Maryland Auto Insurance Regulations
A Consumer Guide to
Auto
insurAnce
INSURANCE
ADMINISTRATION
Table of Contents
Introduction · · · · · · · · · · · · · · · · · · · · · · 1
How ·to ·Shop ·for ·Auto ·Insurance · · · · · · · · · · · · · 1
What ·Factors ·Impact ·Rates? · · · · · · · · · · · · · · · 4
What ·Discounts ·are ·Available? · · · · · · · · · · · · · · 6
Basic ·Overview ·of ·Coverage · · · · · · · · · · · · · · · 7
What ·Other ·Coverages ·are ·Available? · · · · · · · · · · · 9
Additional ·or ·Supplemental ·Coverage · · · · · · · · · · 10
Answers ·to ·Commonly ·Asked ·Questions · · · · · · · · 11
·
Policy ·Related ·Questions · · · · · · · · · · · · · · 11
·
Premium ·Increases, ·Nonrenewals ·and ·Cancellations · · 19
·
Claims ·Related ·Questions · · · · · · · · · · · · · 23
How ·to ·File ·a ·Complaint · · · · · · · · · · · · · · · 27
i
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
Introduction
the 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.
How to Shop for
Auto Insurance
comparison shopping is the key to getting the most for your insurance dollar.
consumers think nothing of price shopping for televisions, radios 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 200 auto insurers (or insurance companies)
licensed in the state, so there are plenty of places to shop.
The ·best ·time ·to ·shop ·for ·insurance ·is ·BEFORE ·you ·purchase ·a ·vehicle, ·trade ·in ·
a ·vehicle, ·add ·drivers ·to ·your ·policy ·or ·renew ·your ·policy.
Here are some basic tips to follow when shopping for insurance:
Before ·buying ·a ·car, ·determine ·your ·insurance ·costs. · this is the first
cost-savings step in purchasing auto insurance. When you are shopping around for a
new or used car, be sure you factor in the cost of insurance as well. High-performance
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
Insurers
with the insurance coverage you are buying. it is important to
know which coverages Maryland law requires you to purchase
may not use your
and those coverages that you may choose to purchase (refer to
credit history to
other sections of this publication for more information).
decide if they will
insure you, cancel you,
Seek ·additional ·information. · Many resources offer
renew you or
information about insurance. in addition to referring to the
Maryland insurance Administration's auto insurance rate guide,
increase your
you may also seek information from consumer groups, consumer
premium.
publications (i.e. consumer reports) 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
A Consumer Guide to Auto Insurance
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.
For 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, and 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.
Individuals
*Under Maryland law, individuals and entities that
and entities that
sell, solicit or negotiate insurance contracts (insurance
sell, solicit or
agents and brokers) are referred to as "producers."
negotiate insurance
· Ask your relatives and friends for recommendations
contracts (insurance
regarding purchasing auto insurance. in addition,
agents and brokers)
some banks, employers and special interest groups offer
are referred to as
insurance directly to their members.
"producers."
· 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
coverages and limits for those coverages that you wish to purchase and driving record
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
(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 rate comparison Guide to 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
11-12 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 much is the downpayment?
· How much are the monthly payments?
· 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 who 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 to obtain some complaint information.
A Consumer Guide to Auto Insurance
What Factors
Impact Rates?
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. insurer's evaluate these characteristics to
determine whether their guidelines, known as underwriting guidelines, permit them
to write a policy for you. the individual risk characteristics that insurers typically
review include:
· Your driving history for the past three years; specifically including any moving
violations on your driving record and/or any accidents you have been involved in.
· What type of vehicle you wish to insure; the make, model and age.
· Whether your vehicle is used for commercial purposes (i.e. for deliveries or
transportation services).
· Whether there are any drivers of your vehicle under age 21 (and whether those
drivers are covered under a different policy).
· Whether any drivers in your household have licenses that have been suspended or
revoked.
· Whether you have been cancelled or nonrenewed by a previous insurer.
· Whether you have allowed your prior insurance coverage to lapse for a period of
time.
· the amounts of insurance coverage you wish to purchase.
· Your credit history (please refer to page 10).
· Whether you have a stable residential address and/or work history.
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:
Insurers
Your ·driving ·record. Insurers are prohibited from
increasing your rate based on accidents or traffic
are prohibited from
violations that are more than three years old. insurers
increasing your rate
will consider traffic accidents and traffic violations that have
based on accidents or occurred in the past three years in determining your risk.
traffic violations that if your driving record is less than perfect, then you will be
are more than three
considered a higher risk and will pay a higher premium.
years old.
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. · statistics used by insurers show that 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.
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
Marital ·Status. statistics used by insurers show that 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. statistics used by insurers show that 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 a vehicle that displays such
characteristics.
Credit ·history. · some insurers review an individual's credit history when
determining their premium. For instance, bankruptcies, late payments and the
number of credit cards you have may result in a higher premium. insurers must
follow specific guidelines when using a consumer's credit history to underwrite or
rate an auto insurance policy.
those guidelines state that an insurer may not:
· increase a renewal premium based on the credit history of the insured.
· Apply a surcharge of more than 40% based on credit history.
· use the following factors to rate a policy: the absence of or inability to obtain
credit history, the number of credit inquiries, or any factor that is more than 5
years old.
Additionally, you have the right to request that your insurer recheck your credit
history once per policy period. if your credit history has improved, the renewal
premium may be reduced. However, if your credit history has deteriorated, this
information cannot be used to increase your premium.
You can review your credit report to become informed about your standing when
you apply for certain credit and certain types of insurance. You may also correct
any errors you discover in your report. You can review these reports at no charge
every 12 months. You may obtain a free credit report by calling 877-322-8228 ·
or by visiting the website www.annualcreditreport.com. For questions or to make
corrections to your credit report, you should contact the Federal trade commission
at www.ftc.gov, or any of these credit reporting agencies: transunion at
800-916-8800 or www.transunion.com, equifax at 800-685-1111 or
www.econsumer.equifax.com, or experian at 888-397-3742 or www.experian.com.
