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Auto Insurance - All the Details — Ratings of Car Insurance companies and advice on coverages, price, where
to complain, ... more (by Delaware Valley Consumers' CHECKBOOK, Fall 2013/Winter 2014)
 
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Auto Insurance

The Full Story: All Our Advice 

Coverage Options...And How Much to Buy

The first step in shopping for auto insurance is to decide on the types and levels of coverage that will keep risk to an acceptable level for a reasonable annual premium. You will have to choose from a broad range of auto insurance coverage options. In terms of the amount of coverage, keep in mind that the purpose of insurance is to protect you from losses you can’t afford to cover yourself. When you buy more insurance than you need, you are simply wasting money. 

Liability Coverage 

When you injure someone else, or damage someone’s property, you may be legally required to pay for the loss. Your home, your savings, and even your future wages are vulnerable. 

Liability coverage pays the amount for which you may be liable for bodily injury and property damage to others—up to certain limits—and covers legal fees incurred in your defense. Bodily injury claims can include wage loss, medical expenses, rehabilitation costs, and “pain and suffering.” Property damage can include damages to someone else’s car, building, or other property. 

Liability coverage generally protects you, your spouse, other members of your household, and anyone else who drives your car with your expressed or implied permission. But any liability coverage has payout limits, and if the damages for which you are found liable exceed those limits you’ll have to pay out of pocket. Determine what limits you can live with, keeping in mind that the higher the limits the higher the premium. 

Your policy’s limits are usually expressed as a set of three numbers each representing a multiple of $1,000 divided by diagonal lines. For example, a 100/300/50 policy pays a maximum of $100,000 for bodily injury to one person, a maximum of $300,000 for total bodily injuries when more than one person is hurt in an accident, and a maximum of $50,000 for property damage in a single accident. Some policies are written with a single limit, say $300,000, and will pay up to this limit even if only one person is injured or only property is damaged. Because of its greater flexibility, single-limit $300,000 coverage is worth somewhat more than 100/300/50 split-limit coverage. 

Since your liability insurance not only protects your assets but also ensures financial relief for anyone you injure, Delaware, New Jersey, and Pennsylvania laws require you to carry at least a minimum level of liability insurance. The minimums are 15/30/10 in Delaware and 15/30/5 in Pennsylvania. New Jersey’s minimums vary because two types of insurance policies are available: “Basic” insurance is a bare-bones policy that requires only $5,000 in property damage liability coverage and no bodily injury coverage. The “Standard” policy requires liability limits of at least 15/30/5. 

Be aware that if you drive without liability insurance, or buy a policy with minimum coverage amounts, most companies will treat you as a person who takes unnecessary risks and charge very high premiums for future coverage. 

To protect their assets from catastrophe, most drivers buy liability insurance and insure above the legal minimum. Drivers who possess substantial assets (or anticipate substantial future assets) have the strongest incentives to purchase substantial liability coverage: They have the most to lose; they are the most attractive targets for lawsuits; and they may receive the least sympathy from juries. 

Although coverage with higher limits costs more, cost increases are often modest. As this figure shows, policyholders with 100/300 bodily injury liability coverage (and $500 deductibles for collision and comprehensive coverages) can expect their total annual premium to increase by about 12 percent by moving up to 250/500 coverage, and expect to save only about nine percent by moving down to 50/100 coverage. And for most drivers, doubling the limits of property damage coverage from $50,000 to $100,000 costs very little. Most consumers consider these extra costs a small price to pay for increased peace of mind. 

If you want to protect your assets and future income from claims in excess of $500,000, consider an “umbrella” policy that supplements the liability protection provided by your auto and homeowners policies. In addition to protecting you from claims for bodily injury and property damage, an umbrella policy will protect you against suits for other types of injuries—such as libel, slander, defamation of character, false arrest, and invasion of privacy—which are not covered by your auto or homeowners policies. Before selling you an umbrella policy, insurance companies may require you to increase the liability coverages in your auto and homeowners policies to the maximum offered. 

Collision and Comprehensive Coverage 

Collision and comprehensive coverage pay to repair or replace your car following an accident, regardless of who is at fault. This coverage is not required by law, but if your vehicle is financed your lender may require you to purchase it. 

