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Independent Insurance Agents of South Dakota
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Thursday, 04/24/2014email print

Consumer Information
Don't let insurance
rates DRIVE you crazy!!
Tips on auto insurance

With more than 150 million drivers and 160 million registered vehicles on the road today, auto insurance is the most widely purchased of all property-liability insurance.  Drivers buy auto insurance for economic protection against theft, vandalism, and other risks, but few are familiar with the ins and outs of their particular policy.  The following addresses the most common questions about auto insurance.  If they don't try looking here. 


 Who needs auto insurance?

In most states insurance is a prerequisite to registering your car.  So if you want to drive your own vehicle, you must be insured.

 What are the different types of policies and what do they cover?

Auto insurance is divided into several different types of coverage:

Liability covers damage to other people's property and injuries you may cause while operating an automobile.

Collision covers damage to your own vehicle in an accident.

Other-than-Collision covers fire damage to your vehicle, break-ins, vandalism or theft, as well as natural disasters (earthquake, hail, hurricane, flood, etc. - unless the vehicle is overturned, then it is considered a collision).

Medical payments insurance guarantees emergency and related medical payments, usually in the range of $5,000 to $10,000, for you, your passengers and other parties, regardless of who is at fault. It also covers you and members of your household in any accident involving an automobile, whether you are on foot, in a friend's car, riding a bicycle, etc.

Uninsured motorist (UM) and underinsured motorist (UIM) coverage protects you and your passengers if injured in an accident with drivers carrying insufficient liability coverage.

Extra coverages include expenses for towing, labor, temporary replacement vehicles, etc. These are generally defined as add-ons or endorsements to your policy.

Your agent can offer you more information on the limits and types of coverage that will best suit your situation.

 Should I look into auto insurance before I buy my first car? 

Yes.  Factors such as safety and frequency of theft of specific makes and models can play an important role in determining your insurance rate. Some cars are safer than others to drive and some are less apt to be stolen. Choosing one of these will help lower your insurance rate. Your insurance agent can help you estimate your insurance needs and premiums.

 Why and how are policies priced for different drivers? 

For various reasons, drivers are categorized by:

  1. Sex -- Men have more accidents on the road than women.
  2. Age -- Drivers under 25 (and, for some insurers, under 30) are considered at higher risk of having an accident.
  3. Marital Status -- Married drivers tend to have fewer accidents than single drivers.
  4. Personal Driving Record -- Years of driving experience, accidents, speeding tickets and drunk-driving offenses are all factors in determining how much of a risk you pose as a motorist.
  5. How You Use Your Vehicle -- If you commute by car during rush hours, you're at greater risk of having an accident than if you only drive for errands and recreation on the weekends.  Drivers who use their own vehicles for business also are considered to be at a greater risk.
  6. Type of Vehicle -- The value, size, weight, age of your vehicle--even the cost of replacement parts--are essential to determining the price of your insurance.  Larger, heavier vehicles are considered at lower risk than smaller, lighter ones.  Plus, more expensive cars are costlier to have repaired than economy models.
  7. Other factors affecting regional insurance rates include time and efficiency of police response and law enforcement, local road and traffic conditions and the quality of local medical services.  Insurers even factor in the litigation rates in a given area--that is, how many lawsuits are filed, go to trial, are settled out of court and for how much.

 Why are rates different for different cars, even if the cars cost the same?

Vehicles are also grouped into categories according to their liklihood of being damaged, vandalized or stolen.  Insurers generally consider the size and type of vehicle (to evaluate the safety of the vehicle), as well as the value and the cost of repairs (which can vary greatly, even on vehicles that cost roughly the same).  Thus, a new station wagon is expected to hold up better in an accident than a sports car or a subcompact.

That's why you should research insurance coverage before you buy your car.  It helps you to understand the actual cost and indicates those vehicles with good safety records. 

 How does where I live affect my premium? 

