According to the Insurance Information Institute, in 2015, the average auto liability claim for bodily injury was over $17,000. This represents injuries to other people as opposed to your own injuries. About 5 percent of bodily injury claims top $100,000. Whether $17,000 or over $100,000 or somewhere in between, most of us don’t have that kind of loose change under the couch cushions.
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Do you have the right auto insurance coverage to protect your assets?
- What to look for in an Auto Insurance Company
- Main Auto Insurance Coverages
- What’s not covered by your Auto Insurance?
- Spotlight on Auto Insurance Medical Coverage
- What Affects Auto Insurance Rates
- Online Auto Insurance Quoting Tools
- The Value of Local Agents
- Auto Insurance Claims Process
- Best Auto Insurance Company (Overall): Amica
- Best For Veterans (USAA)
- Final Thoughts
What to look for in an Auto Insurance Company
Insurance is governed at the state level, so while many basic coverages will be similar, there are some different approaches on coverage options, depending on the state in which you reside. Most of these differences are in the liability coverage options and in the medical coverage options. First, let’s discuss the core coverage areas.
Main Auto Insurance Coverages
When you hear the term full coverage used in reference to auto insurance, it just means that your policy has collision and comprehensive coverage in addition to liability coverage. Liability coverage applies to the entire policy. Collision and comprehensive coverage are chosen on a per vehicle basis.
Collision coverage is an optional coverage. None of the states require collision coverage as a mandatory coverage because it’s intended to protect your own property, your car. Lenders may require this coverage if there is still a balance on the auto loan because it protects their collateral – again, your car. Specifically, collision covers damage to your car due to impact with another car, impact with a stationary object, like a tree or a guardrail, or damage due to a vehicle rollover.
In the event of a covered claim, collision coverage will pay towards the repair or replacement of your vehicle based on the actual cash value of your vehicle. Actual cash value is what your car is worth, not what you paid for it or what it costs to replace the car. The amount you choose for a deductible will also be “deducted” from your claim payout.
To offer a simplified example, if your car has a collision claim for $5,000 in damage and you have a $1000 deductible, the insurance company will pay $4,000 towards your repair. However, if your car is older and now only worth $3,500, the insurance company will only pay $2,500 for the claim because your deductible of $1,000 is subtracted from the payout and the insured value of the car is its actual cash value of $3,500. In this example, the car is a total loss. In fact, a claim can be deemed a total loss if the cost of repair is higher than 70 percent of the actual cash value, although some insurers use an 80 percent ruling. They are basing the total loss ruling on the anticipation that the cost of the repair will grow once the body shop starts taking things apart and finding more damage.
Some agents in the business still refer to comprehensive coverage as “other than collision” coverage. The alternate name for this coverage is accurate. Vehicles can be damaged in many ways that don’t involve collision, including falling branches, impact with animals, broken glass, or theft, wherein the vehicle may be damaged – or gone altogether.
Comprehensive coverage is also required by lenders but is not required by law in any states because it protects your own property. If it’s your vehicle that is damaged, you don’t have any liability to anyone else for that damage. Comprehensive coverage is also subject to a deductible you can choose. Choices usually range from $0 up to $2,500, but available choices may vary by insurer.
A note on deductibles: Many auto insurance policies start with a default selection for deductibles. In NJ, for example, the state uses a coverage selection form which references a “standard” deductible of $750 for both collision and comprehensive coverage. The use of the term “standard” can be misleading and is sometimes utilized to move the sale along quickly with minimal discussion or to quietly manage loss ratios by shifting smaller comprehensive claims back to the consumer. In reality, you can choose any deductible amount you want from the insurer’s options. A $750 deductible can make sense for collision coverage because a higher deductible will reduce premiums, but a higher deductible won’t save very much money for comprehensive coverage and might leave you footing the whole bill for windshield damage and other smaller claims.
Collision and comprehensive coverage are protection for your own property, your car. Liability coverage is coverage for damage to the property of others and for bodily injury caused to others. Most insurance policies will break out these coverages into separate coverage amounts so you can choose your coverage limits independently. Liability coverage is mandatory for nearly all states, but minimum coverage amounts vary by state.
