«AUTO INSURANCE INSURANCE ADMINISTRATION A CO N S U M E R G U I D E TO AU TO I N S U R A N C E TA B L E O F C O N T E N T S Introduction....... ...»
A CONSUMER GUIDE TO
A CO N S U M E R G U I D E TO AU TO I N S U R A N C E
TA B L E O F C O N T E N T S
Introduction.................................................... 1 How to Shop for Auto Insurance..................................... 1 What Factors Impact Rates?........................................ 6 What Discounts are Available?....................................... 8 Basic Overview of Coverage....................................... 10 What Other Coverages are Available?................................ 14 Additional or Supplemental Coverage................................ 15 Commonly Asked Questions....................................... 16 Policy and Coverage Issues..................................... 16 Premium Increases, Nonrenewals and Cancellations.................. 27 Claims Related Questions...................................... 36 How to File a Complaint.......................................... 44 Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CO N S U M E R G U I D E TO AU TO I N S U R A N C E
INTRODUCTIONThe Maryland Insurance Administration (MIA) is an independent state agency that regulates Maryland’s insurance marketplace and protects consumers by ensuring that insurers and insurance producers (agents and brokers) act in accordance with insurance laws. We produced this guide to help educate Maryland residents about auto insurance.
The Insurance Administration is also responsible for investigating and resolving complaints and questions concerning insurers that do business in Maryland.
H OW TO S H O P F O R
AU TO I N S U R A N C EComparison shopping is the key to getting the most for your insurance dollar.
Consumers think nothing of price shopping for televisions, computer tablets or appliances to save $20 or $30, but forget to shop around for auto insurance where hundreds of dollars can be saved. There are more than 150 auto insurers (or insurance companies) licensed in the state which offer policies, so there are plenty of places to shop.
Here are some basic tips to follow when shopping for insurance:
Before buying a car, determine your insurance costs. This is the first costsavings step in purchasing auto insurance. When you are shopping around Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CO N S U M E R G U I D E TO AU TO I N S U R A N C Efor a new or used car, be sure you factor in the cost of insurance as well. Highperformance vehicles are more expensive to insure.
Know what insurance coverage you are buying. Before you begin calling to request price quotes, you should familiarize yourself with the insurance coverage you are buying. It is important to know which coverages Maryland law requires you to purchase and those coverages that you may choose to purchase (Refer to other sections of this publication for more information).
Seek additional information. Many resources offer information about insurance.
In addition to referring to the Maryland Insurance Administration’s auto insurance rate guide, you may also seek information from consumer groups, consumer publications and the internet.
Check your Credit Report. Under Maryland law, insurers may not use your credit history to decide if they will insure you, cancel you, renew you or increase your premium. However, insurers may use your credit history to determine what rate you will be paying for your auto insurance. Not all insurers use credit history and you may obtain auto insurance through insurers that do not use credit. For those insurers that do use credit, they are required to tell you at the time you apply for the insurance that they will consider your credit history. If you ask, an insurer must tell you how much of your premium is as a result of your credit score.
Credit reports are used to determine the type of financial risk you present.
Reviewing your credit report will help inform you of your standing when you apply for certain credit and certain types of insurance, as well as allow you to correct any errors you identify. You are entitled to review your credit report at no charge once every 12 months. For questions or to make corrections to your credit report, you should contact the Federal Trade Commission, or any of these credit reporting agencies: TransUnion, Equifax, or Experian. The MIA’s web page, www.insurance.maryland.gov, under the tab For Consumers, has a link to enable you to access your credit report a well as your loss history report.
2 Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CO N S U M E R G U I D E TO AU TO I N S U R A N C EFor those insurers that use credit history to determine a portion of your premium, they are required to review your credit history every two years, or you can request the insurer to do so once during your policy term. The insurer may only give you the benefit of any improvement in your credit history; it cannot be used to increase your premium even if your credit deteriorates from what it was when you applied for your policy.
DO COMPARISON SHOPPING
• Contact several insurers or contact a producer*. Agents/agencies have contractual arrangements with insurers to sell insurance on behalf of the insurers. Brokers do not have such arrangements, but work with agents to locate or broker insurance on the consumer’s behalf. In either instance, your insurance policy is with the insurer itself and not the agent/agency or broker. Insurers, agents, agencies and brokers are listed in the Yellow Pages and advertise in newspapers.
* Under Maryland law, individuals and entities that sell, solicit or negotiate insurance contracts (insurance agents and brokers) are referred to as “producers.”
• Ask your relatives and friends for recommendations regarding purchasing auto insurance. In addition, some banks, employers and special interest groups offer insurance directly to their members.
• The internet also provides a variety of insurance information. Many insurers have web sites and/or work with non-affiliated quoting vendors to provide insurance premium quotes on-line.