A Consumer Guide to Auto Insurance
What Discounts
are Available?
obtaining discounts is one of the ways to keep your insurance costs down. it
is important to be aware of these discounts before purchasing auto insurance.
However, insurers do not offer all the same discounts. some of the most common
discounts include:
Good ·driving ·record. · Most insurers offer discounts to drivers who have not
had an accident and/or violations in a specific time period (normally three or more
years). insurers are prohibited from considering violations older than three years.
Safety ·devices. · Discounts frequently are offered for devices that
limit bodily injury or property damage caused by accidents. such
devices include anti-lock brakes, automatic safety belts and air
bags.
Anti-theft ·devices. car alarms and other theft-deterrent
devices may also result in a discount.
Multiple ·policies. Although an insurer cannot require you
to buy a homeowners' insurance policy when you purchase an
auto insurance policy, some insurers offer discounts to policyholders
who purchase both auto and homeowners policies. in addition, insurers
may also offer discounts if you have more than one vehicle insured with the insurer.
Good ·student. statistical data compiled by insurers indicates that students
who maintain a B average or better are less likely to receive speeding violations or
be involved in accidents. therefore, many insurers offer discounts to students who
maintain at least a B average.
Driver ·Education ·Courses. · ·Many insurers offer discounts for the completion
of a driver education course.
Renewal ·Discount. some insurers offer a discount to their policyholders who
have maintained continuous coverage with the insurer for a number of years.
Memberships ·or ·employment ·discounts. insurers may offer discounts
to members of certain organizations (e.g. credit unions, shopper's clubs or alumni
associations). You may also be eligible to receive a discount through your employer
(e.g. state employee, military or teacher).
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
Options ·for ·High-Risk ·Drivers
If ·you ·have ·speeding ·tickets, ·accidents ·or ·other ·violations, ·some ·auto ·insurers ·
will ·consider ·you ·a ·high-risk ·driver ·and ·may ·not ·sell ·you ·an ·insurance ·policy. · ·
However, ·auto ·insurance ·coverage ·is ·required ·under ·Maryland ·law. · ·A ·high-risk ·
driver ·does ·have ·options. · ·Some ·insurers ·and ·independent ·producers ·specialize ·
in ·finding ·coverage ·for ·high-risk ·drivers.
Alternatively, ·Maryland ·residents ·who ·have ·not ·been ·able ·to ·obtain ·auto ·li-
ability ·coverage ·from ·a ·private ·insurer ·may ·seek ·coverage ·from ·the ·Maryland ·
Automobile ·Insurance ·Fund ·(MAIF). · ·For ·additional ·information, ·please ·call ·
800-492-7120, ·or ·visit ·the ·MAIF ·web ·site ·at ·www.maif.state.md.us
Basic Overview
of Coverage
Auto insurance coverage may include several types of protection. However, state
law requires all registered vehicle owners to purchase certain minimum protections
or coverage levels. Many drivers purchase more than the minimum requirements to
protect themselves from high repair bills, medical expenses and lawsuits. consumers
who choose to purchase coverage above the state's minimum requirements will pay
higher premiums.
Liability ·Insurance
Liability insurance protects policyholders when they have caused an accident. there
are two types of liability coverage that are required by state law: bodily injury
liability coverage and property damage liability coverage.
The ·minimum ·amount ·of ·liability ·coverage ·required ·by ·Maryland ·Law ·is:
$20,000 ·for ·bodily ·injury ·per ·person
$40,000 ·bodily ·injury ·per ·accident; ·and
$15,000 ·property ·damage
Bodily Injury Liability Insurance
if you cause an accident and an injured person makes a claim or files a lawsuit
against you, bodily injury coverage will:
· Pay for a lawyer to defend you if you are sued; and
· Pay the amount of medical expenses, lost wages and pain and suffering that you
are legally responsible to pay to another person (up to the policy limits); or,
· Pay an amount to settle these claims (up to the policy limits).
in other words, if the claim against you is covered by your bodily injury insurance,
then (up to the dollar limits of the coverage that you purchased) your personal assets
(i.e. savings, investments) will not have to pay for claims or lawsuits filed by any
injured person.
A Consumer Guide to Auto Insurance
Property Damage Liability Insurance:
if you cause an accident that damages someone's property (such as their car) and
the property owner makes a claim or files a lawsuit against you, property damage
liability coverage will:
· Pay for a lawyer to defend you in the event that you are sued; and
· Pay the amount of physical damage that you caused to vehicles or property that
you do not own (up to the policy limits); or,
· Pay an amount to settle these claims (up to the policy limits).
in other words, if the claim against you is covered by property damage liability
insurance, then (up to the dollar amount of the limits of coverage that you
purchased) you will not have to use your personal assets to pay claims or lawsuits
filed by the property owner(s).
other people, such as family members, also may be covered under your insurance
policy's bodily injury or property damage coverage. Family members are generally
covered if: they are listed on the policy as drivers, they are driving your car for an
occasional purpose with your consent, and they are not otherwise excluded by your
policy's terms. if you are unsure whether a potential driver would be covered under
your policy, read the terms of your policy or call your insurer or producer before you
let that person drive the car.
note: While state law establishes the minimum level of liability coverage,
consumers who can afford higher premiums may choose to purchase more coverage.
Higher limits of coverage provide more protection against repair expenses, medical
expenses and legal judgments which might be higher than the minimum coverages
required by Maryland law.
Uninsured/Underinsured Motorist coverage
uninsured/underinsured motorist coverage will protect you if someone driving
without insurance, or with an inadequate amount of insurance, causes damage
to your property or injures you or your passenger(s). coverage also applies when
an auto damages your vehicle or injures you and leaves the scene of the accident
without being identified. this insurance covers repairs to your property, as well as
medical expenses, lost wages, pain and suffering.
The ·minimum ·amount ·of ·uninsured/underinsured ·coverage ·required ·by · ·
Maryland ·law ·is:
$20,000 ·for ·bodily ·injury ·per ·person;
$40,000 ·bodily ·injury ·per ·accident; ·and
$15,000 ·property ·damage.
