Auto Insurance FAQ

Auto Insurance FAQ that Will Save You Money

Here are the auto insurance FAQ (frequently asked questions) that I receive the most.

What are car financial responsibility laws?

These are the laws in your state that require you to prove you are financially capable to shoulder whatever responsibility that may arise while driving your car.

What happens if I choose not to purchase car insurance and still drive my car?

It differs from state to state.  Except for New Hampshire and Wisconsin where car insurance is optional, every state requires all drivers to be insured.  If you refuse, you may face substantial penalties that may include fines, revocation of your driver’s license, and even serving a sentence in jail.

Is anyone who drives my car covered?

The answer to this question is yes, provided the one who drives the car has the insured person’s consent to drive the car.  The insured person is the one named on the insurance policy, sometimes including his or her spouse.

In this regard, you will have to see to it that you understand your own insurance policy.  For instance, you may need to have everyone living in your household who has a driver’s license listed on the insurance policy.  If a driver from your household is not listed, he/she will not be covered.

What are the best liability policy limits?

Insurance agents generally agree that the minimum policy required by all states is insufficient.  They propose the ratio of 100:300:100 for the average driver.  This can be illustrated as follows:

  • $100,000 per person for bodily injury
  • $300,000 per accident for bodily injury
  • $100,000 per accident for property damage

In most states, the cost of medical treatment is comparable so these guidelines apply across the board.

However, you may need to take into consideration the policy limit on property damage if you are not an average driver.  If you live in an area with exceptionally high real estate prices, you may want to consider higher limits.  Keep in mind that if you are at fault, coverage for property damage refers to the other car and any other real or personal property that may have been damaged in the accident.

My teenager just got his license.  Does he need to be insured?

Yes, in most situations.  Remember that every person in your household who has a driver’s license must be listed on your insurance policy, unless of course they have their own auto insurance policy.  So if your teenager has just received his own driver’s license, or you have a son or daughter who is a college student and uses your address as his or her permanent place of residence, you should have their names listed on your auto insurance policy.

What considerations are involved when an insurance company decides whether to cancel or not renew a policy?

Insurance companies assess risks relevant to each policyholder and then decide if the policy holder is a “worthwhile risk” or if his policy should be canceled.  This means your claims, driving, and credit history in addition to other factors. Insurance companies will view you in a favorable light if you don’t have a record of filing frequent claims and have clean driving and credit histories.