Bodily Injury Liability: If someone else is injured in an accident in which you were at fault, you could be liable for the cost of their injuries, pain, and suffering, lost wages, etc. All it takes is an attorney with a calculator for your potential exposure to bodily injury liability to scale rapidly. To underscore the difference in financial exposure, the average claim for collision coverage is just over $3,000, while the average claim for bodily injury liability is over $17,000. Many bodily injury claims are much higher.
Property Damage Liability: Property damage liability pays towards the repair or replacement of the things that belong to others but which we sometimes bump into with our cars. These might include other cars, guardrails, lampposts, buildings, etc. The biggest risk of loss (liability) here, is usually other cars, particularly if we bump into several other cars during the same accident and the costs start to multiply.
Split Limit Coverage: Split limits means a separate coverage limit is set for bodily injury liability to a single person, bodily injury liability for the whole accident, and property damage liability.
A common split limit selection for homeowners is 100/300/100. The first number (in thousands) is bodily injury liability coverage per person ($100,000), the second number is bodily injury liability for the entire accident ($300,000), and the third number property damage liability coverage ($100,000). Many agents recommend these as base levels for homeowners, but a bit of bad luck doesn’t choose accident participants based on home ownership status. Renters can reduce their financial exposure with these (or higher) coverage levels as well.
Some auto Insurance policies also offer an option for a combined single limit, which assigns a single limit for coverage for all liability in an automobile accident.
Uninsured or underinsured motorist coverage is required in some states, but not all. this coverage is designed to protect you if you are injured or your vehicle is damaged by another driver who either does not have insurance or does not have sufficient coverage to pay for the loss. In most cases, the limits for uninsured and underinsured motorist coverage will match the liability coverage limits you’ve chosen for yourself.
Insurance is regulated at the state level and each state has its own set of rules. Medical coverage is the area where you’ll find the most divergence from state to state. Because the way coverage is handled differs by state and because your individual health coverage should be considered, you’ll want to discuss your medical coverage options with an agent to be sure you understand the specifics for your state.
You’ll probably find one of two primary options in your state, and sometimes both: MedPay and Personal Injury Protection. Both types of coverage pay toward your medical costs if you are injured by an automobile. In some states, a fixed amount of coverage is available. In other states, there is a menu of coverage options, particularly in those states that offer personal injury protection.
There may also be an option to make your health insurance policy primary for medical coverage on your automobile policy. This option comes with its advantages and potential pitfalls. The main consideration is to be sure your health insurance company will pay primary if you are injured by an automobile. Some health plans and policies won’t pay primary and if your auto insurance policy is set up for health insurance primary and you are injured by an automobile, it can be an expensive experience.
Discuss your medical coverage options with an agent, and if choosing Health Insurance Primary (HIP), first be sure to verify with your health insurance company that they will pay primary.
What’s not covered by your Auto Insurance?
Even the best car insurance policy won’t cover everything. Some insurers offer options to fill some of the gaps. Other gaps will likely never be covered.
Illegal/Criminal Activity – You’ll find some exclusions in your policy which explain that damage caused while engaged in illegal or criminal acts will not be covered.
Rental Cars – The coverages you have on your policy will extend to rental cars, but usually not if used for business, and usually not longer than 30 days. Additionally, if the rental car is damaged, you will not be covered for “loss of use” when the rental company can’t rent the car to someone else because it is being repaired, or for “diminution”, which is the loss of value for the rental car even after it is repaired. Also, be aware that if you don’t have collision or comprehensive coverage on your own policy, the rental car will not have those coverages either, unless you purchase separate insurance from the rental car agency.
Rideshare or Commercial Use – Rideshare companies like Uber and Lyft are all the rage now, but many consumers who use their cars for ridesharing are not aware of potential gaps in their coverage. Your auto policy covers you when you’re not “on the job” with a rideshare company, but coverage becomes fuzzy if you are “available” to take a customer or “in transit” to pick up a customer, or even if you just dropped one off. Once you have a passenger, the rideshare company’s insurance takes over. The basic premise is that a personal auto insurance policy is for personal use of your vehicle.