Ask for price quotes. In order to make an apples-to-apples price comparison, you must provide the same information to each insurer or producer. The following information is normally requested: make/model/year of the vehicle you wish to insure, average annual miles driven, the region in which you live, the types of Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CO N S U M E R G U I D E TO AU TO I N S U R A N C Ecoverages and limits for those coverages that you wish to purchase and driving record (accidents or violations) of the vehicle operators. This information is required to provide you an accurate quote. (Refer to the Maryland Insurance Administration’s Auto Insurance Comparison Guide to Rates obtain information about sample rates.) Ask about deductibles. A deductible is the amount you agree to be responsible for in the event of damage to your vehicle (i.e. accident, fire or vandalism). If you select a high deductible, you will pay more money out-of-pocket for any damage;
however, your insurance premium should be lower.
Ask for discounts. Again, to help keep rates down, ask what discounts the insurer offers. Make sure you provide all information that may result in a discounted premium (e.g. security devices, safety devices, good driving record, good student, defensive driving courses, multi-vehicle or multi-policy discounts, etc.). (See pages 9-10 for additional information.) Protect yourself from insurance fraud. Once you have selected an insurer, contact the Maryland Insurance Administration to verify that the insurer is licensed to sell insurance in Maryland. It is illegal for unlicensed insurers to sell insurance.
If you choose to use a producer, also verify that the producer is licensed.
Financing Insurance. Not everyone can afford to pay their insurance premiums upfront; therefore, many insurers offer installment plans. In addition, your premium may be financed by a premium finance company in exchange for your agreement to pay interest and service fees.
Whether you choose an installment plan or a premium finance company, ask the
following questions before buying the policy:
• How many months will payments be made (i.e. six or 12 months)?
• How much is the total payment over the period of the policy?
• Is a premium finance company financing the payment?
• What is the interest rate on the premium payments (if the payments are financed)?
• What other costs or fees are associated with financing the premium?
• Does the insurer offer an installment plan? Is there an installment charge or service fee?
Other considerations. Price is an important factor in selecting an auto insurer;
however, other factors also deserve consideration. Some consumers prefer to deal with a producer that has an office in the same community or with an insurer that has a claims office nearby. Customer service is another important consideration.
Also, you may want to know how long the insurer or producer has been operating in Maryland, how quickly claims are processed and how often complaints were filed against the insurer or producer. Some of this information may be obtained directly from the insurer or producer. You may also contact the Maryland Insurance Administration in writing to obtain some complaint information. Additionally, closed complaint information is available on the National Association of Insurance Commissioner’s (NAIC) Consumer Information Source which can be accessed on the NAIC’s website at www.naic.org/index_consumer.htm.
Maryland Insurance Administration • 800-492-6116 • www.insurance.maryland.gov
A CO N S U M E R G U I D E TO AU TO I N S U R A N C E
W H AT FA C TO R S
I M PA C T R AT E S ?When you apply for auto insurance, the insurer will ask for information about you to evaluate your individual risk characteristics. These individual risk characteristics assist insurers in predicting the likelihood that you will be in an auto accident in the future or will file a claim for damages. Insurers evaluate these characteristics to determine whether their guidelines, known as underwriting guidelines, permit them to write a policy for you.
If the insurer’s underwriting guidelines permit a policy to be written for you, the insurer will then assign a rate based on your individual risk characteristics. Some
risk characteristics that insurers rely on to determine rates include:
Your driving record. Insurers are prohibited from increasing your rate based on accidents or traffic violations that are more than three years old. Insurers may consider traffic accidents and traffic violations that have occurred in the past three years in determining your risk. If your driving record is less than perfect, then you will be considered a higher risk and will pay a higher premium.
Geographic area. The number of claims filed by policyholders in your geographic area affects the rates charged by insurers. Counties or zip codes are commonly used geographic areas.
Gender and age. Males and young adults have a higher incidence of accidents;
therefore, your gender and age will impact your rate. Rates generally decrease at age 25 and may increase as you approach age 50 or 55.
Marital Status. Married individuals have a lower incidence of accidents and claims. Therefore, married individuals generally pay lower premiums than single people.
Prior insurance coverage. Most insurers ask about your insurance history, including whether or not you currently have coverage or whether or not you have ever been cancelled or nonrenewed. Some insurers require individuals to pay higher premiums if there has been any lapse in insurance coverage. However, insurers are prohibited by law from denying insurance because an applicant was previously insured by the Maryland Automobile Insurance Fund.
Annual mileage. Insurers will also calculate your premium based on the average distance you drive on an annual basis. If your annual mileage is high, then insurers will consider you a greater risk and will charge you a higher premium.
Age, make and model of vehicle. Premiums are also based on your vehicle’s age, make, model and value. Certain makes and models of vehicles – when involved in accidents – cause or permit greater levels of bodily injury, sustain greater levels of damage, and are more difficult and costly to repair. Insurers charge a higher premium to insure those makes and models.
Credit history. Some insurers review an individual’s credit history when determining that person’s premium. For instance, bankruptcies, late payments, and the number of credit cards you have may result in a higher premium. Insurers must follow specific laws when using a consumer’s credit history to underwrite or rate an auto insurance policy.
Those laws state that an insurer may not:
• increase a renewal premium based on the credit history of the insured;