Personal Injury Protection (PIP)
up to the specified dollar amount of your coverage, PiP coverage will reimburse
you (or others named on your policy) for reasonable and necessary medical expenses
resulting from an auto accident, as well as lost wages. this reimbursement will be
made regardless of who caused the accident.
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
PiP coverage can be denied if claims are not properly and timely filed with your
insurer. therefore, it is important to contact your insurer or producer immediately
after an accident has occurred and request PiP forms.
Maryland ·law ·requires ·consumers ·to ·purchase ·at ·least ·$2,500 ·in ·Personal ·
Injury ·Protection ·(PIP) ·coverage. · ·You ·may ·be ·able ·to ·waive ·PIP ·coverage ·for ·
certain ·individuals ·resulting ·in ·a ·reduction ·in ·your ·premium. · ·Consult ·your ·
producer ·for ·a ·thorough ·explanation. · ·
Because PiP coverage may duplicate an individual's health care coverage, some
consumers choose to waive PiP if they feel they have adequate health care coverage
and/or can afford to pay for medical treatment. You should check your health care
policy and consult your producer about this coverage. Although waiving PiP results
in a lower premium, you should keep in mind that PiP also pays lost wages and
your household members' medical expenses, which are not covered under health
care policies.
What Other Coverages
are Available?
Physical Damage Coverage, also referred to as comprehensive and collision coverage,
is the most commonly recognized coverage as it protects you from expenses related
to damage or loss of your vehicle (e.g. accidents that you cause, theft or vandalism).
Although Maryland law does not require you to purchase physical damage coverage,
often banks and other financial institutions that lend you money to purchase your
vehicle or lease you a vehicle, will often require that you purchase both collision and
comprehensive coverage to protect their interests in the vehicle.
Collision Coverage pays to repair your vehicle or pays you what your
vehicle was worth right before an accident occurred (if your
insurer determines the vehicle is a total loss, this means that
the cost to repair the vehicle exceed the value of the vehicle).
collision coverage is provided regardless of who caused the
accident.
Because collision coverage is usually the most expensive
component of your auto insurance premium, many people may
choose to purchase collision coverage with a high deductible.
Generally, your premium decreases as the amount of the deductible
increases. For example, if you hit a pole and the resulting damage to your vehicle
is $1,200 and your deductible is $500, then the insurer will pay $700 to the body
shop and you will pay the balance of $500. on the other hand, if you purchased
collision coverage with a lower deductible or no deductible, then you would pay less
towards the repair costs, but you would pay a higher premium.
A Consumer Guide to Auto Insurance
Comprehensive Coverage (also known as other than collision) pays for damage to
your car resulting from causes other than an accident, such as vandalism or theft. As
with collision coverage, choosing a higher deductible will lower your insurance cost.
Additional or
Supplemental Coverage
Additional coverages are available that can supplement your insurance policy.
Medical Payments Coverage pays for medical expenses and related costs for you or
others injured or killed while riding in your vehicle. these claims may include
rehabilitative, surgical, chiropractic, x-ray, dental, prosthetic, professional nursing
and funeral expenses. in addition, this coverage will typically cover you or members
of your family if hit by a vehicle while walking or riding in another vehicle.
Most policies require that the amount you purchased under your PiP coverage be
used in full before payments will be made under medical payments coverage.
Medical payments coverage is different from PiP coverage in that medical payments
coverage will only pay medical expenses. if you have health care coverage, you
should consult your policy to determine whether you are duplicating coverage.
Please see page 12 for further explanation of PiP coverage.
Rental Reimbursement Coverage pays for all or a portion of the cost of a rental vehicle
while your vehicle is being repaired after an accident or a loss specifically protected
under your comprehensive coverage. the coverage typically pays a specific daily rate
for a specified number of days.
Transportation Expense Coverage covers additional transportation costs such as car
rental, bus fare, etc. while your vehicle is being repaired after an accident or a loss
covered under your comprehensive coverage.
Towing and Labor Coverage pays to tow your vehicle to a repair shop after an
accident or a breakdown. Members of auto clubs, such as AAA, may already have
similar coverage.
Mechanical Breakdown Coverage pays to repair your vehicle after a mechanical
breakdown (e.g. engine failure). new car buyers are advised that mechanical
breakdown coverage may be less expensive than purchasing an extended warranty
through an auto dealer. insurers offer this coverage either directly or as a separate
policy.
0
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
COmmOnly ASkeD
QueSTIOnS
Policy and
Coverage Issues
What ·types ·of ·coverages ·are ·provided ·when ·I ·purchase ·
an ·auto ·insurance ·policy? · ·Can ·I ·purchase ·other ·
coverages ·as ·well?
An auto insurance policy must contain certain "mandatory"coverages, and may
contain other optional coverages that you may choose to purchase. Below is a
description of various types of mandatory and optional coverages. You are required
to purchase no less than the statutory minimum amount for the mandatory
coverages. However, you may choose to purchase more than the statutorily required
limits of one or all of the mandatory coverages. there is no statutory minimum for
optional coverages. You may wish to contact your producer or insurer for
assistance in determining the appropriate amount of insurance for
you.
State
minimum
· Bodily ·Injury ·Liability ·Coverage ·(Mandatory):
coverage
Bodily injury liability insurance provides coverage for
medical expenses, loss of wages and pain and suffering that
is $20,000 per
you may be legally responsible to pay to a person you have
person and
injured. this coverage may be applicable to passengers in
$40,000 per
your vehicle, persons in another vehicle or pedestrians. the
accident.
policy provides separate limits of coverage for each person
injured and a cap on coverage for each accident. Maryland law
requires minimum coverage in the amount of $20,000
per person and $40,000 per accident.
State
· Property ·Damage ·Liability ·Coverage ·
minimum
(Mandatory):
coverage for
Property damage liability insurance provides coverage
property damage
for physical damage which you have caused to vehicles
liability is
or property that you do not own. Maryland law
requires minimum coverage for property damage
$15,000.
liability in the amount of $15,000.
