Insurance: Auto Insurance FAQs


Q: Am I entitled to a rental vehicle and for how long?

  • A: You may be entitled to reimbursement for the cost of a rental vehicle that you use while you are waiting for your vehicle to be repaired if your personal automobile insurance policy has an endorsement for rental coverage, or "rental reimbursement" clause. Rental car reimbursement coverage is usually an optional add-on to your car insurance policy. If you're collecting for your damages from a company other than your own, your state may or may not have a law requiring rental reimbursement.


Q: Are there any specific time limits for an insurance company to pay a claim?

  • A: While there are no specific time limits for the settlement of claims, most states require insurance companies to pay all claims in a prompt and reasonable amount of time. However, what constitutes "prompt and reasonable" may vary from claim to claim. Unique situations, special circumstances or abnormal increases in case loads due to, for example, weather events such as a blizzard or hurricane, can slow the process down. Check with your state's insurance division for any specific time frames your insurer must follow.


Q: Can I require my insurance to authorize the use of original equipment parts when repairing my vehicle? My policy says they will return my damaged vehicle to " pre-accident condition."

  • A: Possibly. This can depend on both the state you are in as well as the terms of your auto insurance policy. Some automobile insurance companies automatically use original equipment manufacturer (OEM) parts. Others use non-OEM parts. If the repair of the damaged part directly affects the operational safety of the auto, the insurance company may be required by your state law to replace it with an original equipment manufacturer (OEM) part as long as it's still available.

    For non-safety-related parts, there may be more restrictions on the use of OEM both under state law as well as your policy. You may be able to insist on OEM parts, but where they aren't required you will generally have to pay the difference in cost.


Q: Can my insurance company refuse to pay my claim?

  • A: This is often referred to as "denying" the claim. Most insurance policies include a section in your policy that defines what you, the policyholder, are required to do when an accident occurs. This information in your policy sets out the general as well as any specific procedures that you must follow in order to have your claim covered by the insurer. It's essential to follow these procedures carefully, since payment of your claim may depend on your doing so.

    The claim may be denied, for example, because the company has determined that the loss is not "covered" by the terms of the insurance policy or that the person who suffered the loss is not an "insured" under your policy. If you become involved in a coverage dispute with your insurance company, you may want to obtain the assistance of an attorney that is experience in handling insurance coverage matters due to the complexity of insurance policies. The resolution of coverage disputes often depends on careful analysis of the unique facts and circumstances of each case in light of applicable state law.


Q: Do I have to hire a lawyer to defend me if I'm sued because of an auto accident?

  • A: No. When you buy liability insurance, part of the insurance company's obligation is to provide a defense for you if you are sued. The insurance company will do this by hiring and paying for an attorney to represent you in court. Even though the insurance company selects the lawyer and must approve the payment of all legal fees and other expenses of the lawsuit, the lawyer represents you. You do, however, have the option of hiring an additional lawyer of your own choosing at your own expense.


Q: I'm in a "no-fault" state. What does this mean if I have an accident?

  • A: In most states, auto insurance functions under a traditional fault-based system. Under this system, insurance companies make payments based on each person's degree of fault in an accident. If you live in a no-fault state and get into an accident, your auto insurance provider automatically pays for your damages (regardless of fault) up to your policy limits. In exchange for this guaranteed payment, you give up some of your rights to sue the other driver. On the other hand, you are also protected from being sued in the event you are at fault in an accident.


Q: Is automobile insurance required?

  • A: Most states require car owners to buy a minimum amount of bodily injury and property damage liability insurance before they can legally drive their cars. All states have financial responsibility laws, which means that people involved in an automobile accident will be required to furnish proof of financial responsibility up to certain minimum dollar limits. Most drivers purchase automobile liability insurance to comply with state financial responsibility laws.

    The mandatory requirements in your state may include minimum amounts of the following types of coverage:

    • Bodily injury liability (BIL)
    • Physical damage liability (PDL)
    • No-fault personal injury protection (PIP)
    • Uninsured motorist coverage (UM)
    • Underinsured motorist (UIM)

    The following types of coverage are not required by any state but if you have a car loan, your lender may insist you carry these until you pay off your loan:

    Optional insurance coverage includes:

    • Collision
    • Comprehensive


Q: Is my insurance company required to provide me advance notification if they are canceling my policy?

  • A: Yes. Generally, a 10 day notice of cancellation is required but each state has its own rules governing the cancellation of automobile insurance policies. Your insurance company can cancel your auto insurance policy during the "binding period" (first 30-60 days of a new policy) for almost any reason. State laws vary on how long the binding period is. After your policy has been in effect for 60 days, an insurance company generally cannot cancel except for certain reasons, such as your failure to pay the premium or your losing your license to drive. At the end of the policy period, the company may refuse to renew your policy but they must give you advance notice.


Q: May I keep my auto if I have a claim and the insurance company declares it a total loss?

  • A: Your insurance company is entitled to any salvage value your auto may have and will typically take title to your auto when it pays your claim. You may be able to negotiate with your insurance company to purchase the vehicle from them.


