Auto Insurance

Understanding Auto Insurance

Auto insurance helps you recover financially from damage, injuries and expenses—including legal fees— related to an accident. It’s a contract between you and the insurance company in which you agree to pay a premium in return for the insurance company paying for losses outlined in your policy.

Types of Auto Insurance Coverage

Your car insurance coverage depends on the contract you choose and what you qualify for based on your driving history.

There can be many types of coverage on one policy, including:

• Liability: If you’re at fault in a car accident, liability coverage pays for repairs, medical costs for your passengers’ injuries, plus other expenses related to the accident. The maximum amount the policy will pay is called the liability limit, which is set when your open your policy. Anything more than your limit would come out of your pocket unless you have other insurance.
• Collision: If you hit another vehicle or an object like a guardrail or wall, your collision coverage would pay for repairs to your car after you pay a deductible—or up-front amount. (For instance, if you have a $500 deductible and your repairs cost $1,000, your collision coverage will pay $500 after you pay the first $500.)
• Comprehensive: If your car is damaged by something other than an accident, like hitting a deer or a tree falling on your car, a portion of the damage will be covered if you have comprehensive coverage. Like collision, comprehensive has a deductible.
• Medical Expenses: This coverage pays for injuries that you or any of your passengers suffer in an accident, regardless of whom is at fault. It also pays for injuries you or your family members sustain while riding in other people’s vehicles.
• Uninsured/Underinsured Motorist: This covers you if you have injuries and property damage in an accident and the driver at fault either doesn’t have insurance or doesn’t have enough insurance to cover your loss. It will also cover you when a hit-and-run driver flees the scene and you can’t file a claim against their insurance company.
• Roadside Assistance: This optional coverage can feel like a life-saver when you need a tow, help with a flat tire or dead battery.
• Rental Reimbursement: If your car is in the shop for a while and you need a vehicle, this has you covered.

Which States Require Auto Insurance?

All states but Virginia and New Hampshire require at least some insurance coverage. Failure to have insurance can mean a fine and/or time behind bars, as well as suspension or revocation of your driver’s license. In most states, the minimum required coverage is liability insurance, though some states require additional coverage, like collision and comprehensive.

Getting Dropped from Auto Insurance

Auto insurance is a contract which can be canceled by either you or the insurance company. You can drop the contract by changing to another company. An insurance company can drop you for the following reasons:

• You don’t pay your premiums
• You give fraudulent information on your application for coverage
• Your driver’s license is suspended or revoked for any reason

Denied Auto Insurance Claims

Your claim can be denied for things like:*

• Filing a fraudulent claim that exaggerates or fabricates an accident or loss
• Filing a claim under coverage you don’t have
• Filing a claim for a loss that is not included in your policy
• Making improvements to your car as a part of your repairs
• Filing a claim while your insurance is suspended

*These rules vary state-by-state.

Auto Insurance & Your Credit

Insurance companies check credit to help determine your insurability. A poor credit score can look like you’re in financial trouble, and an insurer could decide you’re too risky to insure. The insurance score that the insurance company pulls to determine your rate is called a “soft pull” and doesn’t affect your credit score.

Driving History

An insurance company could check your driving record when you are:

• Applying for a new policy
• Renewing an existing policy
• Adding a new driver
• Adding a vehicle

Your driving record helps the company determine how likely it is they’ll have to pay a claim for you. If you have a record that includes tickets, accidents or points on your license, you will probably be a higher risk for them. To compensate for that, the insurer might charge you a higher premium than someone with a clean driving record.

Rental Car Insurance Coverage

Say you’re at the rental car counter and the agent is strongly suggesting you get the special insurance coverage on your rental car — what should you do?

Most policies provide the same coverage for a rental car that you have for your personal vehicle, unless the rental is being used for business purposes. Check your policy before you go.

Does Car Insurance Cover Theft?

Theft is covered by comprehensive coverage, and there’s a little bit of work and waiting on your end before you’re compensated. First, you have to file a police report and wait while they try to find your car. If they don’t find it, that’s when you file a claim with your insurance company.

Unfortunately, insurance companies have an increased risk of fraudulent theft claims, so there’s more paperwork involved with these. But you’ll usually be compensated for the value of the vehicle up to the limit of your comprehensive coverage.

Auto Insurance with a Suspended License

Most insurance companies won’t cover someone who has a suspended or revoked driver’s license. If you have no other way to get to work or school, talk your local DMV for a Hardship License, then work with your insurance agent to help you file an SR 22, which guarantees insurance coverage for a specified period of time.

HomeStreet Insurance Information Sharing

Insurance companies don’t share your personal information directly with each other, but when you make an insurance claim or look for new insurance, information about your claims history goes into a national loss-underwriting database, which can be accessed by insurance companies that are considering insuring you.

Keep in mind though, that because your driving record is on file with your state’s motor vehicle department, your information is public record — including tickets and accidents.