A Consumer Guide to Auto Insurance
· Personal ·Injury ·Protection ·(PIP) ·Coverage ·(Mandatory ·Offer/ ·
· You ·May ·Waive):
Personal injury protection (PiP) insurance provides reimbursement for medical
expenses and lost wages for injuries incurred as a result of an accident, regardless
of fault, up to a minimum of $2,500. if you choose to purchase PiP coverage
for all insured drivers and residents of the household above 16 years of age, this
is known as "Full PiP." You may, however, elect not to purchase a portion
of Full PiP. When you decline to purchase PiP for any listed driver and family
members of your household (over 16 years of age), this is known as "Limited
PiP". some policyholders who have health insurance coverage may choose
to waive PiP coverage in order to reduce the premium on the policy. Please
note, however, that PiP is designed to ensure that medical expenses are paid
promptly, to limit the economic harm you may suffer due to injuries from an
auto accident. Many policyholders pay the extra expense associated with PiP
in order to have coverage for lost wages. others purchase PiP so that they have
a second source of recovery when being treated for accident-related injuries.
· Comprehensive ·Coverage ·(Optional):
Maryland law does not require that you purchase comprehensive coverage.
However, if you take out a loan to purchase your vehicle, most lenders will
require that you purchase comprehensive coverage. the same is true if you have
leased a vehicle; the lessor may require you to purchase comprehensive coverage
for the vehicle. comprehensive insurance provides coverage for property
damage to your insured vehicle resulting from occurrences other than collision,
and is sometimes referred to as coverage for "acts of God." comprehensive
insurance typically provides coverage for flood, theft, vandalism, glass breakage
not resulting from an accident, and accidents in which the driver strikes an
animal.
· Collision ·Coverage ·(Optional):
Maryland law does not require that you purchase collision coverage. However,
if you take out a loan to purchase your vehicle, most lenders will require that
you purchase collision coverage. collision insurance provides coverage for
property damage to your insured vehicle in the event of a collision or in the
event the vehicle flips over.
· Uninsured/Underinsured ·Motorist · ·
· Bodily ·Injury ·Liability · ·
Uninsured/
· (Mandatory):
underinsured motorist
uninsured/underinsured motorist bodily
bodily injury liability
injury liability insurance provides coverage
for medical expenses, lost wages and
insurance is mandatory
pain and suffering caused by a vehicle
and must cover at
which does not have insurance or which
least $20,000 in damages
has insurance that is insufficient to cover
per person injured, with
damages. Maryland law requires that
a cap of $40,000
you purchase uninsured/underinsured
per accident.
motorist bodily injury liability insurance
which covers at least $20,000 in damages per
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
person injured, with a cap of $40,000 per accident. You may choose to
purchase coverage in amounts larger than this statutory minimum.
· Uninsured/Underinsured ·Motorist ·Property · ·
· Damage ·Liability ·(Mandatory): ·
uninsured/underinsured motorist property damage liability
insurance provides coverage for property damage to your
vehicle and other property that is caused by a vehicle
that does not have insurance or which has insurance in
Uninsured/
an amount insufficient to cover the damages.
underinsured
coverage also applies when an auto damages your
motorist property
vehicle or injures you and leaves the scene of the
damage insurance
accident without being identified. Please check
covering at least
your insurance policy, as there is usually a provision
$15,000 in damage
that requires you to notify the police and report the
accident to the insurer within 24 to 48 hours after its
is required.
occurrence. Maryland law requires that you purchase
uninsured/underinsured motorist property damage
insurance which covers at least $15,000 in damage. You
may choose to purchase coverage in amounts larger than this statutory
minimum.
· Medical ·Payments ·Coverage ·(Optional):
Medical payments insurance provides coverage for medical expenses arising
out of an auto accident, regardless of fault. this coverage is available after any
PiP coverage is exhausted.
· Towing ·and ·Labor ·(Optional):
towing and labor insurance provides coverage for towing and labor expenses
arising out of a breakdown of an insured vehicle.
· Rental ·Reimbursement ·(Optional):
rental reimbursement insurance provides coverage for your costs in renting a
vehicle that is needed to act as a substitute for the insured vehicle damaged in
an accident. coverage is usually provided on a fixed rate basis per day,
regardless of the actual daily cost of the rental, up to a maximum amount of
days (usually not to exceed 30 days).
How ·do ·insurers ·develop ·the ·premium ·that ·I ·am ·
charged?
insurers consider a wide variety of criteria in developing their premiums. each
of the criteria assists the insurer in predicting the likelihood that you will be in
an accident or otherwise incur damages resulting in filing a claim. the criteria
that insurers consider commonly include age, sex, marital status, number of miles
driven annually, driving record, credit history, whether the insured vehicle is used
for business, pleasure or both, the type of vehicle insured, and the location where
the vehicle is principally garaged. since each insurer balances these rating factors
A Consumer Guide to Auto Insurance
differently, the rate quoted by one insurer may differ dramatically from the rates
quoted by other insurers. the amount of your premium will also depend upon the
coverages you purchase, the amounts or limits for the coverages that you purchase,
and the deductibles you choose for the coverages.
When shopping for an auto insurance policy, it is important to compare quoted
premiums, policy limits, coverages and deductibles in order to determine which
insurer provides the best value for your insurance dollars. there are many options
available and questions to be answered with respect to the differences between
quotes. Your insurance producer or insurer should be able to assist you and answer
all of your questions.
