Asking the Right Questions to Your Auto Insurance Agent

Not only can you save yourself time and frustration, but asking the right questions to an auto insurance agent can save you money. As a general rule, insurance agents don't tell you about every aspect of a particular policy nor do they go into detail about the fine print or important details regarding your policy. They often assume you’ll read it when you get home. However, most people never end up reading it, and the finer appoints of your coverage details isn't thought about again until it's needed (i.e., after you need to make a claim), which can often be too late.

Below, you'll find a list of questions that every customer should ask their insurance agent before buying a policy.

1. Do I have both comprehensive and collision coverage? Is it worth it?

Collision coverage will pay for vehicle repairs when an accident occurs – whether you hit or are hit by another car or you run into a lamppost. Comprehensive coverage will pay for damage that is caused by anything other than a collision, e.g., theft, flood, vandalism or falling trees. Both types of coverage will typically require a deductible to be paid first by you (per incident) before the claim is paid by the insurance carrier. 

If you own a newer car, having both comprehensive and collision coverage is a very good idea since you probably don't have the means to repair or replace a vehicle that costs $20,000 or $30,000.

 However, some recommend cancelling it (or not getting such coverage at all) once your car gets older, and its value depreciates to under $2,000 or $3,000. For smaller incidents where it is worth repairing such a low-value car, chances are that the deductible you need to pay will cover most of the cost of the damage.

For larger incidents costing thousands of dollars to fix, the insurance company will typically write your car off as a total loss and just pay you for the car’s replacement value (rule of thumb is that if the cost of repairs is more than 75% of the replacement value of your car that the insurer will write off your car as a total loss). If the car is stolen, then you will definitely only get the replacement value of the car.

In all such cases, the premium that you end up paying over the course of 1-2 years may be greater than the replacement value of the car – there’s no use paying $3,000 in premiums on comprehensive and collision coverage if the insurance company will only pay you $2,000 should your car need to be replaced. Keep in mind that if you have loans outstanding against your older vehicle, that the lienholder on the car (i.e., your lender) may still require you to maintain collision and comprehensive coverage on your vehicle.

You can determine the value of your vehicle by referring to similar vehicles that may be listed for sale in the newspaper or on the internet using websites such as www.nada.com or www.kbb.com.

2. Am I getting all the available discounts?

While you will usually automatically receive safe-driver discounts, vehicle safety feature discounts, and multiple driver/car discounts, there are plenty of other discounts that are available that they don't automatically apply to your policy.

Some of the discounts that you could miss out on if you don't ask include:

• Good Student discounts. These discounts could save up to 20% if your student maintains a B average in school. Also, a young driver might qualify for reduced rates if he or she completes a driver’s education approved by your state’s DMV.
• Mature Driver discounts. Drivers 55 or older may qualify for a discount by successfully completing an accident prevention course approved by your state’s DMV. To qualify, you must keep your driving record free of accidents and violations after taking the course. For more information, contact the AARP at 1-888-687-2277, or the National Safety Council at (800) 621-7615.
• Clean Living discounts. Some companies offer discounts for drivers who refrain from drinking alcohol or smoking tobacco products.
• Anti-theft and Safety Equipment discounts. Most insurance companies offer discounts for cars that have airbags, anti-theft devices, tracking devices (e..g, Lojack) and other safety equipment.
• Defensive Driving Course discounts. In some states, if all drivers of a vehicle complete an approved defensive driving course, you can receive discounts for a certain number of years off your policy. After the initial period, you may continue to receive a discount should all the drivers take a refresher course. Check with your DMV or insurance carrier for more details.
• Hybrid Vehicle discounts.  Because it's eco-friendly, some states help insurers offer discounts on insurance for hybrids and other fuel-efficient vehicles.
• Low-Mileage discounts. If you drive your car significantly less than the yearly average, which is 12,000 miles per year, you may be eligible for discounts, or you may save under a pay-as-you-drive plan.
• Professional Organization discounts. Most people don’t know that you can get discounts for being part of a professional or social organization such as a medical board, state bar association, or a college fraternity (as an alumni).
• Multiple Policy discounts. You can also get a discount if you have more than one insurance policy with the same company such as auto, home and life.

3. If my car is considered total loss, how much will my policy pay in order to cover my loss?

An insurer will likely determine that your car is a total loss if the cost to repair the damage (excluding cosmetic damage) approaches or exceeds the vehicle’s actual cash value. There are two methods to determine the value that you will be paid upon a total loss of your car, and you should know what your options are:

The most common way is for an insurer to determine what your vehicle’s actual cash value (ACV) was by establishing its actual cash value immediately before the accident. Generally, insurers refer to the National Auto Dealers Association (NADA) Official Used Car Guide, Kelley Blue Book or CCC database to determine your vehicle’s ACV. Alternatively, the insurer may determine the actual cash value of your vehicle by obtaining a quote for a substantially similar vehicle from a qualified dealer at a location reasonably convenient to you.

An alternative method is for you and the insurer to agree upon a value when you enter into your policy agreement. The amount that you set at the start of your policy term will be the amount you are paid for the total loss of your vehicle until your policy is renewed (and a new value is agreed upon). This particular option can be added to your auto insurance policy if your insurer offers it and usually costs about $100 extra for the average person.

4. Is Uninsured/Underinsured Motorist coverage included in my policy?

Also known as UM/UIM coverage, uninsured/underinsured motorist coverage does not come standard on all policies since every state doesn't require that all drivers carry such. Your agent will inform you if it is required by the state, but, even if isn't, it is still advisable for most drivers to purchase. An extremely high percentage of drivers (up to 25% in some states) driver without adequate insurance coverage. If you ever get into an accident with an uninsured or underinsured driver, even if you were not at fault, you may end up being on the hook for damage to your car or injuries to yourself or your passengers.

There are two types of UM/UIM coverage you’ll want to consider. The first, and the one most commonly required by states, is to cover bodily injuries to yourself and/or your passengers in the event of an accident with an underinsured or uninsured motorist. This type of coverage will pay for your and/or your passengers’ medical expenses up to a certain limit. The other is to cover property damage. If you don’t have collision coverage UM/UIM property damage coverage pays up to a certain amount for repairs to your car (some states have limits at $3,500, some are lower and some are higher). So, as you can see, it’s not a replacement for collision coverage. If you do have collision coverage, you are covered under your own policy for damage to your car with an uninsured or underinsured motorist, but you can still use UM/UIM property damage coverage to cover your deductible.

5. Will my insurer pay for original parts for my repairs?

 This will depend on your insurer and is important to know before you buy your coverage. Some insurance companies will guarantee you OEM parts, i.e., original equipment manufacturer parts, while other insurance companies will only pay for aftermarket parts. Typically, aftermarket parts are less expensive are generally made by foreign manufacturers (and sometimes of lower quality) while OEM parts are made by the original manufacturer of your automobile.