Collision coverage pays for the damages your car suffers when it runs into something. Comprehensive coverage pays for damage to your car from almost all other causes—including vandalism, explosion, fire, wind, and collision with animals. It will even pay if your dog chews up the upholstery. Comprehensive also pays if your car is stolen. 

Both collision and comprehensive pay only up to the actual cash value of your car. If you want to cover additions to your car—video screens, an upgraded sound system, a special paint job, or other features—you will have to pay an extra premium. 

As the car’s value diminishes, the price of comprehensive and collision coverage declines—but only during the first few years of the car’s life. The collision premium for a 10-year-old car—for which an insurance company would pay almost nothing in the event of a complete loss—is about the same as for a six-year-old car. So collision coverage becomes increasingly wasteful as your car ages. 

Collision and comprehensive coverages are sold with deductibles—the amount you agree to pay out of pocket before you can collect from the company. You save by taking a high deductible because it helps the company avoid the paperwork of processing small claims. In general, the best course is to take as high a deductible as you can afford to lose without seriously disrupting your life. 

This figure illustrates the considerable savings yielded by high deductibles. For example, the sample couple would save about nine percent off their total insurance bill by increasing their collision and comprehensive deductibles from $500 to $1,000. 

The virtues of substantial deductibles are more obvious insofar as you may not even choose to file claims for under $1,000 or so. Filing small claims might lead a company to cancel your coverage or raise your premiums. 

Medical Payments and Personal Injury Protection Coverage

Delaware 

In Delaware, drivers are required to purchase “personal injury protection” coverage (PIP) with a limit of at least $15,000 per person involved in an accident and $30,000 per accident. Under this coverage, your insurance company will cover medical expenses and loss of wages resulting from an auto accident for you, your family members, and your passengers, regardless of who is at fault. 

New Jersey 

New Jersey drivers are also required to purchase PIP coverage. Under this coverage, your insurance company will pay medical expenses for you, your family members, and your passengers injured in an auto accident, regardless of fault. 

If you choose a state-authorized “Basic” policy, you are required to take PIP coverage for medical expenses up to $15,000 per person per accident and up to $250,000 for “permanent or significant injury.” 

If you take a “Standard” policy, you have a number of choices. You can take coverage limits for medical expenses as low as $15,000 and up to $250,000 regardless of whether there is “permanent or significant injury” (there is always mandatory coverage up to $250,000 if there is “permanent or significant injury”). You pay a higher premium to cover lost wages and to pay someone to perform tasks you ordinarily perform yourself, such as housecleaning and laundry. With the Standard policy, you have the option of taking a deductible, which means you won’t collect on your PIP coverage until expenses exceed the deductible. You can also save money by making your family’s health insurance plan the primary payer of medical expenses in the event of an accident. 

Pennsylvania 

Pennsylvania drivers are required to purchase at least $5,000 of “medical payments” coverage. Under this coverage, your insurance company will pay medical expenses for you, your family members, and your passengers injured in an auto accident, regardless of fault. 

You can choose to exceed the minimum $5,000 level of medical payments coverage, and you can purchase related coverages for income loss, accidental death benefits, and funeral expenses. As an alternative to buying all these related coverages separately, you can purchase “combined first party benefits” coverage, which includes medical payments, income loss, accidental death, and funeral expenses. 

How Much Makes Sense 

Should you buy more than the minimum medical expense and PIP coverages? 

Most of the medical expenses paid for by medical payments coverage or PIP coverage would be covered by the injured party’s regular health insurance. If you and your family have health insurance, medical payments coverage or PIP coverage will fill in gaps in health insurance (deductibles, copayments, etc.) and cover medical expenses for your passengers who may not have health insurance. 

Increasing medical payments coverage to a high limit is relatively inexpensive, and could make sense if you do not have health insurance. But you might do better to use this money to purchase health insurance that would protect you and your family from any disease or injury that might befall you, not merely from injuries that involve automobiles. 

Additional protection for income loss is relatively expensive. Since such coverage pays out only if you lose income as a result of an auto accident, the money may be better applied toward financing disability insurance which would protect you from a wide range of disabilities in addition to those that involve automobile accidents. 

Full-Tort Versus Limited-Tort Policies

New Jersey and Pennsylvania are called “choice” no-fault states. “No-fault” refers to the fact that, if you live in one of these states, your own auto insurance coverage protects you regardless of who is at fault in an accident. 