Q: My auto was declared a total loss. Is my insurance company required to pay me the replacement cost?

  • A: No. When your auto is declared a total loss, your insurance company will only pay you the actual cash value of the auto at the time of the loss, not the cost to replace it. Your auto's value can be determined a number of ways:

    • Retail value for an auto of like kind and quality prior to the accident
    • Price paid for the auto plus the value of prior, documented improvements to the auto at the time of the accident
    • Actual purchase cost of an available auto of like kind and quality
    • There could be a decrease in any of the values due to prior unrelated damage which is detected by the appraiser or for which a claim has been previously paid

    If your auto has substantial value because of its exceptional condition such as an antique, classic or restored auto, you should have it appraised and then insure it for the appraised value.


Q: My insurance company is denying my claim because the location where I keep my vehicle is not what is listed on the application. Is this right?

  • A: Yes, it is possible. If you give false, misleading or incomplete information on the application and if such information increases the insurance company's risk of loss, your company may then be able to refuse to pay the claim under guidelines set out by your state. Misleading information includes the description of where the vehicle is kept, the names of the operators or any information related to those who operate the vehicle.


Q: My state has a Full Tort or Limited Tort Option. What does this mean?

  • A: Under "full tort," if you're in an accident, you may sue for all injuries you sustain. If you choose the "limited tort" option, you generally limit your right to sue except for serious injuries, as defined by your state. In return for selecting the limited tort option, you often save a percentage off your total premium.


Q: The accident I was in was determined not to be my fault. The insurance company is offering far less for my vehicle than what I owe. Don't they have to at least pay off my loan?

  • A: No. The insurance company is not required to take into consideration any outstanding loan on the vehicle. They generally are only required to pay the actual cash value of the vehicle.


Q: What factors can an insurance company look at to determine if they will insure me?

  • A: Typically, insurance companies weigh the following factors to determine if they will write, or continue, coverage for an individual:

    • Your age
    • Car make and model
    • Your claims history
    • Your driving record
    • Your credit report
    • Where you live
    • What your car is used for
    • Complexity of the vehicle to repair
    • Cost of replacing vehicle components - airbags, headlights, etc.

    Insurance companies cannot discriminate against providing coverage based on a protected class such as race, sex, religion, national origin or ancestry. Your state may also have additional restrictions such as profession or marital status.


Q: What if I fail to keep insurance on my vehicle?

  • A: The Department of Motor Vehicles (or similar agency) in the state in which you live is generally authorized to suspend your driving privileges, perhaps even your vehicle tag and registration, as well as levy fines for failing to maintain insurance. Also, your vehicle may be impounded and you may be required to appear in court.


Q: What is " Bodily Injury Liability" ("BIL") insurance?

  • Bodily Injury Liability (BIL) coverage pays for injuries that you, the designated driver or policyholder, cause to someone else. It will also usually pay if the accident was caused by a member of your family living with you or a person using your own auto with your consent. You and family members listed on the policy are also covered when driving someone else's car with their permission.

    Your insurance company will pay for injuries up to the limits of your policy and provide legal representation for you if you're sued. This coverage does not pay for bodily injury you may sustain. If you're sued due to an accident and the jury or judge awards a verdict to the injured party larger than your bodily injury liability insurance limit, you may be held personally liable for the difference.


Q: What is collision coverage?

  • A: Collision coverage pays for damage to your car resulting from a collision with another car, object (such as a tree, telephone pole or building) or as a result of flipping over. It also covers damage caused by potholes. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver's insurance company. You'll be reimbursed for the deductible if they recover from the other insurance company.


Q: What is "comprehensive coverage"?

  • A: Comprehensive coverage reimburses you for loss due to damage that is caused by something other than a collision with another car or object. For example, loss from theft, fire, windstorm, vandalism, glass breakage, falling objects, explosion, earthquake, hail, flood or contact with animals such as birds or deer may be covered.


Q: What is "Personal Injury Protection" insurance ("PIP")?

  • A: PIP is insurance coverage that pays for medical expenses, lost wages and the cost of replacing services normally performed by someone injured in an auto accident, regardless of fault. It may also cover funeral costs. Not all states require PIP coverage, but states with no fault laws may limit the right to sue for non-monetary damages such as pain and suffering.

    In most states, those covered by a PIP policy usually include:

    • Policyholder
    • Policyholder's relatives in the same household
    • Passengers
    • Other authorized drivers
    • Policyholder and family members if they are injured while riding in someone else's car or as a pedestrian when struck by another vehicle


Q: What is "Property Damage Liability" ("PDL") insurance?

  • A: Property damage liability (PDL) coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property up to the stated amount provided by your policy. Usually, this means damage to someone else's car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hits. It may also cover the contents of the other party's automobile.


Q: What is Uninsured or Underinsured motorist coverage?

  • A: Uninsured coverage will reimburse you, a member of your family or a designated driver for medical expenses, lost wages and other injury-related losses if one of you is hit by an uninsured or hit-and-run driver. Underinsured motorist coverage pays you for damages that are more than the amount of coverage carried by a driver who has insufficient insurance to pay for your total loss.



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