Auto Insurance: An Interview with the Insurance Information Institute

Each year, the I.I.I. works on more than 3,700 news stories, handles more than 6,000 requests for information and answers nearly 50,000 questions from consumers.

In addition to direct contact with the media, individuals and organizations, the I.I.I. publishes a host of helpful pamphlets and books ranging in subjects from 9 Ways to Lower Your Auto Insurance Costs to the I.I.I. Fact Book.

Recently, the Vice President of I.I.I., Carolyn Gorman, took time to answer a few questions about shopping for car insurance.

How can someone determine how much auto coverage they really need?

Almost every state requires you to buy a minimum amount of liability coverage. Chances are that you will need more liability insurance than the state requires because accidents cost more than the minimum limits. If you’re found legally responsible for bills that are more than your insurance covers, you will have to pay the difference out of your own pocket. These costs could wipe you out!

The Insurance Information Institute (I.I.I.) recommends that you have $100,000 of bodily injury protection per person and $300,000 per accident. If your net worth is more than $300,000, consider buying additional liability insurance. You may also consider purchasing an umbrella or excess liability policy. These policies pay when your underlying coverages are exhausted. Typically, these policies cost between $200 and $300 per year for a million dollars in coverage. If you have your homeowners and auto insurance with the same company, check out the cost of coverage with this company first. If you have coverage with different companies, it may be easier to buy it from your auto insurance company.

In addition to liability coverage, consider buying collision and comprehensive coverage. You don't decide how much to buy. Your coverage reflects the market value of your car and the cost of repairing it.

What is the difference between comprehensive insurance and collision insurance? Should drivers have both?

Collision coverage pays to fix or replace your car if you have been in a collision with another car or object or from flipping overt. Comprehensive will cover you for damages to your car that result from something other than a collision with another car, such as severe weather, theft, fire, falling objects, vandalism, deer/bird.

Is there a good rule of thumb when it comes to setting a deductible?

Choose the highest deductible that you can afford. The higher the deductible, the lower your premium will be.

With so many auto insurance companies to choose from, how can consumers decide which company to contact for a quote?

Speak to your friends and neighbors, then get a quote from 3 or 4 companies. Select a company that will provide you with the coverage you need, as well as the service you expect. Don't go by price alone,

When shopping, how many quotes should a consumer obtain?

Usually 3-4.

Is it better to get auto quotes online or from a local agent?

An online quote is fast and easy and will give you an idea of how much you should expect to pay. However, you probably will not get much of an education on insurance, and may end up with inadequate coverage. If you are a sophisticated shopper, and already have a good grounding in insurance, online is a good choice as it generally costs less because you are not paying an agents commission. An agent, on the other hand, will do the legwork for you and will be able to help you understand the coverage you are buying, which is important, because our research shows that people generally do not understand the coverages they need, or the terminology in the policies.

What personal information will need to be provided to obtain a quote?

Your age, gender, where you live and work, the number of miles you drive, who will be driving the car, such as teenagers, the type of car you drive. Your driving record and credit history will also factor into your premium.

Does credit history affect auto insurance premiums?

Yes. There is a strong correlation between how well a person manages his money and the likelihood of filing a claim in the future. Most people manage their money well, and it is reflected in their premiums. In addition, good money managers do not end up subsidizing those that don't manage their money well, and hence file more claims.

Is there any way consumers can save on their car insurance premiums?

Get quotes from different types of insurance companies. Some sell through their own agents. These agencies have the same name as the insurance company. Some sell through independent agents who offer policies from several insurance companies. Other companies sell directly to consumers over the phone or via the Internet. But don't shop by price alone. You want a company that answers your questions and handles claims fairly and efficiently. Ask friends and relatives for their recommendations, and contact your state insurance department to find out whether they make available consumer complaint ratios by company.

You can also seek out safe driver discounts. Many companies offer discounts to policyholders who have not had any accidents or moving violations for a number of years. You may also qualify for a cut if you have recently taken a defensive driving course.

If a claim is made on auto insurance, should consumers worry that their rate will increase?

It depends on the claim. If it is the result of reckless or drunk driving, absolutely! Filing many small claims will also raise your rates. Infrequent claims, usually will not increase your premiums.

How often should policyholders obtain new auto insurance quotes?

People with file few claims, and have a clean driving record, can usually get a better rate if they shop around every 3 or 4 years.