No-fault laws were established to help ensure timely reimbursement of medical costs for all parties involved in an accident, and to reduce the incidence of lawsuits related to auto accidents. According to New Jersey and Pennsylvania law, the coverages for personal injury protection, medical payments, and loss of income (described in the previous section) will provide benefits to you and your passengers in the event of an accident, regardless of who was at fault

In both New Jersey and Pennsylvania (and other states that have no-fault laws), the guarantee that benefits will be paid regardless of fault is accompanied by a requirement to relinquish some portion of your rights to sue the other party. So when you purchase an auto insurance policy in New Jersey or Pennsylvania, you will have to choose between buying “full-tort” or “limited-tort” coverage. 

Delaware is what is known as an “add-on” no-fault state, where no-fault coverage is added on to traditional tort coverage. In other words, if you are injured in an auto accident, your rights to sue the other party (and vice versa) cannot be limited. Delaware residents don’t have to decide between a full-tort or limited-tort policy. 

With full-tort coverage in New Jersey and Pennsylvania, you retain your unlimited right to sue the at-fault party in an accident. With limited-tort coverage, your rights to sue for pain and suffering, or non-economic losses, are restricted, unless your injuries reach a threshold of severity. 

Full-tort coverage costs typically 20 to 30 percent more than limited-tort coverage. 

Aside from the obvious cost considerations, it is difficult for us to recommend either full- or limited-tort policies. On one hand, limited-tort policies cost much less and benefit all consumers by eliminating lawsuits and lowering premiums for everyone. 

On the other hand, limited-tort policies essentially limit your ability to seek full compensation for pain and suffering—even in accidents caused by another driver’s negligence. 

Uninsured and Underinsured Motorist Coverage

If you are the victim of an accident in which another driver is at fault, you would expect to be compensated by that driver’s insurance company. But despite mandatory coverage laws, many drivers remain uninsured. Also, even an insured driver may be underinsured against large losses. If you are the victim of an uninsured or underinsured motorist, you can use your collision coverage (if you carry it) to repair your car, or your medical payments or personal injury protection coverage, for your medical bills. But you will need additional coverage if your losses exceed these coverages and to compensate you for “pain and suffering.” “Uninsured/underinsured motorist” coverage fills this gap if you can show that the other driver was at fault or if you were the victim of a hit-and-run driver. 

Neither Delaware nor Pennsylvania requires this coverage. New Jersey requires this coverage at the 15/30 level on a Standard policy, but not on a Basic policy. In Pennsylvania, if you choose to buy this coverage and have more than one car on your policy, you may “stack” your coverage. Stacking essentially pools your un/underinsured motorist coverage, increasing your limits for any one car in an accident to the total coverage for all your cars. That is, if you have 100/300 stacked coverage and two cars on your policy, in an accident involving an un/underinsured driver your policy would pay up to $200,000 per person and $600,000 per accident. Stacking 100/300 coverage for two cars could raise your total annual premium by about nine percent. All the reasons that argue for higher limits on liability coverage—which protects someone else—also argue for high limits on uninsured/underinsured motorist coverage—which protects you. The cost of increasing your limit for the personal injury portion of uninsured/underinsured motorist coverage from 20/40 or 25/50 to 100/300 is generally small. 

Rental Car Reimbursement

For an additional premium, most insurers will broaden your collision or comprehensive coverage to include reimbursement for renting a car while your own car is being repaired. 

Given that even a modest level of coverage—typically $30 per day with a limit of $600 per claim—usually costs $50 to $100 per year, our advice is to decline it altogether, since the additional premiums over time are very likely to exceed any benefits you will collect. 

Towing and Road Service

“Towing” coverage covers the costs of towing your vehicle; “emergency road service” coverage pays the labor charges for any repairs that can be made at roadside (such as changing a tire or jumping a battery). Some insurance companies offer only towing coverage, others both towing and road service coverage together. Most companies offer these coverages for about $10 to $20 per year, and a few companies charge nothing for towing coverage. Under many policies, this optional coverage will reimburse you only for $25 per claim, but for $3 or $4 more per year you can get coverage for up to $75 per claim. Though towing and road service coverage is inexpensive, an auto club membership that includes towing and road service could be a better deal if you would use other club benefits. 

How Premiums Are Set

What you’ll pay for insurance depends not only on the coverage limits you select but also on your driving record; your age, gender, and marital status; where you live; the kind of driving you do; your credit record; and other factors. Knowing these factors will give you a sense of how warmly insurance companies are likely to greet your requests for coverage and what changes you could make in your life to lower insurance rates. 