What ·can ·I ·do ·to ·reduce ·my ·auto ·insurance ·premium?
the first step to reducing your auto insurance premium is to determine the type
and amount of each coverage that you have, and the amount that you are paying
for each coverage. You can then make a judgment as to whether it is appropriate
(or even possible) to obtain those same coverages from another insurer at a lower
cost and/or whether it is appropriate to reduce the type or amount of one or more
coverages in order to reduce cost. Your insurance producer or insurer may be able
to assist you in making this assessment.
the MiA has prepared a Comparison Guide of Auto Insurance Rates to assist
consumers in comparing the rates of different insurers. this guide is updated
biannually and is available on our website at www.mdinsurance.state.md.us
under consumer information /publications. You may also contact the MiA at
410-468-2000 or 800-492-6116 (toll free) to request a free copy.
if you think that a reduction in the amount of your coverage
might be appropriate, you may want to consider the
following options. if you currently have full personal
injury protection (PiP) coverage and also have health
insurance, you may want to give some consideration
to whether the duplication of coverage is worth the
additional premium you are paying. if you currently
have physical damage coverage (comprehensive and
collision), you may want to give some consideration to
discontinuing the coverage (see the more detailed discussion
below, in response to the next commonly Asked Question).
You should also review your uninsured motorists (uM) coverage
limits. Do they equal your liability limits? if so, you could save some premium
dollars by reducing your uM limits to the minimum required by statute. Before
making any decisions to reduce coverages or the amounts of coverages, however,
you should make a determination as to whether the reduction in coverage that is
provided to you under the policy is justified by the amount you will save in reduced
premium.
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
You may also want to give some consideration to whether increasing the amount
of your deductibles would be beneficial for you. For example, if you raise the
deductible on your collision insurance from $100 to $500, the amount of your
premium will decrease. You must then weigh the benefit of the reduction in
premium against the fact that you will have to pay $500, instead of $100 in the
event that you are in an accident and make a claim under your collision coverage.
once you have reviewed the various coverage options, you should discuss with your
producer or insurer whether there are any discounts that might be available to you.
Many insurers offer, for example, good driver discounts (for drivers without any
violations or accidents for a pre-determined period of time while insured by the
insurer); multi-policy discounts (if you have more than one policy with the insurer,
i.e., homeowners and auto); multi-vehicle discounts (when you insure more than
one vehicle with the insurer); protective device discounts (anti-theft, antilock
brakes, air bags); discounts depending on the make and model of your vehicle;
affinity group discounts (if, for example, you are a member of an alumni group,
buying club or other organization); and longevity discounts (for those insured by
an insurer for a certain period of time).
You may also want to ask your producer or insurer to explain your premium
payment options. You may be able to reduce your total insurance costs by
changing to a different payment method. For example, if your premium is being
financed through a premium finance company, you are paying fees and interest
charges on top of your premium. check to see if your insurer offers installment
plans that allow you to make payments monthly, bi-monthly, or quarterly for
a nominal fee and no interest. Also, check to see whether the insurer offers a
discount if you pay the entire annual or semi-annual premium up front.
My ·car ·is ·several ·years ·old ·and ·has ·been ·paid ·off. · ·
Should ·I ·maintain ·comprehensive ·and ·collision ·
coverage?
the answer depends on whether or not you can afford to repair or replace your
vehicle if it is damaged in an accident that you caused (collision coverage) or if it
is stolen, vandalized or you hit an animal (comprehensive coverage). While you
are required by law to have property damage liability coverage that covers physical
damage to the property of others if you are at fault, the law does not require
you to have coverage for physical damage to your own property. You should
compare the cost of having these coverages against the value of your vehicle. if
the cost of having the insurance coverage exceeds the value of your vehicle, it
may not be worth purchasing these types of coverages. You can determine the
costs of these coverages by asking your producer or insurer to tell you what these
specific coverages cost. You can determine the value of your vehicle by referring
to similar vehicles that may be listed for sale in the newspaper or on the internet
using websites such as www.nada.com or www.kbb.com. should you decide the
cost of comprehensive and collision coverage is not worth the protection you
would receive and you decide to remove these coverages from your auto insurance
A Consumer Guide to Auto Insurance
policy, your premium will be decreased. You can also decrease the amount of your
premium by raising the amount of your deductible, which is the amount you pay
before the insurer will pay for any damages you may have sustained.
May ·an ·insurer ·consider ·my ·credit ·history ·when ·
reviewing ·my ·application ·for ·auto ·insurance?
No. · Maryland law states that an insurer may
not refuse to underwrite (that is to insure),
An insurer
refuse to renew, cancel or increase the
may not refuse to
renewal premium based, in whole or in
underwrite (that is to
part, on the credit history of the insured
insure), refuse to renew,
or applicant. However, an insurer may
cancel or increase the
use credit history to rate a new policy. this
means that the decision to place you with
renewal premium based, in
an affiliated insurer, assign you to a specific
whole or in part, on
tier within an insurer, or to add or remove
the credit history of
a discount based on your credit score when
the insured or
you first obtain insurance with the insurer, is
applicant.
authorized by law.
May ·an ·insurer ·consider ·my
credit ·history ·when ·establishing ·the ·premium ·
for ·my ·auto ·insurance ·policy?
Yes. When a person initially applies for an auto insurance policy, the insurer
may consider an applicant's credit history when determining the premium to be
charged. if the insurer considers your credit history, it can only rely upon credit
factors that occurred within the previous five years.
Additionally, the insurer/producer must advise you, at the time of your application,
that your credit history is being considered and, if you request it, must provide you
with a quote that separately identifies the portion of the premium that is affected by
your credit history.
Once the policy is effective, your premium cannot be increased if your credit
score worsens. However, if your credit score improves, that may help lower your
premium at renewal. insurers that use credit are required to obtain new credit
scores every two years and you will automatically receive the benefit of an improved
credit score if the new report shows an improvement. However, if you believe your
score improved, you may request the insurer to check it even if the two year period
has not passed. You are entitled to request the insurer to check your credit score
once during any policy period.
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
What ·happens ·if ·there ·is ·a ·lapse ·in ·my ·coverage? · · ·
Will ·I ·have ·to ·pay ·a ·penalty?
