Car Insurance Policy FAQs
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UPDATED: Nov 18, 2020
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How Are Policies Priced for Different Drivers?
Every person who approaches an insurance company for a car insurance policy is assessed individually. This means that while there are basic requirements and criteria to qualify for insurance, your personal driving history affects the end figure.
Some of these standard factors aside from driving history are age, gender, vehicle type, insurance claims history, and residence. Once you have submitted all the documents required by the insurance company, the company then evaluates everything by computing the average cost to repair your vehicle (often based on the maximum damage), and then inputting your personal data.
This personal data is assessed separately before it is inputted. The auto insurance company comes up with a probability ratio that you will get involved in an accident, have your car stolen, and other features you would like included in your car insurance.
For instance, if the assessed repair costs are $10,000 with a driver’s record with no ticket or incident, the insured will pay a lower amount than another person with a lowered valued car but with a single incident of DUI.
What happens to my policy if I get caught drinking and driving?
Driving under the Influence or DUI (DWI – driving while intoxicated and OWI – operating while intoxicated) is a very serious offense. While the penalties differ per state, the law is clear for all and insurance companies are right behind the law doing their share in trying to deter road accidents through stiff consequences.
If the driver is proven to be under the influence of alcohol then in most states, the policy holder has to secure a special insurance policy. This is the SR-22. It comes with a much higher premium and can be required for a maximum period of 3 years.
The previous insurance will be canceled and considered forfeited. The insurance company will most likely deny any claims for liability. On the other hand, if you are a repeat offender, you will be permanently blocked from being approved by the insurance company.
Aside from the problems you will have with higher premiums, you could have a difficult time buying insurance with low premiums after the mandated special insurance period. To get insurance coverage, you will need to show your valid driver’s license and go through a background check. It is at this point when your DUI will pop up and result in the higher insurance plan.
What happens with my policy if I have a bad driving record?
Even one road incident can create a bad driving record and so the effects can begin with a simple speeding ticket. Insurance companies are extra vigilant about clients with bad driving records because it can be a precursor to major damages and claims.
Car owners with good driving records are allowed to list excluded drivers on their car insurance policy. This is to protect the car owner and the insurance company from any claims that may be caused by something the excluded driver did on the road.
The excluded driver is not covered by the car insurance but can be eligible for medical insurance. Very commonly among listed as excluded drivers are teenagers, those with a suspended license, and those who have filed many claims.
For car owners who get a bad driving record during the insured period and make a claim, they can expect a higher premium when the time for renewal of policy arrives. However, a driver with a bad record who doesn’t make a claim can be automatically renewed by the insurance company at the same rate.
If he or she decides to change insurance provider, he/she will have to present his/her valid driver’s license in which case, the bad driving record will be viewed.
How do I cancel my auto insurance policy?
Most people cancel their auto insurance policy once the notice of renewal arrives. When this letter comes, all you have to do is contact the insurance company and inform them that you do not want to renew the policy.
In cases where you want to cancel the auto insurance policy before it expires, you have to formally send in a letter of termination. There are terms under the policy which may require you to continue to pay for the remainder of the period. If you fail to fulfill your obligation to pay the premium, the insurance company could report you to the credit agencies.
The process of cancellation differs depending on the policies of each insurance company. Some may require you to discuss the situation with an agent or sign documents regarding the termination. If you have paid the insurance policy on an advance payment basis, you could request for a refund on the balance. The process usually takes a few weeks if approved.
The last step you should do is to inform the DMV that you have cancelled your policy. You will be required to state your reason such as sale of vehicle or death of car owner. For cars to be junked, the DMV will require you to surrender the registration tags and the license plates.
If I get into an accident, do I have to use my policy or can I use my parent’s policy?
If you are a dependent or a minor, you can “ride” on your parents’ policy provided you are listed on their policy. This means you have the permission of your parents to drive their car and they are paying a slightly higher premium because your name is included in their auto insurance plan.
On the other hand, if you are not listed and try to use your parents’ policy instead of your own, you could be liable for insurance fraud. The insured, your parents also become liable for insurance fraud if you do this so you can see that it can be very complicated.
In addition, if you have your own car insurance policy and you are a minor or dependent, you need to have the signatures of your parents and/or guardian for the policy contract to be binding.
In another situation, if you are legally an adult but living in the same house with your parents you can also be listed under their car insurance policy. This is what insurance companies call “household” which refers to anyone living under the same roof.