Accidents and Traffic Convictions

Your driving record is very important. Industry data indicate that an individual who has had two accidents in the past two years is almost two-and-a-half times more likely to have an accident in the coming year than someone who has had no accidents. Similarly, the accident rate for individuals with two traffic violation convictions in a three-year period is twice as high as the rate for drivers with no convictions. 

It’s not surprising, then, that your previous driving record has a big impact on your auto insurance premiums. 

This figure shows that, for one illustrative couple, if the husband had not received a recent traffic citation the couple’s premiums would be $353 per year lower, on average. With some companies, one traffic violation won’t affect premiums much; but with others, one ticket incurs big penalties. 

Previous accidents are even more costly than tickets. Most companies charge an extra 20 percent or more for customers who have had one accident in the last three years, and an extra 50 percent or more if they’ve had two accidents. Many companies won’t even insure drivers with poor driving histories. 

Most companies consider the driving records of everyone who will be driving your car or cars. Therefore, if you have a perfect driving record but your spouse has had violations or accidents, you may not qualify for the “preferred” rate. Different companies treat driving records differently for families with more than one car. Some companies will charge a higher premium only for the car driven primarily by the driver with violations and/or accidents, while others will pool the “points” from the violations and accidents and spread them over all the cars, or assign the driver with the worst record to the highest cost car. 

Age, Gender, and Marital Status

Men under 25 have the highest accident rates; after age 30, accident rates drop and remain fairly constant up to age 65. Married men generally have lower accident rates than unmarried men. And women, especially married women, have the best records of all. 

This does not mean that women or older men are better drivers than, say, 25-year-old men. They may have fewer accidents simply because they drive fewer miles. 

Nonetheless, low accident rates result in lower premiums. If a company agrees to insure him at all, a single 17-year-old male can expect to pay about four times as much as a 30-year-old male, and twice as much as his twin sister, for comparable coverage. Even 25-year-old males can expect to pay about one-and-a-half times as much a 30 year old. 

Here are a few common rating guidelines: 

  • Rates for drivers between ages 16 and 20 decrease slightly each year (as long as their driving records remain accident- and violation-free), then remain the same between the ages of 21 and 24. But a few companies offer married women relatively low “adult” rates beginning at age 21. 
  • Rates for single males age 25 to 29 are often the same as for males age 21 to 24. But single females age 25 to 29 may be classified as “adults.” 
  • Married males in the 25-to-29 age bracket are often offered “adult” rates, and married females almost always are. 
  • Most companies classify single males as “adults” at age 30, but some continue to charge higher premiums up to age 49. 
  • Rates for drivers over 64 are normally either the same as, or slightly lower than, the “adult” rate. Some companies offer a “senior discount” to drivers as young as 50. 

Since youthful drivers have especially high accident rates, companies have sought ways to identify the better risks among them to attract these youths and their parents. 

Many companies offer special rates, usually four to 10 percent lower, for youths who have taken approved driver training courses. Studies have shown that these courses do not produce better drivers, but, because “good risks” seem to take them, they serve as a convenient screening device for the companies. 

Many companies also give a break—often 10 to 20 percent—to youths who earn good grades (usually a B average or better). The combination of discounts for driver training and good grades may total 15 to 30 percent of a family’s premium. 

Most companies also cut premiums dramatically if a youth goes to school more than 100 miles from home without taking a car. In addition, by agreeing to restrict a youth’s driving to a single less-expensive car, a family may be able to cut the rates on other cars it owns. 

Where You Live

Some localities present more chances for accidents, experience a higher incidence of auto theft and vandalism, or have higher repair costs or medical and legal charges than others. As shown in our price comparisons, these differences sometimes result in higher auto insurance rates in some parts of the Delaware Valley area than in others. 

What Car You Drive

Insurance companies charge more for insurance on cars that are relatively expensive to replace and repair, or prone to damage and theft. Some companies charge extra for, or refuse to insure, high-performance cars because their owners may be less responsible than other drivers. 

Your insurance premiums may also be slightly reduced if your car is equipped with safety devices or anti-theft features. For example, most companies offer small discounts for cars with four-wheel anti-lock brakes; passive disabling systems (which deactivate the car’s ignition system when the key is removed); and anti-theft tracking devices. But these discounts are usually very small—typically only one to three percent of the total premium. 

