Auto Insurance: Unraveling The Mystery Of Policy Pricing

Auto insurance companies offer a range of coverage options, from liability insurance to comprehensive and collision insurance, as well as additional coverage for specific needs such as rental cars, sports cars, and electric vehicles. When choosing an auto insurance company, it is important to consider factors such as financial strength, customer complaints, ease of use, and affordability. While the specific coverage and rates will vary depending on personal circumstances, it is recommended to shop around and compare quotes from multiple insurers to find the best fit for your needs and budget.

Discounts and savings

Policy Discounts

Policy discounts include bundling or multi-policy discounts, which are often one of the biggest money-saving options. You can typically get a discount of 5% to 25% when you bundle your auto insurance with other policies such as home, renters, condo, boat, motorcycle, or life insurance. For example, State Farm offers an average bundling discount of 23%, while American Family and Farmers offer an average of 18%. If you insure more than one car with the same company, you can usually get a multi-car discount of up to 8% to 25%.

Driver Behaviour Discounts

Driver behaviour discounts reward safe driving habits and a clean driving record. Good driver discounts are often defined as going a specified period, such as three years or five years, without accidents, citations, or moving violations. GEICO, for instance, offers a discount of up to 22% for customers who have been accident-free for five years. Progressive's Snapshot® program personalizes your rate based on your actual driving, with an average savings of $231. Some companies also offer discounts for customers who complete a defensive driving course.

Driver Characteristic Discounts

Driver characteristic discounts include student discounts for high school or college students who maintain a certain grade point average (usually a B or higher). Good student discounts can range from 8% to 25% depending on the company. Distant student discounts are also available for full-time students who live away from home and don't have regular access to a vehicle. Military and veteran discounts are offered by many companies, such as GEICO, which provides up to a 15% discount for active-duty military, retired military, or members of the National Guard or Reserves.

Vehicle-Based Discounts

Vehicle-based discounts include safety equipment discounts for features like anti-lock brakes, airbags, and daytime running lights. Airbag discounts can be substantial, with up to 40% off your medical payments or personal injury protection coverage. Anti-theft device discounts can provide up to 5% to 25% off your comprehensive coverage. New vehicle discounts are also common, with discounts of 10% to 15% for cars less than three years old.

Other discounts to look out for include paperless/electronic billing discounts, automatic payment discounts, loyalty/renewal discounts, and occupational/group membership discounts.

Required and additional coverages

Auto insurance provides financial protection for you, your family, other passengers, and your vehicle. There are several types of coverage, including liability coverages, vehicle coverages, coverages for yourself, and other optional coverages.

Required Coverages

Nearly every state requires car owners to carry auto liability coverage. This includes bodily injury liability and property damage liability.

Bodily Injury Liability

This covers costs associated with injuries and death caused by you or another driver operating your car. It also covers medical expenses and funeral expenses for you and your passengers.

Property Damage Liability

This coverage reimburses others for damage that you or another driver operating your car causes to another vehicle or other property, such as a fence, building, or utility pole.

Additional Coverages

Medical Payments or Personal Injury Protection (PIP)

This coverage is frequently required by many states. It provides reimbursement for medical expenses for injuries to you or your passengers, as well as lost wages and other related expenses.

Uninsured Motorist Coverage

This coverage reimburses you when an accident is caused by an uninsured motorist or in the case of a hit-and-run. You can also purchase underinsured motorist coverage, which will cover costs when another driver lacks adequate coverage to pay for a serious accident.

Collision Coverage

This optional coverage reimburses you for damage to your car that occurs as a result of a collision with another vehicle or object, such as a tree or telephone pole. Collision coverage does not reimburse you for mechanical failure or normal wear and tear but will cover damage from potholes or rolling your car.

Comprehensive Coverage

This optional coverage protects your vehicle from events beyond your control, including fire, theft, vandalism, flood, hail, falling rocks or trees, and other hazards. It also covers windshield damage.

Glass Coverage

Some auto policies include no-deductible glass coverage for windshields, side windows, rear windows, and glass sunroofs. Supplemental glass coverage can also be purchased.

