bills and pain and suffering sustained by a person if you cause an accident.
Property damage liability coverage: Pays for damage or destruction to property if you cause an accident .
Uninsured motorist bodily injury coverage: Pays for medical bills and pain and suffering if you or a passenger in your car is injured due to an accident caused by an uninsured motorist.
Underinsured motorist bodily injury coverage: Pays for medical bills and pain and suffering if you or a passenger in your car is injured due to an accident caused by a driver who does not have enough liability coverage
Collision coverage: Pays for repairs or replacement of your vehicle when involved in an accident
Covered Auto: Any auto that you pay a premium for coverage and is listed on your declarations page
Declarations page: The policy document that lists you covered autos, drivers and premium; an overview of your auto insurance