In short, consider insurance costs when deciding what vehicle to buy (and, to some extent, how to equip it), but the impact of your choice may be larger or smaller depending on which insurance company you select. 

How Much You Drive

Premiums are higher for drivers who put a lot of miles on their cars, but surcharges for high-mileage drivers and discounts for low-mileage drivers typically are small. 

Companies also consider the number of cars they are insuring for a family. The second car usually costs considerably less than the first because companies assume you will drive each car less than you would drive a single car. 

Length of Time with Continuous Insurance Coverage

If you have had a lapse in insurance coverage at any time in the last five years—including for non-payment of premium—expect your rates to skyrocket. Insurers view potential customers who have had insurance lapses as high-risk policyholders and most will not offer them their lowest rate plans. 

Similarly, many insurance companies will not offer their lowest rate programs to potential customers who have recently maintained liability coverage limits below the 300/100/50 level. 

Length of Time with Insurance Company

If you have been “loss free” with your current company for a while, consider any longevity discounts your company already offers or will offer in the future. Many companies offer discounts of five to 10 percent for three years of coverage without an at-fault accident, and may increase the discount at six years and nine years. Another benefit of longevity is that your current company might examine your entire history with it when deciding whether to re-assign you to a higher risk category (and charge you higher premiums) if you have accidents, whereas a new company might examine only your driving record in the last three years. Some companies don’t raise their rates for policyholders who have had clean driving histories for a long time. 

Dual-Policy Deals

Many insurance companies offer lower rates if you insure both your car and your home with them. Some knock off five percent, 10 percent, or even more from either the auto or homeowners rate, and some knock off a percentage from both. 

From a consumer’s point of view, this dual-policy pricing is an undesirable practice because it makes shopping more difficult; to find out the exact savings you could realize by switching companies, you have to shop for both types of coverage at once. And these discounts usually aren’t large enough to have a major effect on the relative rankings of companies. 

Credit History

Because many companies have concluded that consumers with poor credit histories are more likely than others to file claims, most use credit histories as a factor in setting rates. 

Using complicated secret formulas, insurance companies—or credit bureaus on their behalf—calculate an insurance score that may be used to determine rates, or even whether to cover a driver at all. The insurance formulas are not the same as those used by lenders (such as banks or mortgage companies) to calculate credit scores, but they draw on the same types of data. The formulas vary from company to company, since different insurers (or scoring companies) weigh factors differently. 

The appropriateness of using credit histories in making insurance decisions is a hotly debated topic among the insurance industry, consumer groups, and state legislatures. Aware of the risk of discrimination and unfair treatment under such practices, many states have passed, or are considering, laws designed to protect consumers by limiting insurance companies’ use of credit data. But insurance companies in Delaware, New Jersey, and Pennsylvania are allowed to use credit data in setting rates, and most do. 

The impact of credit history on rates is dramatic. For potential customers with poor credit, companies regularly quote premiums that are double the premiums for customers with excellent credit. 

Clearly, saving on insurance is one of many reasons that consumers need to maintain good credit records—for example, by paying bills promptly, not opening too many lines of credit, and keeping balances relatively low on existing lines of credit—and for making sure credit reports are accurate. 

Identifying the Best Companies

There are two main considerations in choosing among auto insurance companies: amount of premiums and quality of service. But also consider a company’s record on terminating policyholders and a few other factors. 

Shopping for Low Premiums

Our price comparisons show annual premiums quoted by insurance companies for illustrative profiles in various Delaware Valley area locations, including rates for the largest insurers writing new auto insurance policies in each state. 

For the Delaware and Pennsylvania profiles, CHECKBOOK first asked each company to provide rates, but several of them refused: Allstate, Ameriprise, Donegal, Encompass, Farmers, GEICO, Metropolitan, Nationwide, Progressive, and Travelers. To gather rates for these companies, our researchers, without revealing their affiliation with CHECKBOOK, obtained rate quotes by using the companies’ online rate-quoting system or, if one wasn’t available, by calling company agents. When we then sent the rates to these companies for verification, only Ameriprise responded. 