Your Personal Property – Personal property (laptops, phones, etc.) damaged in an accident or stolen from your automobile won’t be covered by your auto insurance policy. However, if you have a homeowners or renters insurance policy, you may be able to place a claim with that policy, subject to your deductible.
Deliberate Damage – If you set fire to your car or take a sledgehammer to it, the insurance company won’t pay to repair or replace your car. However, if someone else does those things to your car as an act of vandalism, you are covered if you have comprehensive coverage, subject to your deductible.
Riots, Civil Commotion, War, Acts of Terrorism – These things may seem far-fetched, and you’re much more likely to have a common fender-bender, but your insurance policy probably excludes all of these risks – if any of them do happen.
Spotlight on Auto Insurance Medical Coverage
As mentioned earlier, the medical coverage for your auto insurance policy is an area that’s important to discuss with an agent. There are some potential pitfalls if your policy isn’t structured with your finances in mind.
For example, if you live in a state that uses Personal Injury Protection to provide medical coverage on your auto insurance policy, you’ll have choices of coverage as low as $15,000 in some states. A lower amount of PIP coverage will help to keep premiums lower. An agent or producer might also suggest a higher deductible for your PIP, also to keep costs down.
Deductibles for PIP can go as high as $2500. This combination of a high deductible and lower coverage amount can keep costs low and everything is wonderful in the world – until you get injured by an automobile.
In the example above, here’s what happens if you are injured:
You’ll have to pay $2,500 for your deductible. Your PIP coverage will cover up to $15,000 in medical expenses. However, in many cases, there is a copay of 20 percent up to the first $5,000 (after your deductible).
|PIP Coverage||Copay Amount|
|$5,000 – $2,500||$2,500 subject to Copay|
|$2,500 x 20%||$500 Copay|
Now your out of pocket expense is up to $3,000.
After your chosen $15,000 limit is reached, your coverage rolls over to your existing health insurance if you have health insurance. You’ll likely pay another deductible (and Copay) with your health insurance company. Let’s assume that deductible is only $500.
Now your out of pocket expense is up to $3,500.
Depending on your individual finances, the savings available through lower coverage limits and higher deductibles may be tempting, but also may not be worth the financial risk. Ask your agent for quotes with different coverage limits, if available, and different deductibles so you can make a better-informed decision.
What Affects Auto Insurance Rates
Insurance is the transfer of risk from an individual to a pool of individuals. To make the math work, insurance companies need to understand the risk you represent relative to the pool.
In the background, there can be literally thousands of data points used in determining an insurance rate. Some are (much) bigger factors than others.
Credit – Insurance companies have found a correlation between credit ratings and the risk of a claim – for all major insurance types. Good credit will earn better insurance rates if all other rating criteria is equal.
Driving History – Insurers look at your driving history including tickets, accidents, DUI incidents, and Reckless or Careless Driving violations. Each company weighs these items differently, but it’s common for insurers to weigh accidents in the past 5 years and tickets or violations in the past 3 years.
Location – Where you live is a bigger deal than you might think. Urban areas have more cars on the roads to bump into – and more distractions.
Type of car – The type of car you drive can affect rates in several ways. The repair or replacement costs may be higher with one make or model than with another. Some types of cars are more likely to be stolen, sometimes just for parts. Also, the safety features or crash ratings of a particular type of car can affect rates, sometimes reducing the cost to insure that vehicle.
Miles Driven – Every mile driven is a mile in which you could be involved in an accident. Some insurers offer a discount for low mileage drivers. If your mileage use is well above the average of about 15,000 miles per year, some insurers will charge more for your insurance due to the increased risk.
Experience – They say experience is the best teacher, and if we don’t have much experience driving, insurance companies may charge more. Some insurers won’t even write a policy for a driver with less than three years of driving experience.
Gender – On average, males will pay more than females, especially when younger.
Age – Younger drivers will pay more than older drivers. Different insurers begin to give price breaks at different ages. Some begin at age 21. Others begin at age 25, or even as old as age 30. Some insurers will also charge more for drivers over the age of 70.