Maryland law requires that all owners of motor vehicles purchase and maintain
the minimum coverage for bodily injury liability, personal injury protection,
property damage and uninsured/underinsured motorist protection. (Currently,
the law requires you to have a minimum of $20,000 per person and $40,000
per accident in bodily injury liability coverage and $15,000 in property
liability coverage, and identical amounts of uninsured/underinsured motorist
coverage, as well as $2,500 in Personal Injury Protection coverage.) State law
also requires insurers to report to the Maryland Motor Vehicle Administration
(MVA) when a policy has been cancelled or nonrenewed.
the MVA conducts a random sample of registered vehicles to ensure that vehicle
owners have purchased the minimum required insurance coverage and that the
insurance is being maintained. if the MVA cannot verify your insurance coverage,
it will request the vehicle owner to provide a Financial responsibility Filing (Fr-19)
to show that adequate coverage has been in place since the vehicle was purchased.
insurers are required to provide Fr-19 forms free-of-charge, without question, to all
policyholders.
if no coverage can be verified through an insurer, the MVA will fine the vehicle
owner for each day the vehicle was uninsured . the fine for having no insurance is
a minimum of $150.00. the first through 30 days of no insurance results in a fine
of $150.00 and there is an additional charge of $7.00 per day for each day after the
30th day that the vehicle is uninsured up to a maximum of $2,500.00 per year. if
you wish to challenge the fine, you must contact the MVA, not the MiA.
if it is established that there was a period of time that your vehicle was uninsured,
you may also find that your insurance premium is higher after a lapse. Additionally,
you may find that some insurers will not insure you or your vehicle if there has been
a lapse in coverage while you owned it. This may occur because insurers have
found that those who drive without insurance present a greater risk for future
losses than those drivers who maintain continuous insurance coverage.
Is ·there ·a ·difference ·between ·the ·"Point ·System" ·used ·by ·
the ·Maryland ·Motor ·Vehicle ·Administration ·(MVA) ·and ·
the ·"Point ·System" ·used ·by ·an ·insurer?
Yes. the MVA tracks points assigned to your driving record for any violations of
motor vehicle laws (e.g. tickets or accidents). the law sets out the number of points
that may be assigned for any violation of the motor vehicle law. this point system
is used to determine if you are eligible for a Maryland driver's license or if it will be
restricted in any manner.
on the other hand, insurers assign points based on the insurer's individual
underwriting (or pricing) guidelines or in accordance with its rating plan filed
A Consumer Guide to Auto Insurance
with the Maryland insurance Administration. the guidelines or rating plans are
not necessarily consistent with the MVA's point system and are not established by
law. rather, insurers assign points to a driver's rating category for moving violations
and accidents. the total points for all drivers in a particular rating category will
determine whether the insurer will insure you, will renew your insurance and
what the amount of your policy premium will be, including any rate increases or
surcharges that may be added due to your driving violations or claims history.
Additionally, while the MVA maintains points on your driving record for a period
of two (2) years, points assigned by an insurer remain on the policy for a period of
three (3) years.
My ·child ·is ·attending ·college ·and ·is ·living ·away ·from ·
home. · ·Why ·should ·I ·keep ·him/her ·on ·the ·policy?
A personal auto insurance policy provides coverage for the named insured, all listed
drivers and all resident relatives in the household. Although your child is away at
school, he or she may still be considered a resident of your household and, as such,
still presents an exposure or risk to the insurer.
For example, when the child returns home for visits, school breaks, etc., he or she
will, more than likely, have access to the family vehicles and will drive them. As a
result, some insurers may continue to charge and collect premiums as if the child
is still in the home. However, other insurers may take this into consideration and
adjust the rate accordingly. therefore, you should contact your insurer or producer
and ask what the insurer's rating rules provide with respect to a child away at college.
My ·daughter ·or ·son ·is ·going ·to ·be ·driving ·soon. · ·When ·
should ·I ·notify ·my ·insurer?
insurers determine premiums based upon the exposure or risk presented by the
applicants and/or insureds. Youthful operators will cause the premiums to increase
because a youthful operator does not have much experience operating a motor
vehicle and is, statistically, more likely to be involved in an accident.
some insurers require that policyholders add youthful
operators as soon as they obtain their learner's permits or
provisional licenses, while others require their addition
to the policy upon receipt of their driver's licenses. As
a result, you should contact your insurer or producer
before your child obtains a learner's permit to find
out what the insurer's policy, guidelines or rating plan
requires and how this will affect your premium.
some insurers also offer an "accident forgiveness" program
which means that, for additional cost, the premiums will not
be raised if any of the drivers, including the youthful operator, are involved in an
accident. For families with youthful operators, this may be a wise purchase.
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
What ·is ·GAP ·insurance ·and ·should ·I ·purchase ·it?
today's automobiles are expensive and most consumers finance the purchase of a
motor vehicle. However, the value of a motor vehicle will start to decline as soon as
you drive it off the lot. As a result, many new and used car buyers find themselves
"upside down," owing more for the vehicle than the vehicle's actual cash value at the
time of a loss. it can be devastating if your vehicle is stolen and not recovered or is
totaled in an accident and the actual cash value is less than the balance owed on the
loan. the insurer paying for the accident is only required to pay you the actual cash
value of the damaged vehicle at the time of the loss. thus, you could be left in a
situation where your vehicle is determined to be a total loss, but once you have been
paid the value of the vehicle, you still owe a balance on your motor vehicle loan.
GAP insurance is an optional coverage that you can purchase to protect you in the
event your vehicle is totaled and the actual cash value of the vehicle is less than the
amount owed on the vehicle. some insurers offer a replacement cost endorsement
that would provide you with a new vehicle as a replacement for the damaged
vehicle. GAP protection provides you with a policy that will pay the difference
between the actual cash value of the vehicle paid pursuant to the auto insurance
policy and the amount outstanding on the loan. this means that at the end of the
claims process, you are not left with an outstanding balance due for a vehicle that
no longer exists. However, you will still be without a vehicle.
Premium Increases,
nonrenewals and
Cancellations
I ·have ·not ·had ·a ·ticket ·or ·an ·accident, ·nor ·have ·I ·filed ·a ·
claim. · ·Why ·has ·my ·premium ·increased?