Where you live (or,  more precisely, where you keep your car) has a bearing on your chances of having an accident or becoming a victim of theft or vandalism.  That's why a vehicle owner in Brooklyn, New York, pays a higher rate than the owner of an identical vehicle in Casper, Wyoming.

 What steps can I take to reduce my rates?

Insurers often discount their rates in order to encourage good driving practices and the use of safety and security precautions.  Insurers generally offer discounts for:

  • Safety features -- Anti-lock brakes, air bags and passive restraint systems (i.e.,;automatic seat belts).
  • Defensive Driving -- Clean violation record, driver's-ed courses for teenagers and defensive driving or accident prevention courses for adults (insurance discounts for the latter are required in some states).
  • Security Systems -- Alarms, electronic locks and disabling devices.
  • Changing Driving Habits -- Commuting by public transit, using a company vehicle for work-related travel and car-pooling.
  • Formal Agreements Not to Drink and Drive -- The availability of a discount for signing such an agreement varies among insurance companies and states.
  • Buying Homeowners and Auto Policies from the Same Company -- If you own a home and an automobile and you are insured by two different companies, check into the cost of carrying both policies by one insurer.

  • Increasing Deductibles -- Requesting higher deductibles, the amount of money you pay before you make a claim, will bring your rates down.

 Why would my insurer cancel my policy?

Technically, in most states your insurer can cancel your policy only if:

  • you fail to pay your premium;
  • you lose your driver's license;
  • you are guilty of material misrepresentation during the application process--i.e., you fail to notify your insurer of a recorded violation, such as drunk-driving offense; or
  • you fail to report a substantial change of risk, such as buying a high-powered sports car to replace a family sedan. 

However, your insurer can choose not to renew your policy for a variety of reasons. 

 Tips on how to save money on premiums

  • Choose a higher deductible on collision and comprehensive coverage.
  • Remove collision and/or comprehensive coverage on older cars.
  • Eliminate any overlaps in personal injury protection (PIP) coverage between your accident insurance and your health insurance.

  • Enroll in a car pool or take advantage of public transit.
  • Don't drive unnecessarily, since rates are determined in part on the amount and type of driving.
  • Shop for a car that is reasonably priced with good performance records and safety features like airbags, seat belts and anti-lock brakes.

  • Drive defensively. Tickets and at-fault accidents can increase your rates for up to three years.
  • Beware of geographic rate differentials. Living in less urban areas reduces rates.
  • Take a defensive driving course. Many insurance companies offer discounts to drivers who get a B or better.

  • Contact your local independent insurance agent, who can shop around for you and explain exactly what is covered by different policies.


Additional Coverages: Extra coverage that can be purchased to provide protection above and beyond that provided in the original or standard policy (e.g., purchasing a higher amount of coverage against the theft of jewelry). When such additional coverage is purchased, it becomes an Endorsement or Rider to the original policy.


 Do I always need to buy insurance when I rent a car?  Am I not covered by my own  policy?

If you have fully insured your own vehicle, including collision and comprehensive coverage, and rent a vehicle for pleasure only (while on vacation, for example), you may not need to buy extra insurance from the rental company.  In most states, your basic rental fee by law will include liability coverage for damage or injury to others.  But different rules apply when you rent a car for business purposes, so check with your agent for details.  Also chekc with your credit card company. Many credit cards provide additional protection if the card is used to rent a car.

  I don't have my own insurance, can I still rent a car?

If you do not have your own insurance, be aware that many car rental liability policies cover you only at the state's required minimum.  Also, you should buy the collision and comprehensive coverage offered by the rental company for your own protection.

  Is a collision damage waiver (CDW) insurance?

No.   A CDW simply releases you from financial responsibility if you damage the vehicle you are renting, provided you comply with the terms of the rental contract.  But those terms can vary considerably, and CDWs are not state-regulated, which means they are technically not insurance. 

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Independent Insurance Agents of South Dakota (IIASD)

Mailing address: 305 Island Drive Fort Pierre SD 57532
jdiamond@iiasd.org 
Tel. (605) 224-6234
Fax: (605) 224-6235
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