Gap Insurance

If you lease or finance your vehicle, auto dealers or lenders will likely require you to purchase collision and comprehensive coverage. However, these coverages only cover the market value of your car, not what you paid for it. Gap insurance can be purchased to cover the difference if your car is totaled or stolen.

Customer satisfaction

Auto insurance companies are increasingly focusing on customer satisfaction, and this has become more important to consumers. Customer satisfaction is determined by a company's ability to meet customer expectations, and this is measured through customer satisfaction surveys and rating schemes.

One of the most well-known and reputable rating companies is J.D. Power, which has been examining customer satisfaction in the auto insurance industry for 23 years. They rank auto insurers through the following five factors:

• Billing process and policy information
• Overall customer service
• Claims handling
• Communication
• Customer loyalty and recommendations

According to J.D. Power's 2022 Auto Insurance Satisfaction Study, the top-rated auto insurance companies for customer satisfaction are:

• Wawanesa (California)
• The Hartford (Northwest and Florida)
• Erie Insurance (Mid-Atlantic and North Central)
• Amica Mutual (New England)
• Farm Bureau Insurance (Southeast)
• State Farm (Southwest)

Other companies that have been recognised for their high customer satisfaction ratings include:

• Auto-Owners Insurance
• NJM Insurance
• MetLife
• Nationwide
• Farmers
• USAA
• GEICO
• Progressive
• Allstate
• American Family
• Erie Insurance

While price is a top concern for auto insurance consumers, customer satisfaction is also a critical factor. Companies with high customer satisfaction ratings tend to have efficient and responsive customer service representatives, quick claims handling, and competitive rates. They also offer a variety of policy options, discounts, and add-ons to meet the diverse needs of their customers.

Accident forgiveness

Some insurance companies offer accident forgiveness as a reward for loyal customers with clean driving records. For example, Liberty Mutual offers accident forgiveness to customers with five years of accident-free driving, and GEICO offers it as a reward for reaching a milestone anniversary with the company and maintaining a clean driving record. Other companies, like Progressive, offer accident forgiveness as part of a tiered loyalty program, with benefits increasing the longer a customer stays with the company.

For drivers who do not qualify for accident forgiveness as a reward, it can often be purchased as an add-on to an existing policy. This option is available from companies like Progressive, Nationwide, and GEICO. However, it is important to note that accident forgiveness may not be available in all states, and eligibility requirements can vary by insurer. For example, drivers under 21 may not be eligible for free accident forgiveness, and some states, like California, do not offer accident forgiveness at all.

Claims

When an accident occurs, it is important to promptly report it to both the insurance company and the local police department. If the damage exceeds a certain threshold or if anyone is injured, filing an accident report with the Department of Motor Vehicles is necessary. Policyholders should also familiarise themselves with the specific reporting requirements outlined in their insurance policy to ensure compliance and facilitate the smooth handling of their claim.

There are different types of claims that insurance companies handle, including property damage claims and bodily injury claims. Property damage claims involve repairs or replacement of the insured vehicle, while bodily injury claims cover medical expenses and other costs associated with injuries sustained in an accident.

Once a claim is filed, the insurance company will initiate an evaluation process to determine its validity and the amount of compensation to be paid. They will assess the details of the accident, review any provided evidence, and may even conduct their own investigation if needed. This evaluation process can take time as the insurer needs to gather all relevant information to make an informed decision.

During the evaluation, the insurance company will consider factors such as the severity of the damage or injuries, policy limits, and applicable deductibles. They may use computer software or employ adjusters to inspect the damage and negotiate with the claimant.

After a claim is approved, the insurance company will determine the payment method, which can vary depending on the company and the nature of the claim. They may issue a check directly to the policyholder or opt for direct payment to a repair shop or medical provider.

It is important to understand the factors that can influence claim payouts, such as the severity of damages or injuries, policy limits, deductibles, and fault. By being aware of these factors, policyholders can manage their expectations and ensure their financial interests are protected.

Various auto insurance companies have been recognised for their efficient handling of claims, including USAA, Auto-Owners, State Farm, Geico, NJM, Amica, Nationwide, Erie, Progressive, and Westfield. These companies have been praised for their low levels of complaints, competitive rates, and efficient claims processes.

Frequently asked questions