While many insurers have defensive driver plans, also known as surcharge plans,
that assess the policyholders who receive tickets or are involved in accidents an
additional premium, often the surcharges may not be enough to cover the insurers
losses. sometimes, based upon the experience of the group, the premiums collected
may not be sufficient to support the projected costs of the claims. When this
occurs, an insurer will file with the MiA a plan to implement a general rate increase.
the insurer is required to provide actuarial support for the proposed rate increase
and is allowed to charge and collect premiums in accordance with the plans if they
justify their rates.
in general, the more stringent the insurer's underwriting criteria (no losses, or one
loss within three years, no tickets, etc.) the lower the premium for the policyholders
as the insurer is limiting its exposure to losses.
A Consumer Guide to Auto Insurance
My ·insurer ·sent ·a ·notice ·increasing ·my ·premium ·due ·to ·
my ·son's ·accident ·and ·offered ·the ·option ·to ·exclude ·him. ·
What ·does ·this ·mean?
When an insurer proposes to increase your auto
insurance policy premium, Maryland law requires
Your insurer
the insurer to send you a notice at least 45 days in
must send you
advance of the date the new premium is effective.
a notice at least 45
If the premium increase is based on the driving
days in advance of
record of one or more drivers insured under
the policy, the notice must provide you with
the date the new
the option to exclude the driver whose record is
premium is
causing the increase from the coverage of the policy.
effective.
Thus, you have at least three options:
1. Accept and pay the increased premium;
2. File a protest of the increase with the MIA; or
3. Exclude the driver causing the premium to increase from
the policy.
the first option is self-explanatory.
the second option, a protest of the increase, will only result in the insurer's action
being overturned (and the premium increase being disallowed) if the insurer
has violated Maryland insurance law. if, however, the insurer acted properly in
implementing the increase and provided the proper notice, the MiA will uphold the
insurer's action and permit the insurer to collect the premium increase.
the third option is for the insured to decide to exclude the driver with the poor
driving history from the coverage of the policy. if you exclude this driver, the insurer
cannot increase your premium based on the driving history of the excluded driver.
it is important to understand, however, that an excluded driver cannot legally
operate the insured vehicle(s) unless he obtains a separate policy of auto insurance.
if the excluded driver should operate any vehicle covered by the insurance policy
and is involved in an accident, there will be no coverage under your policy for the
damage the excluded driver has caused; either to another person and their property
or to your vehicle.
What ·is ·the ·difference ·between ·a ·nonrenewal ·and ·a ·
cancellation?
insurance policies are issued for a specific term or period of time. insurers will
issue a policy for a period of either six or 12 months. A nonrenewal occurs when
an insurer decides not to renew your insurance coverage at the end of the policy's
term. A cancellation occurs when an insurer decides to stop your coverage before
the policy term ends or during the effective period of the policy.
0
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
Can ·my ·insurer ·nonrenew ·my ·policy ·because ·of ·
accidents ·that ·were ·not ·my ·fault?
Yes. An insurer may cancel or nonrenew a policy if you have filed three or
more "not-at-fault" claims within a three-year period of time. Comprehensive
Your insurer
and uninsured/underinsured motorist coverages are considered "not-at-fault"
must send you
coverages. comprehensive claims include theft, vandalism or striking of an animal.
a notice at least 45
Personal injury Protection claims may be considered either "at-fault" or "not-at-
fault," depending on the facts surrounding the particular claim. even though you
days in advance of
may not have been at fault for these claims, there are costs for an insurer associated
the date the new
with these claims which is why state law allows them to be used to cancel or
premium is
nonrenew a policy if there are three or more within a three year time period.
effective.
May ·my ·insurer ·lawfully ·cancel ·or ·nonrenew ·my ·policy ·
for ·accidents ·and ·violations?
Yes, but only under the following conditions:
· if you misrepresented your driving record or other material fact(s) when
applying for your insurance or while making a claim.
· if, within the past three years, you:
- filed three or more claims where you were not responsible or "not-at-fault"
(e.g. theft, windshield damage or a Personal injury Protection claim);
- filed two or more claims for accidents that you caused or that you were
considered to be "at-fault";
- filed any combination of three or more "at-fault" accident claims or moving
violations;
- were convicted of operating a motor vehicle while under the influence of
alcohol, impaired or intoxicated, while under the influence of drugs or
controlled dangerous substance or any combination of drugs and alcohol that
impair your ability to operate a motor vehicle;
- were convicted of homicide, assault, reckless endangerment or criminal
negligence arising out of the operation of your vehicle;
- were convicted of using a motor vehicle to participate in a felony act; or
- violated the insurer's underwriting guidelines.
· if, within the past two years, you:
- have had your license or registration revoked or suspended for a reason
related to the driving record of the operator; or
- have had three or more moving violations.
note: A "conviction" includes a plea of nolo contendere and a finding of
probation before judgment (PBJ). Maryland law specifically recognizes these
exceptions for cancellation or nonrenewal; however, your insurer may have separate
guidelines that are more or less restrictive.
A Consumer Guide to Auto Insurance
Can ·my ·insurer ·cancel ·or ·nonrenew ·my ·policy ·if ·I ·gave ·
inaccurate ·information ·when ·I ·applied ·or ·when ·I ·made ·a ·
claim?
Yes. Your insurer may lawfully cancel or nonrenew your policy if you misrepresent
material information when applying for insurance (such as, in some cases, your
driving record or accident history), or if you misrepresent material information
when filing a claim (such as, in some cases, how the accident occurred or who was
driving).
Can ·my ·insurer ·cancel ·my ·policy ·for ·late ·payment?
Yes. Your insurer may cancel your insurance policy for nonpayment of a premium,
even if the payment is just one day late. the insurer must provide you with 10 days
advance notice that the policy will be cancelled for nonpayment of premium. some
insurers have guidelines for late payment and may reinstate your policy when the
payment has been made after its due date, but this is not a legal requirement. the
best practice is to pay your premiums by the due date in order to avoid having your
policy cancelled.
