Your 5-minute guide to car insurance

Here's some basic advice, plus 22 tips to help you protect yourself and get the best value for the money you spend on automobile coverage.

Your car insurance rates are based on a few factors you can't readily change -- your sex, age, marital status and where you live -- and many that you can -- your credit scores, what you drive, how well you drive and how much coverage you buy.

Here's how to get the best deal.

First, let's review the basics. Details vary from state to state. (See "Shopping for auto insurance.")

• Liability insurance pays for injuries and property damage caused by a crash if an insurance adjuster determines you were at fault. It does not cover your injuries or those of other people on your policy, or damage to your vehicle. State minimum requirements provide inadequate protection. Buy no less than $100,000 per person, $300,000 per accident and $50,000 for property damage, or no less than $300,000 if your policy has a single limit. You are personally liable for claims that exceed your coverage, so buy even more if you can, and consider an umbrella policy.

• Uninsured/underinsured motorist protection covers injuries to the occupants of your car -- and property damage in some states -- if the other driver has no insurance or too little.

• Collision insurance pays for damage to your vehicle in an accident. If your car is totaled, you'll get what the insurer considers the pre-crash market value of your car, minus your deductible. To get a general idea of what that may be, check the Kelley Blue Book private-party price or visit the Web site of the National Automobile Dealers Association. You can pay extra for replacement-cost coverage for newer cars.

• Comprehensive insurance covers theft of your vehicle and noncollision damage to your car, as well as animal collisions. You may be eligible for lower rates if your vehicle has anti-theft and tracking devices.

• Medical or personal-injury protection provides coverage for you and your passengers, regardless of fault. You may not need this insurance if you have good health insurance.

• Twelve states have no-fault insurance, which generally covers the insured person's injuries and property damage no matter who is at fault.

• Consider gap insurance if you owe more on your car than it's worth.

Reduce your rates

The company you select and the coverage you buy can greatly reduce your rates.

• Shop around. Check rates online at InsWeb.com, call companies, and consult an agent through the Independent Insurance Agents & Brokers of America. Rates vary greatly depending on a company's operating expenses, history of claims and formulas for setting premiums. Check a company's financial status and consumer record. The last thing you need is to go cheap and then find it's all but impossible to file a claim.

• Increase your deductibles on comprehensive and collision coverage to an amount you can cover out of pocket.

• Consider dropping both if you own your vehicle outright and the combined annual cost for that coverage is more than 10% of what you would get if you car were totaled. (See "Dump the insurance on your clunker.")

• Ask your insurer about all available special discounts.

• If you're switching insurance companies, do it in writing. Your credit scores will suffer if you're canceled for nonpayment.

Control yourself

Your behavior on and off the road has a bearing on your rates.

• Pay all bills on time. Your premiums are based in part on your credit scores or an insurance risk score based on your credit reports. (See "The new math of car insurance.") TransUnion's TrueCredit will provide your auto insurance risk score for $9.95.

• Drive defensively, and avoid distractions such as text messaging or talking on a cell phone. One speeding ticket may not raise your rates, but an accident you caused probably would -- generally by 40% of the company's base rate.

• Don't drink and drive. (See "DUI: The $10,000 ride home.")

• Don't lend out your car. If your friend wrecks it, your rates will go up. If your uninsured friend wrecks your car, you'll be liable for claims exceeding your policy.

The type of vehicle you drive affects your rates.

• Check the cost of insuring that sports car before you buy it. You'll pay higher premiums for a vehicle with higher collision-damage costs or that's attractive to thieves. Use MSN Money's comparison tool. And no, it doesn't cost more to insure a red car.

• High-tech items are more expensive to replace after a crash. (See "High-tech cars mean high-priced repairs.")

The deal on discounts

Factors such as age, how much you drive, where you live and, sometimes, what you do for a living affect insurance premiums. You can take some steps to get a better rate.

• If you get married, you'll get a discount and benefit from combining policies. (See "Paying too much for car insurance?")

• People 55 and older get a discount for taking a driving class.

• Adding your newly licensed teen to your policy will increase your premiums 50% to 200%. One way to reduce costs: Buy a beater and list your child as the driver. Teen drivers can get discounts for drivers ed courses or good grades. (See "Cut the cost of insuring your teen driver.")