Length of Coverage and Coverage Limits – If you have had state minimum coverage limits or have gaps in your coverage history or if you have haven’t been insured with your previous insurer for a long period of time, any of these criteria can cost you money in the form of higher premiums when price shopping.
Home Ownership – Insurance companies generally give lower rates to homeowners because they have found a correlation between homeownership and reduced risk. You can also bundle your homeowners insurance.
Recent Claim Trends – It’s not unusual for an insurer to raise rates in a state following a storm that damages vehicles or another event that affects usage (like reduced gas prices) if these events create a surge in claims. The money needed to replenish reserves after a surge in claims comes from the premiums we pay.
It hardly seems fair sometimes that we are rated based on wide data in addition to individual driving history, but the way insurance companies can remain solvent to pay claims is to look at broad and macro trends in addition to individual criteria to better understand risks.
Geographic Location – Where you live can have a huge impact on auto insurance rates. In some cases, these differences can be due to state rules that mandate certain types or levels of coverage. In other cases, and area can be more expensive because the roads are more heavily congested.
Weather events can also be another driving force that affects rates by region. Hail, wind, and storms can cause damage to cars, cause accidents, and create surges in claims.
Most Expensive States for Auto Insurance:
- Rhode Island
Least Expensive States for Auto Insurance:
- North Carolina
It’s not just the state you live in that can affect rates, it’s your zip code. If you move to a new location, even if it’s nearby, your rates could change based on the overall risk in that area. The good news is: rates might go down
Online Auto Insurance Quoting Tools
Every major insurer has an online quote tool that allows shoppers or customers to fill out a form to get a quote online. Often, these forms have fine-print disclaimers which explain that the quote may not be accurate and that actual rates may vary after underwriting review of your application.
Online quoting tools have their place – as a tool. Consumers can compare prices in a general way, eliminating companies with high quotes and who haven’t shown sufficient value to justify the higher price. Because of the complexity of the policy for certain insurance types, it’s recommended that you speak with an agent who can walk you through your options and help answer questions before binding a policy.
Speaking with an agent can be more time consuming than getting online quotes. Utilizing online quote tools allows consumers to narrow their choices and then have those conversations with agents from the right companies.
The Value of Local Agents
Many customers still like to do business face to face or at least to know that there is an office nearby so they can stop in if they have questions or problems or need to make changes to their policy.
Local insurance agents will always have their place in the insurance market, even as technology improves the overall shopping experience by providing more information for consumers before they purchase a policy. Of particular value, a local agent looks at your individual needs as a whole, and can gently guide you away for a coverage selection which can hurt you financially and explain why you may not want to make that choice. An online form won’t say a word if you make it coverage selection which may not be in your best interest.
Many local agents are independent agents, meaning they can offer policies from a number of companies, including regional insurers which may offer a better value but are not as well known.
Auto Insurance Claims Process
First, let’s mention the importance of documentation if you do have an accident or if your vehicle is damaged. If at all possible, take pictures of the accident scene, damage to the vehicles or anything else that may be of relevance, such as skid marks. Call the police as well so they can take a report.
If you think you may be at fault in an accident, do not admit fault at the scene. Accidents can happen very quickly and what we think happened may not be what happened at all. Fault will be determined later in the process based on the information in the police report and the investigation by your insurance adjuster.
Also, If you think the other party is at fault in an accident, you have the option of reporting the claim directly with the other party’s insurance company. Reporting the claim with your own insurer may be easier, but your claim will be subject to your chosen deductible (up to $2,500) and it may take a while to get your deductible back from your insurer because they have to collect it from the other party’s insurer first. The option is yours.
Reporting a claim with your own insurer involves a few steps to the process and this is where the insurance companies begin to diverge in regard to customer satisfaction. We buy insurance because of the possibility of a claim and we expect the claim experience to go smoothly. Some companies do “smooth” better than others.
Initially, you’ll report your claim to a claims agent who simply collects information. You might choose to start with your local agent if you have one. A local agent may be able to provide guidance based on experience but cannot sway the outcome of the claim.