Finally, if you are driving your parents’ car and you are listed under their policy, then you can use their policy. But if you are driving your own car, it can get complicated since the car insurance policy will indicate which vehicle is insured under that policy.
If I add a name to my policy, will it increase?
Yes, any changes in your car insurance policy in terms of person covered will mean an increase in premium. The exact amount of the increase will depend on who you are adding, how many people you are adding, and their personal driving record and data.
For instance, insurance companies will usually quote a higher premium if the person added is a young teenager who just got his driver’s license. The amount would be lower if you add a spouse with a perfect driving record after you got married.
In short, insurance companies will assess the additional risk factor for them so age and experience matters.
Once the additional name is approved, as the main policy holder, you are responsible for the actions of the listed person/people. You cannot feign ignorance about a car accident or a traffic citation issued against your vehicle.
Insurance companies will hold you fully responsible for all the incidents by the listed secondary drivers. When the renewal period comes around, you may see a big increase if the secondary driver has racked up a bad driving record.
Many parents add their teenagers to their policy because they believe it will teach them to be responsible. They may even require that child to pay for the additional amount charged to their car insurance policy to prepare the teenager for the time when he will have to pay for his own auto insurance.
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Do you have to be related to the person you add to your policy?
No, insurance companies do not set limits on the qualifications in adding names to one’s policy. You can add a friend, relative, or acquaintance and they will assess the premium based on that person’s history and records. The question though that must be answered is why add anyone?
When you add a name to your car insurance policy, you are effectively taking responsibility for this person’s driving skills and habits. The buck will ultimately end with you so if you must add anyone, be sure you can rely on them to drive safe.
Any accident or traffic ticket that person gets while driving your car will mean another increase in your premium when the time for renewal comes around. You will become a new high risk client even if you never figured in a car accident or got a ticket during the year. It is even possible for the insurance company to cancel out your insurance policy based on the gravity of the car accident or multiple bad driving incidents.
The reason you may be thinking that the person to be added can only be a relative is because most experts in car insurance would recommend adding only a person who is living in the same house as you. This way you can monitor his or her driving activities and habits.
Will my policy cover auto theft?
If you are worried about the chances of your car being stolen, then you must include coverage for theft. There are car insurance plans that do not cover theft. For instance liability insurance is not a comprehensive policy and only covers you for property damage or injuries.
You can customize your insurance policy so that theft, liability, even the sound system is covered. You will need to sit down with the insurance agent to work out an insurance policy that meets all your security needs while staying within your budget.
To lower the premium on the added feature for theft, you should upgrade your car alarm system, buy a steering wheel lock, or make sure you keep your car parked inside a garage instead of on the street at night.
While there is not much you can do about your place of residence, you must take steps to ensure some degree of safety for the car so the insurance company does not charge you the highest rate possible. All these, you must make arrangements for or fix before approaching the insurance company.
Keep in mind though that these are not the only gauge for assessing risk factor. The insurance company will still take into consideration your driving history, usual daily route, place of residence, car brand and model, and maybe even lifestyle.
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More questions you might find useful
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- What are my rights when filing a car insurance claim?
- When filing my auto insurance claim, who can I go to for repairs?
- What happens when my insurance company discovers past car insurance claims?
- What are the options if my car insurance does not pay claims?
- How do you file personal injury claims through your car insurance?
- How can I settle my car accident claim without the insurance company?
- How far back do insurance companies go when looking at auto claims?
- What do insurance companies base car value for insurance claims?
If the current policy holder dies, what happens to the policy?
If the person who owns the car insurance policy dies, technically the policy ends and is no longer valid. However, if there is more than one name to the policy, then the other party must inform the insurance company as soon as possible. Read more..
Can the same person be on more than one car insurance policy?
Yes, this is done by persons who own more than one vehicle. It is also possible to be listed in another car insurance policy owned by a parent or guardian if you are a teenager or you have a suspended license. On the other hand, there are some who own more than one car and decide to buy a multi-car insurance plan instead of several one car insurance plans.
The multi-car insurance is one document which makes it easier to monitor and is more convenient, not to mention the possible discount on the premium that one can ask the insurance company for.
One reason why you would want separate car insurance policies for each car would be because you plan on selling one of the cars (or all) eventually and you want to avoid the hassle of paperwork with the DMV and the insurance provider.
It is important to note that if you plan on having several plans with different companies, you must be careful about making compensation claims on more than one policy for the same accident or incident. If you do file more than one claim, it would be considered double indemnity which is considered a felony insurance fraud.