• You may get a discount if your child attends college away from home.

If you wreck your car

If you've been in a collision, tell your insurance company for your own protection, even if injuries are not readily apparent. Informing the company doesn't mean you're filing a claim.

• If you disagree with the value assigned to your totaled vehicle, provide quotes from local dealers and proof that your vehicle was well-maintained. (See "12 secrets your car insurer won't tell you.") Still unsatisfied? Your options are mediation, arbitration and, finally, a lawsuit.

• Twenty-eight states require insurance companies to pay the sales tax on a replacement vehicle, based on the settlement value of your totaled car. Request it, as well as registration and title fees, wherever you live.

• In 14 states you can get payment for the "diminished value" of your damaged car.

• If the driver at fault in a crash is uninsured, consider "stacking" or collecting on all of your policies that have uninsured/underinsured motorist coverage to fully cover the damage, unless state law prohibits it.

• Body shops may be tempted to cut corners to meet insurance companies' pricing requirements. Check Assured Performance Collision Care for qualified repair shops. (See "7 things auto-body shops won't tell you.")

• If you cause an accident, does your policy require you to pay the difference between generic and original-equipment manufacturer parts? If someone else caused the accident, request original-equipment parts for your repairs.

Information about different types of auto insurance coverage

Different auto insurance companies offer many different types of coverage. Most states require drivers to purchase a minimum amount of certain types of coverage.
Here are brief descriptions of typical types of auto insurance coverage offered:

1. Body injury Coverage : This coverage is mandatory in most states. Bodily injury coverage pays for medical bills, lost wages, treatment and/or funeral costs for anyone injured or killed by your car. Such coverage will also pay for "pain and suffering" damages when a third party successfully sues.

2. Property-Damage Liability Coverage: This coverage pays for the repair and replacement of vehicles and other property damaged when you or another authorized driver causes an accident.

3. Medical Payments Coverage: Usually optional, this coverage pays for medical expenses over and above amounts covered by personal insurance protection, no matter who caused the accident.

4. Personal Injury Protection: Pays medical expenses and some percentage of lost wages to you or anyone authorized to drive your car, no matter who caused the accident.

5. Comprehensive Coverage: Pays for damage to or loss of your car in the event of fire, theft. Again, your lender may require this coverage if your car is financed.

6. Rental Reimbursement: Reimburses up to a specified amount per day for car rental or transportation costs while your car is being repaired following an accident.

7. Protection from an Uninsured or Underinsured Motorist Coverage: Protects you, passengers and anyone authorized to drive your car against bodily injury caused by an uninsured, underinsured or hit-and-run driver.

8. Towing and Labor: It will covers up to a specified amount for labor charges when your car breaks down, whether or not there is an accident involved.

9. Auto Replacement: The full car replacement value apart from the depreciated value.

Generally your auto insurance will cover the above sides.

Copywrited article by “Finance ideas 4u”

How to file an insurance claim -- and win

Submitting a claim can be quick and easy so long as you follow these tips.

Insurance is like gambling. You and the insurance company are betting on the likelihood of you filing a claim and the amount of that claim.

So, who wins this bet?

If you play your cards right, you can.

Submitting a claim on your home or auto policy is pretty simple. It usually involves contacting your agent, filling out a claim form and waiting for an adjuster to look over the damage. Then, if appropriate, it's just a matter of waiting for your check to arrive. Most claims are handled quickly.

Each state has its own performance requirements when it comes to responding to claims. If you feel your insurer isn't moving quickly enough on your claim, call your state's insurance department.

The claims process can be hazardous, particularly if you make too many claims. Most insurance companies will cancel your policy if you make two or three claims in a short period of time, often a year. The insurers want to stay away from high risks, so you should be sure to make only those claims that are absolutely necessary. Granted, if your policy is supposed to cover a particular loss, don't be afraid to make a claim. Just keep in mind that there can sometimes be unpleasant repercussions.

Here are some general tips for handling auto and home insurance claims:

• Know your policy. It's important to understand what your policy says. The policy is a contract between you and your insurance company. Make sure you know what's covered and what's not and what the deductibles are. If you have any questions about the policy, the time to ask is before you need to make a claim.