The rates in our price comparisons for New Jersey were reported to the New Jersey Department of Banking and Insurance in response to legal filing requirements. We collected these rates from the state’s website in August 2013. To obtain current rates, visit www.state.nj.us/dobi/division_consumers/insurance/autopremiumcomparison.htm

As these comparisons indicate, company-to-company rate differences are dramatic—more than $1,000 a year in almost every case, and several thousand dollars in many cases. 

The rates in our price comparisons will probably not apply exactly to you; most readers will differ in location of residence, vehicle usage, vehicle type, or other ways. But the rates provide a good starting point for shopping. Companies with low rates in our price comparisons are likely to be excellent prospects. 

Once you have identified a few prospective companies, begin shopping on the Web; many company websites will provide quotes. Or use the websites to locate agents. Then ask each agent to quote a price for the coverage you want. Before shopping, make a list of the coverages you plan to purchase. 

Independent agents who sell policies offered by many companies can provide quotes from various companies. But policies from some companies are not available through independent brokers or agents; to get these companies’ rates—which often are the lowest available—you have to obtain a quote from a company website or contact company agents directly. 

When contacting agents, you may have to push hard to obtain reliable information. When we researched our article on homeowners insurance, we found that many insurance agents were unable to provide accurate price quotes and that some could not correctly answer even the most basic questions about coverages. For auto insurance, we find that most agents can quote accurate rates, but problems still exist. Some agents quote wildly inaccurate rates, while others persistently push more coverage than requested. 

In addition to seeking out companies based on their relative rankings in our price comparisons, you might consider using an insurance comparison website, such as www.insweb.com, www.insurance.com, or www.answerfinancial.com. But because these sites provide rates only from companies with which they have business relationships, the lowest cost companies for you may not be included in reports the sites generate. 

Most insurance companies write auto policies by assigning prospective customers to tiers determined by their driving and credit records. When dealing with agents, make sure you ask whether you qualify for the best rates companies offer, and, if not, why you don’t. 

If you have so many accidents or violations that it is difficult for you to qualify for coverage, you are entitled to buy insurance through your state’s assigned risk plan. Rates in the assigned risk plan are often triple or more what you’d pay for a “preferred” policy. 

Companies’ underwriting policies—which drivers get the best rates, which pay more, and which they won’t insure at all—have enormous impact on insurance rates. Unfortunately, companies are not required to publicly disclose their underwriting policies. 

Shopping for Service

Consider price in relation to the quality of service companies provide, especially their claims-handling service. Our Ratings Tables, for the largest insurers in the area, provide three types of information about service: a survey of policyholders, a survey of auto body shops, and an analysis of complaints. 

Our Survey of Policyholders 

We asked area consumers (primarily CHECKBOOK and Consumer Reports subscribers) who had recently made auto insurance claims to rate their companies “inferior,” “adequate,” or “superior” for “simplicity of claim procedures,” “adequacy of claim payment,” and other elements of service. Our Ratings Tables show what percentage of policyholders rated each company “superior” on each element. (For a further description of our policyholder survey and how its results and our other research results should be interpreted, click here.) 

Our Ratings Tables show big differences in how customers rated companies. 

Asking the Experts: Auto Body Shops 

We also asked area auto body shops to rate the insurers “poor,” “fair,” “good,” “very good,” or “excellent” on “treating their customers (car owners) fairly.” Our Ratings Tables show the percent of surveyed shops that rated each company “good,” “very good,” or “excellent,” and the number of ratings each company received. 

Surveyed shops gave high marks to Chubb and Erie—they both received favorable ratings from at least 85 percent of shops. Ameriprise, Mercury, Nationwide, Safeco, and State Farm were rated lowest, receiving favorable ratings from 50 percent or fewer of the shops. 

Complaints 

Another way to assess quality is to look at the number of complaints filed against each company with state insurance departments, compared to its volume of business. While policyholders might rate a company less than “superior” if its deficiencies are minor, filing a formal complaint with a government regulatory agency presumably reflects serious dissatisfaction. 

Our Ratings Tables report counts of private passenger auto insurance complaints filed in New Jersey and Pennsylvania for 2011 and 2012 and “complaint rates” for each company. Complaint rates take into account the fact that companies that do much more business than others are likely to incur more complaints. The complaint rates for New Jersey are calculated as the companies’ total number of complaints per 100,000 auto insurance policies; for Pennsylvania, they are calculated as the total number of complaints per $10 million dollars in private passenger auto insurance premiums written. 

