10 Things You Should Know About Buying Auto Insurance

1. How is Your Insurance Rate Determined?
Two factors determine what you pay for auto insurance. The first factor is underwriting and the second factor is rating. Insurance companies underwrite to assess the risk associated with an applicant, group the applicant with other similar risks and decide if the company will accept the application. Based on the results of the underwriting process, the rating assigns a price based on what the insurer believes it will cost to assume the financial responsibility for the applicant's potential claim.

2. Several Factors Will Affect Risk Rating
Your driving record, area in which you live, gender and age, marital status, prior insurance coverage, vehicle use and make and model of your vehicle are common factors that can affect the price you will pay for your auto insurance.

3. Ask Your Agent About Discounts
Discounts are awarded because the insurance company sees you as a "better risk." Here are some discounts you should look for: multiple vehicles, driver education courses, good student, safety devices, anti-theft devices, low mileage, good driver/renewal, auto/home package and dividends. Not all discounts are offered by every insurer, so check with your agent to see if you qualify.

4. Tort System vs. No-Fault System
The three basic coverages sold under the tort system are bodily injury liability insurance, property damage liability insurance and uninsured motorists coverage.

5. Check Into Optional Coverage
The most commonly recognized coverages, in addition to the basic liability package, are collision and comprehensive coverages. Collision coverage pays for physical damage to your car as a result of your auto colliding with an object such as a tree or another car. This is relatively expensive coverage and is not required by law. Comprehensive coverage pays for damage to your auto from almost all other causes, including fire, severe weather, vandalism, floods and theft. This coverage will also cover broken glass and windshield damage. Comprehensive coverage is less expensive than collision, but is also optional. Other optional coverages include medical payments coverage, rental reimbursement coverage and towing and labor coverage.

6. Where to Go for More Information
Information is available to consumers from a number of unbiased sources. These sources include public libraries, state insurance departments, online resources, consumer groups and consumer publications. The Iowa Insurance Division has personnel available to answer questions regarding auto insurance coverage.

7. Shop Around Before You Buy
When shopping for auto insurance, premium quotations are a useful tool for comparison of different companies' products. When asking for price quotations, it is crucial that you provide the same information to each agent or company. The agent will usually request the following information: description of your vehicle, its use, your driver's license number, the number of drivers in your household, the coverages and limits you want.

8. Where to Shop
Check the newspaper and yellow pages of the telephone directory for companies and agents in your area. In addition, ask your neighbors, relatives and friends for recommendations on insurance companies and agents. In particular, ask them what kind of claim service they have received from the companies they recommend. Remember to shop around to get the best price and service.

9. For Your Protection
Once you have selected the insurance coverages you need and an insurance agent or company, there are steps you can take to make certain you get your money's worth. Before signing an application for any insurance coverage, call Iowa Insurance Division and verify that the company and the agent are licensed to do business in your state. It is illegal for unlicensed insurers to sell insurance, and if you buy from an unlicensed insurer, you have no guarantee that the coverage you pay for will ever be honored.

10. Read Your Policy Carefully
You should be aware that an auto insurance policy is a legal contract. It is written so your rights and responsibilities, as well as those of the insurance company, are clearly stated. When you purchase auto insurance, you will receive a policy. You should read that policy and make certain you understand its contents. If you have questions about your insurance policy, contact your insurance agent for clarification. If you still have questions, contact the Iowa Insurance Division for additional assistance.

Source: National Association of Insurance Commissioners, May 2008