• Stake your claim quickly. Call your agent or your company's claims hotline as soon as possible. Your policy may require that you make the notification within a certain time frame. Getting your agent involved first may help speed things along and get you some personal attention.

• Avoid using the word "lawyer." Insurance companies get a little skittish when you threaten to get a lawyer involved. Once you hire an attorney, the adjuster, the insurance company and your agent will only be able to communicate with the lawyer. If you really need help settling your claim, call your state insurance department first.

• Keep a copy of the police report. If your claim involves a collision, file a police report and keep a copy of it. Get the name, address, phone number and name of the other party's insurance company before you leave the scene. (While you're there, don't admit fault or offer to pay for the damages. It could jeopardize your insurance coverage.)

• Get an estimate or two. It's important to get a second opinion on the repairs needed for your vehicle or your home. The adjuster may be able to approve your claim on the spot if you have a reliable estimate from a reputable source.

• Make temporary repairs. If your home is damaged, you should make whatever temporary repairs are needed to protect your home and you from further damage or injury. These should always be covered by your policy. Just remember not to start any permanent repairs until you hear from an adjuster. If you make any temporary repairs, make copies of the bills for your records, just in case the adjuster loses them.

• Document, document, document. This is important both before you need to make a claim and when you need to make one. Save the receipts for items you buy. That will help prove what items you had and how much those items cost. Photographs and/or videotapes of your home (both in pre- and post-disaster form) can also be beneficial. These will help you establish an inventory of your belongings should the need arise. Take photos or videos of the damage before you begin cleaning up.

12 secrets your car insurer won't tell you

Knowing how the industry works can save you a lot of money and grief. Here are the secrets behind the premiums, and how you can save after an accident.
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Getting a good deal on auto insurance is hard enough. Keeping your premiums from rising? That can feel like playing a game where the rule maker refuses to tell you the rules.


Here are a dozen ways the industry works, with tips to help you save:


If you have good credit, you'll pay less. Almost all insurers -- including the top five -- pull your credit report. Why? Studies have shown a direct correlation between your credit score and the likelihood that you will file a claim. Insurers also know that if you pay your bills in a timely fashion and have had the same credit accounts for a long time, you're more stable than someone who pays late and frequently opens and closes accounts. They use this information to create your "insurance risk score," which is one factor that determines your auto-insurance rate.

Tip: Your insurance-risk score is not available to you, but it may be similar to your credit score. If you have unusual credit activity, wait a month for it to return to normal before buying auto insurance. If your credit history is shaky, clean it up as soon as you can.


Your car model affects your premium. You won't get these numbers from your insurer; in fact, you may not be able to get them at all. But the auto insurers do have a rating system for every car make and model. Most use a system devised by the Insurance Services Office, which starts with the cost of the vehicle and then factors in safety and theft data. Cars are given a rating from 1 to 27, and the higher the number, the higher your premium.

Tip: Look up your car's relative risk with MSN Money's comparison tool. If you're buying a new car, ask your insurance company about the difference in premiums for cars you're considering. Search online for the latest top 10 lists on the most expensive cars to insure, and the least.


Pay in full to avoid installment fees. "Fractional premium" fees are usually charged when you pay your annual premium in installments rather all at once. Payments usually are offered on a six-month, quarterly or monthly basis, but almost every insurance company charges an administrative fee for breaking up the payments. The more you break it down, the more those fees add up.

Tip: Ask about fees for paying in installments. If the fees are small enough, it may be worth it. Remember that insurance companies can cancel your policy for late payment, many times with minimal notification, so make sure you won't miss an installment. If you can pay the premium up front, it may simplify the process and save you a few dollars.


That Pearl Jam CD in your car isn't covered. Stolen or damaged personal items like compact discs aren't covered by your auto insurance.

Tip: You can file a claim on your home insurance. Most home-insurance policies will cover smaller, less expensive items such as compact discs. However, if you carry expensive items such as computer equipment, ask about a rider to your home-insurance policy. It's wise to take photos or video of any expensive personal items before they go missing.


Bad drivers will pay
You'll pay for your bad driving. The industry standard is to increase your premium by 40% of the insurer's base rate after your first at-fault accident. For example, if the company's base rate is $400, your premium will go up by $160. Not all auto insurers play by this rule, though, and some may increase your individual rate by 40%. Regardless of what formula they use, in the majority of cases, your rates will go up.