Shopping for Security

You want to be confident that a prospective insurer will not terminate your coverage or dramatically raise your rates because of accidents or traffic violations. Termination by your company at best is inconvenient and at worst can force you to pay rates hundreds of dollars higher when you find a new company or enroll in a special plan for high-risk drivers. 

There are certain legal restraints on termination in Delaware, New Jersey, and Pennsylvania. It is relatively easy in all three states to cancel a policy during the policy’s first 60 days while a company checks the accuracy of its policyholders’ applications. After that, termination is much more difficult. Even at the time of renewal, there are restraints and certain procedures that must be followed. 

In fact, except in cases of non-payment of premiums, termination is relatively rare. Accordingly, we don’t recommend spending more than an extra $100 or $200 per year on a company with a particularly good record of sticking by its policyholders through a string of accidents or violations. And you shouldn’t have to pay even that, since some of the lowest priced companies receive high ratings on our policyholder survey on their termination practices. 

Of course, termination is not the only disruption you might experience. If a company raises your rates dramatically in response to an accident or violation or two, you may want to terminate on your own, or take a big hit to your budget. On our customer survey ratings on “not unreasonably raising premium,” there was big company-to-company variation. 

What If No One Will Insure You?

Some individuals—usually the young and those with records of accidents or violations—find it difficult to locate a company to insure them. 

If you are one of these “high-risk” individuals, the only solution is to shop. Try several of the major groups and ask to be considered for their “preferred,” “standard,” or “non-standard” plans. Then try the special publicly created “assigned risk” plan in each state: the Pennsylvania Assigned Risk Plan (PA ARP), the Delaware Automobile Insurance Plan (DAIP), and the New Jersey Personal Automobile Insurance Plan (PAIP). These plans are open to licensed drivers who can’t get coverage through the regular market. An agent or broker contacts the plan on the driver’s behalf, and drivers are then assigned to regular insurance companies. Each company is assigned a pro rata share of policyholders according to its share of business in the state, and the policyholder pays the same premium at whatever company he or she is assigned to. 

Don’t assume that once you have been turned down by a preferred company you must turn to a high-risk company or the assigned risk plan. Companies’ standards for accepting new policyholders vary widely and change constantly as their rates and volume of business change. To enhance your chances, remind agents that you or members of your family have other business with their company—for instance, a homeowner’s policy or automobile policies for other drivers. On the other hand, don’t stop shopping even after you are accepted by a preferred company. High-risk companies or the assigned risk plan sometimes offer better rates. If you must join the assigned risk plan at a very high price, look for other coverage after a year. 

Extra Advice: Accident Forgiveness, Disappearing Deductibles, and Other Gimmicks

Recently, several insurers have begun to advertise new policy features. When considering these features, be aware that some can be useless, and others need to be carefully evaluated on a cost-benefit basis. 

As an example, several companies heavily promote “accident forgiveness.” With this option, if you have an accident, your premiums won’t change. Considering that your premiums might increase by 15 percent to more than 100 percent, depending on the company, as a result of having just one at-fault accident, this type of coverage plan might seem like a pretty good deal. 

But usually you’ll have to pay an additional premium for accident forgiveness (and most other advertised add-ons), and with some companies you pay $75 or more per year to buy it. 

When you consider what the insurance companies are offering customers, accident forgiveness actually is a somewhat bizarre option: Companies are offering you regular insurance against losses and claims you might sustain because of an accident, and also offering insurance against the risk of them drastically raising your rates if you actually have an accident. 

Because many of these plans don’t even take effect until drivers have had an accident-free policy with the insurer for five years, policyholders end up paying hundreds of dollars in extra premiums before they can benefit from the plan—and they would benefit then only if they have an accident. Some insurers waive their accident-free waiting period, but charge a lot more for the feature. 

Are add-ons like accident forgiveness, disappearing deductibles, and amnesty for traffic tickets worth the extra cost? If you have a clean driving record, you probably won’t have an accident that would raise your premiums for a long time, if ever. If you have a checkered driving history, the chances are higher that you will have a future accident, but the price you’re already paying—and the extra price you’ll pay for accident forgiveness—will be much higher than what a good driver pays. You have to decide whether even a substantial increase in premiums as a result of an accident or accidents would be a catastrophe. If not, don’t insure against it; insurance is to protect you from catastrophes. 



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