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Post-wreck car insurance
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August 25, 1998: 9:59 a.m. ET
Is there anything you can do to keep your premiums from skyrocketing?
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NEW YORK (CNNfn) - About 35 million auto accidents happen each year, and if you're in one of them, you might think your chances of having low insurance payments are gone forever.
Unfortunately, that's usually true.
After a car crash, especially if it's your fault, your chances of qualifying for any "good driver" discounts your insurance company offers are slim. But there are a handful of things you can do to make sure your future insurance premiums are as small as possible.
First, at the scene of the accident, call the police and get the names, addresses and phone numbers of everyone involved, including the phone numbers of their insurance companies. Once that's done, it's usually best to keep your mouth shut. Among the things to be particularly careful about:
- Don't make any oral or written statements as to responsibility or blame.
- Don't tell anybody how much liability insurance you carry.
- Don't discuss the specifics of the accident with others involved.
- Don't pay for anything on the spot, because you may be held liable for the same damages later.
"While you're panicked after a crash, you're more likely to say or do something that will hurt you financially," says Robert Saperstein, author of "Surviving an Auto Accident : A Guide to Your Physical, Emotional and Economic Recovery." "It's better to not say a word, get all necessary information, and then go home and call your insurance company."
When you call your insurance agent, he will help you complete a claim form, determine what exactly happened and evaluate any damages or injuries. Your agent then will contact your insurer's claims adjuster -- usually within an hour of your report -- whose job is to work with you to fix the problem.
Although compensating you for auto repairs or medical expenses could be easy and immediate, determining liability is more complicated. The adjuster will begin the settlement process, the length of which will depend on the how well the other party cooperates.
The amount of compensation for your loss can vary according to the adjuster's analysis of the damage.
"The key is to remember that you don't have to accept the first figure you're offered, especially if it is lower than the cost of your repair or recovery," Saperstein says. You may have to do some homework to prove your reported loss is valid, such as getting estimates from car repair shops, but it's worth it to be certain your insurer lives up to the provisions of your policy.
Keep in mind that negotiating with an adjuster is just business. Insurers are on the lookout for possible fraud and, unfortunately, consumers end up paying the price for it. In fact, of every dollar you spend on premium payments, nearly a dime goes to cover false claims by others.
Paying the damages yourself
Insurance company policies vary widely. Some of them may raise your premiums after a claim even if the accident was not your fault. But many of them will give you a break if the accident was caused entirely by another party.
If you have this latter kind of insurer, and you were cited for the accident, it's probably a good idea to show up in court to plead your case. Often the police officers or other parties involved won't show up, and the case will be thrown out -- in which case, you get lucky. And depending upon how serious the accident was, you may also want to hire a lawyer to represent you.
Although auto accidents are expensive, many car owners don't depend on their insurance companies to pay for the damage, because they're so afraid of their premiums skyrocketing.
In fact, according to a May survey by the Independent Insurance Agents of America, nearly one in five car owners have paid out of their own pocket for damage to their car or someone else's car due to an accident, rather than file a claim.
Of these, a third said they did it because they were afraid premiums would go up. Another third said they did so because the claim would have been too small. Only about 6 percent of respondents to the survey reported that their insurance company had ever dropped or refused to renew their auto insurance policy.
"There's no magic formula that will tell you whether you should file the claim or not," said Ron Sundermann, insurance agent with Skogman-Ralston-Carlson Insurance in Cedar Rapids, Iowa. "Consider discussing with your insurance company how much your payments will increase, if they will at all, and balance that against how much you'll have to pay out of pocket for your accident. There's no hard and fast rule."
Prepare for next time
If you decide your insurance premiums are going to be too high with your current insurer after an accident, this may not be a bad time to shop around for a new policy.
While looking around, you may be able to lower your premiums by taking advantage of certain discounts. Consider the following advice from the Insurance Information Institute:
Comparison shop. Prices for the same coverage can vary by hundreds of dollars, so it pays to shop around.
Ask for higher deductibles. A deductible is the amount you pay for a covered loss before the insurance company begins picking up the bill. By requesting higher deductibles on collision and comprehensive coverage, you can lower your premium costs substantially. For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive cost by 15% to 30%.
Drop collision and/or comprehensive coverages on older cars. No insurance policy will pay more on a claim than your car is worth. It may not be cost effective to buy collision or comprehensive coverages on cars worth less than $1,000 because your claim payment wouldn't be much more than your annual premium and deductible. Auto dealers and banks can tell you the market value of your car.
Buy a low profile car. Before you buy a new or used car, check what it would cost to insure. Cars that are expensive to repair, or that are favorite targets for thieves, have much higher insurance costs.
Take advantage of low mileage discounts. Some companies offer discounts to motorists who drive fewer than a predetermined number of miles a year.
Find out about automatic seat belt or air bag discounts. You may be able to take advantage of discounts on some coverages if your car has automatic seat belts and/or air bags.
Ask about anti-lock brakes. Anti-lock brakes improve steering control and stability when a car is brought to a stop, thus reducing accidents. Some states, including Florida, New Jersey and New York, require insurance companies to give discounts for cars equipped with these brakes. Other insurance companies provide this discount nationwide.
Inquire about other discounts. Insurance companies offer discounts for things you might not be aware of. Discounts for having more than one car, drivers over 50 years of age, driver training courses, anti-theft devices, and good grades for students are all examples of ways your insurance costs can be reduced by inquiring.
"Unfortunately very few other incentives will cancel out the damage that an accident can do to your premiums," Saperstein said. "You can choose to play a little hardball with the insurer, but you may just have to shop around to find a better deal somewhere else."
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