Tip: Some insurance companies have a "forgive the first accident" policy. The qualifying variables are wide-ranging, so ask your company if it has a forgiveness policy and how to qualify.


You'll pay for your friend's bad driving, too. If your friend borrows your car and crashes it, you'll have to file a claim with your insurance company. You'll have to pay any deductible that applies, and your rates will probably go up as a result of your claim.

Tip: If your friend didn't have permission to take your car, in most cases you won't be held liable for the damage. But if your friend is uninsured and causes damage that exceeds your policy limits, the injured party can come after you for medical and property-damage expenses. Best bet? Don't lend out your car.


Your car's real worth
The value of your "totaled" car may surprise you. Auto-insurance companies don't use the standard Kelley Blue Book or National Association of Automobile Dealers value. Instead, each company has its own proprietary list of car values, and most have specialized software for valuing cars in each region. They take into consideration the car's mileage and pre-accident condition.

The insurance company may also ask local dealers what they'd charge for a similar replacement car. However, the insurer will consider quotes from suburban towns as reasonable estimates, even if you live in the city. You might have to drive several hours to reach the cheapest dealer, just to save the insurance company money. And they might be quoted a better deal than you could get if you walked onto the lot.

Tip: If you disagree with your insurance company's value determination, there are several things you can do:

* Next time, get "gap" insurance. It will pay the difference between what an insurer will cover and what you owe, which can be several thousand dollars.
* If you have maintenance records that show you've had the oil changed every 3,000 miles and you've had the car checked routinely by a mechanic, present copies to the insurance company to show the car was in good condition. If you've been paying premiums on any special parts or upgrades, make sure those are included in the insurance company's evaluation.
* Get price quotes on replacement cars from three dealers within a reasonable driving distance and submit these to your insurance company. Ask the insurance company for a list of dealers within a specific distance who can sell you an equivalent car for the value the company is claiming.
* If you still aren't satisfied, you can step up the process and go to mediation or arbitration. Mediation involves presenting your case to a neutral party for help in reaching a compromise; arbitration is a binding decision. You can also, of course, take the issue to court.

Check into "diminished value." Say your car has been in an accident, but repaired. Is it worth less than the exact same car that hasn't been in an accident? It's a hot topic, but some say yes. In 14 states, you're allowed to file a claim with your insurance company for that lost value.

Tip: Thirty-six states and Washington, D.C., allow insurance companies to exclude payments for diminished value, so if you live in one of those states, you won't get to claim the loss. But in Florida, Georgia, Hawaii, Kansas, Louisiana, Maine, Maryland, Massachusetts, North Carolina, South Dakota, Texas, Virginia, Washington and West Virginia, you have a chance of getting a diminished-value payment. If you weren't at fault in the accident, you often can make a successful case against the insurance company of the driver who was at fault.

You may not owe sales tax on your replacement car.

Twenty-eight states require auto insurers to pay for the sales tax when you replace your totaled vehicle with a new or used car: Alaska, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Maryland, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Vermont, Washington, West Virginia and Wisconsin.

Tip: Make the request; don't expect the insurer to offer to pay upfront. Even in states that do not require sales-tax reimbursement, you should request it. Many auto insurers will not deny the request because the policy requires that they make you "whole," returning you to where you were before the accident at no cost to you. The tax will be calculated based on the pre-accident value of your car. If the insurance company values your car at $10,000, and you purchase a new car for $20,000, the tax will be calculated on $10,000.

Odds and ends

Hit by an uninsured motorist? Try to "stack." Stacking uninsured/underinsured motorist (UM/UIM) coverages means collecting from more than one auto-insurance policy that you hold. Most states forbid this practice, but 19 states allow it or don't address it.

Tip: Check the language of your policy to see if stacking is allowed.

There are two scenarios for stacking: First, if you have multiple cars on your policy with UM/UIM coverage on each, you can collect the limit of your UM/UIM coverage under as many vehicles as necessary to cover full payment for damages. Second, if you have more than one policy with UM/UIM coverage, even if they're from two different insurers, you can make a claim under each policy until all your damages are recovered.

You can wait to add your teenager to your policy until he or she is licensed.