After the claim is reported, you will be given some options for repair and estimates, or an adjuster might inspect the damage in person. Your insurance company can guide you through the claim process and explain your options as they arise, but as in every industry, some companies are better at customer care than others. If you ever feel that you are not being given all the information you need, ask direct questions or request a supervisor.
An insurance policy is a contract and details the coverage types and limits which will govern your claim. Claims satisfaction is often tied to how well a company communicates during the process and how well that company assists to make the process as painless as possible.
There are some very good insurers in the auto insurance space and there are some which don’t place as much emphasis on customer service. In choosing our top picks for auto insurance companies, we looked at some key areas of the customer experience.
Claims satisfaction was given high priority both in individual company reviews and in our top picks. We buy insurance because of the possibility of a claim. Until there is a claim, there really isn’t much value provided by an insurer; they just sit back and collect the premiums, while handling claims for others. When or if we do have a claim, they need to illustrate their value to us.
We also looked at consumer data such as JD Power’s surveys which measured broad satisfaction in a number of areas ranging from price to customer service.
Affordability, often tied to available discounts, was a consideration – but not the main focus. A company that is inexpensive but which doesn’t provide adequate customer service or claims service doesn’t provide the level of value we seek in our top picks.
We also looked for extras, features that make a policy stand out among fairly standard options from competitors, like the ability to earn a dividend or to earn discounts for loyalty or for good driving.
Because a large number of consumers often have more than one type of insurance, we also looked at bundling discounts and the quality of the other policy type most likely to be bundled with auto: home insurance.
Nationwide availability was also considered. There are some very good regional insurers, but we placed our focus on insurers that could meet the needs of most people, regardless of location.
Best Auto Insurance Company (Overall): Amica
As it did with our Best of Homeowners Insurance selection, Amica again earns our top pick for auto insurance, and for many of the same reasons.
Amica is a mutual company, meaning it is owned by its policyholders. This structure enables the company to pay dividends on qualified policies if there is a surplus after expenses have been paid. Dividends are not guaranteed, but the company has paid dividends for the past 100 years and dividends average about 20 percent of premiums for qualified policies.
How Amica Got the Top Spot
Customer service, including claims service, with Amica, is excellent, proving the company’s ongoing commitment to its customers, which are also its owners.
While not always the lowest priced insurer, Amica remains competitive, leaving its customers little reason to shop around because they find value with this insurer.
Amica’s Platinum Choice Auto policy enables customers to earn points by renewing policies and by good driving which can then be used to waive deductibles or to reduce premiums. It’s money in the bank – earned simply by staying with a company that already offers great value for consumers.
Where Amica Falls Short
Where Amica falls short of some competitors is in local agent presence. There are very few physical locations. Customers of Amica should expect to do business online or by phone with their highly-trained and knowledgeable agents.
Best For Veterans (USAA)
USAA is an outstanding auto insurance choice if you qualify for membership. The insurer caters to military personnel, veterans, their families, and the family members of existing USAA members. While its family inclusions open availability to a larger number of people, USAA doesn’t yet service the broad population.
Why we like USAA
Top rated customer service and claim service combined with thoughtful policy features make this insurer worth considering if you are among those who qualify for membership.
In our quote tests, we were able to save over $100 per month as quoted by USAA when compared to another national insurer. The cost savings was underscored by overall better policy options with USAA, which included Accident Forgiveness, Car Replacement Assistance, and Rideshare Gap Protection.
Where USAA Falls Short
For the general consumer, USAA may not be an option. As a consequence, it is limiting as an auto insurance provider and ultimately is best suited for only those that can qualify for membership.
Many companies treat insurance as a commodity, commonly available and with little difference in features or options. Amica and our Special Mention pick, USAA, both recognize that customers are buying service, not just insurance.
Insurance rates are individualized, so it’s important for consumers to shop around. One company might treat you better than another in regard to price. But also consider service and policy options, and have a conversation with your agent about coverage types and limits. An insurance policy sits there silently waiting for a claim. When a claim happens, we want to know that our policy is structured properly to protect us financially and that the service we’ve paid for will be there when we need it most.