You are not required to add your teenager to your policy just because he or she has reached driving age. In most cases, you can wait until he or she has a license -- or, if you're in a high-risk insurance pool, a permit.

Tip: Don't forget to tell your insurance company that you have a licensed teen. If you have to file a claim on his or her behalf, your insurance company is entitled to charge you back premiums from the date your teen received a license.

You must officially cancel your insurance policy when you switch insurers. Your policy most likely states that you can cancel your coverage at any time by notifying the company in writing of the date of termination. However, most people assume that if they decide to terminate the policy at the end of the coverage period, all they have to do is ignore the bill. The insurance companies don't see it that way. They will send you another bill for the next premium payment, and when you don't pay it, the company will cancel you for nonpayment. That goes on your credit record.

Tip: Call your insurance agent or the company and let him know you are canceling your policy. Give a specific date, or you may end up uninsured for a period of time. The company will send you a cancellation request. Most often, the form is already filled out and all it requires is your signature. Make sure you read it to check for errors.

You may have to prove to your former insurance company that you have new coverage. And if you've financed your car through a dealership, update the dealer on your new insurance information, because purchase contracts often require proof of coverage.

Find a great price on car insurance

Most companies won't refuse to add a teenager to the parents' policy," says Ron Sundermann, an independent agent in Cedar Rapids, Iowa. "But to get out of the business, some companies will simply quadruple the rates for teens if they're the principal user of the car.

An agent who knows the market can help find a better deal.

If you live in a rural area, you're probably better off with a local company. "Mass-market companies are not comfortable with the 'unknowns' of a rural area," explains Rick Blank, an independent agent at NFP Property & Casualty Services in White Plains, N.Y. "It's hard to get a company like that to say yes to you. There are little mutual companies in an area that have good prices, and they understand the market, which isn't as attractive to a mass marketer."

Tips to save car insurance

We all wish to make savings in our life. Cars included. Myriad insurance companies offer varying premium rates depending on their policy coverage. So it is important that you get the best Insurance package for your car.

These tips will help you how to manage your Car Insurance budget within limits.

Making Comparisons: The costs of at least three to six insurance companies will give you a fair idea of the costs involved with different policies. Seek the advise of colleagues, friends, relatives. Besides from costs involved, the track record of the companies matter a lot.

The standing, strength and financial position of the company need to be looked into. Request for higher deductibles - It's the amount one pays prior to making any claim for the accident. The complete coverage and collision is sold along with the deductibles. The more the deductibles the less the premium rate. By increasing the deductible say from $300 to $600 will invariable reduce the cost to 20 to 35 percent.

Old Cars - Drop Collision and Comprehensive Coverage - It is better to drop the collision and comprehensive coverage if the car is worth less than 10 times your premium in the current market. One way to reduce the cost is buying the auto coverage from the existing insurance and insurance coverage from existing carrier.

No to Double Health Coverage - Avoid health coverage with auto policy provided you have enough health insurance. This is one way of reducing costs.

A Good Credit Card Record - This has multiple benefits - helps to file claims if the credit score is less. A good credit score will also help in settling the accident with the help of the company.

Low Profile Car Discount - Fancy and trendy cars with high maintenance costs higher rate and attract thieves as well. A low budget, low profile car will help a lot with insurer discounts to boost.

Mileage Counts - More discounts can be obtained by driving less than the national average mileage recorded per year.

Avoid double health coverage- If you think that you have enough health insurance, and then avoid health coverage with your auto policy. This will help you to reduce the cost.

Maintain a good credit record- Insurers are using the credit history while determining the price of insurance. Statistically, the lower your credit score, the more you are likely to file claims. A person with a good credit score is more likely to settle the accident without the support of the company. Try to maintain a good credit record.

Discounts with low profile car- Cars that are expensive to repair or attractive to thieves will have a higher rate. Consider buying a low profile or average car as it your insurer might come up with discounts for such a car.

Low Mileage Pays - Obtain some discount on premiums by driving less than the national average mileage recorded per year.

All about Group Discount - It's all about a group taking insurance plan collectively. Be it an employer, business group or associations. Check for such plans.

Safety Discount - Discounts are also offered if the car is fitted with safety items like air bag, automatic seat belts, anti lock brakes. So make safety pay for you.