My ·insurer ·cancelled ·or ·nonrenewed ·my ·auto ·insurance ·
policy; ·however, ·I ·did ·not ·receive ·prior ·notification. ·
Is ·this ·legal?
Maryland law requires your insurer to give you
Your insurer
at least 45 days notice prior to canceling or
nonrenewing your auto insurance policy for
must give you at
any reason(s) other than nonpayment of
least 45 days notice
premium (the law requires only 10 days notice
prior to canceling or
of cancellation for nonpayment of premium)
nonrenewing your auto
and your insurer must be able to prove that it
insurance policy for any
mailed the notice to you 45 days in advance
of the date of the policy's cancellation or
reason(s) other than
nonrenewal. Proof that you received the notice is
nonpayment of
not required.
premium.
Will ·I ·receive ·a ·notice ·after ·my ·policy ·
has ·been ·cancelled ·or ·nonrenewed?
no. While some insurers may notify you as a courtesy, insurers are not required to
send additional notice once the coverage has expired. the insurer is only required
to send a notice at least 45 days prior to taking this action.
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
Claim-Related
Questions
What ·should ·I ·do ·after ·an ·accident ·or ·when ·I ·discover ·I ·
have ·to ·file ·a ·claim ·for ·something ·other ·than ·an ·accident ·
(i.e. ·vandalism ·or ·theft)?
You should:
· Dial 911. Give the operator detailed information about the incident, including
if you or others involved need medical assistance or towing assistance.
· remove your vehicle from the roadway and off to the side, if possible, so as not
to block the flow of traffic.
· talk to witnesses. obtain names, addresses and phone numbers of those who
witnessed the incident/accident.
· cooperate with the police. Provide all information that is requested of you. Be
sure to write down your incident/accident number and the officer's name
and badge number. (note: in some counties and Baltimore city, police are not
required to write reports of accidents that do not involve bodily injuries or
excessive damage.)
· take notes. Write down the location and time of the accident/incident and any
other details (e.g. summary of what happened). exchange information with
others involved in the accident; including the names, addresses and telephone
numbers of the drivers and passengers, the names addresses and telephone
number of any witnesses; as well as any insurance information for any of
the other vehicles involved (the name of the insurance producer, insurer and the
insurance policy number). Write down the make, model and license plate of
the other vehicles involved. if possible, take pictures or draw a diagram of the
scene.
· contact your insurer or producer as soon as possible. Promptly report
any accident and provide all information that is requested. Keep records of all
paperwork related to your claim (e.g. copy of accident report, notes from
accident scene, expenses, etc.)
Do ·I ·have ·the ·right ·to ·choose ·whether ·to ·repair, ·replace ·
or ·receive ·payment ·for ·my ·damaged ·vehicle?
An insurer is not obligated to replace your damaged vehicle with another vehicle. if
the vehicle can be repaired and the cost of repair is less than the actual cash value
of the vehicle, the insurer will pay to have it repaired. if the damage to the vehicle
cannot be repaired or if the cost of repairs exceeds or approaches the actual cash
value of the vehicle, the insurer will declare your vehicle a total loss and pay you its
actual cash value.
if your vehicle is damaged but can be repaired, you may elect to repair your vehicle
or receive payment from the insurer for the damages. However, if you do not repair
A Consumer Guide to Auto Insurance
the damage, these damages will become pre-existing and will affect the value of your
vehicle in the event of another loss as the insurer will make an adjustment based on
the physical condition of the vehicle prior to the loss. if there is a lienholder on the
vehicle, the lienholder may require that you repair the damage in order to protect
their security for the loan or the lienholder may require that you pay off the balance
of the loan if you wish to keep any excess monies.
if your vehicle is damaged to such an extent that it is determined to be a total loss,
you have the right to elect to retain salvage of the damaged vehicle. this means
that you receive a payment and get a salvage title to your damaged vehicle. Please
be aware that most insurers sell totaled vehicles for salvage in order to recover some
of the monies they pay out. therefore, the salvage value will be deducted from
the amount you receive from the insurer in payment of the total loss if you decide
you want to keep the damaged vehicle. so, before you decide whether you want
to keep the damaged vehicle, you should ask the insurer what the salvage value is
and the amount of money you will receive if the vehicle is salvaged by the insurer as
opposed to the amount of money you will receive if you keep the damaged vehicle.
Additionally, if you keep the salvaged vehicle, please be aware that in the event of a
subsequent loss, the vehicle may have little or no value.
You should review your policy with respect to your rights and the insurer's
obligations after a loss.
Am ·I ·required ·to ·use ·a ·specific ·auto ·body ·shop ·for ·the ·
repairs ·to ·my ·vehicle ·or ·can ·I ·choose ·the ·shop ·I ·want · ·
to ·use?
no, you are not required to use a specific auto body repair
shop; you may have your vehicle repaired at the shop of
An insurer
your choice. Maryland law prohibits an insurer or
or an adjuster may
an adjuster from requiring that a certain repair
not require that a certain
shop be used or from recommending a particular
shop without notifying the claimant or the
repair shop be used or
insured that their vehicle may be repaired by the
recommend a particular
auto shop of their choice. However, the insurer
shop without notifying the
will only pay an amount that it has determined
claimant or the insured that
represents the cost of repair for the damage your
their vehicle may be repaired vehicle sustained as a direct result of the loss based
by the auto shop of
on an estimate of the cost for the necessary parts and
labor expenses.
their choice.
May ·my ·insurer ·repair ·my ·vehicle ·with ·
used ·parts?
Generally, the answer is "yes." Your insurer may have your vehicle repaired with
parts of like kind and quality, which includes used parts and after market parts
known as non-oeM (original equipment manufacturer). However, you may
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
purchase an endorsement that obligates your insurer to use the original equipment
manufacturer's parts. You should review the language of your policy to determine
the insurer's obligation.
What ·if ·my ·insurer ·determines ·that ·my ·car ·is ·a · ·
"total ·loss"?
An insurer may determine that your car is a total loss if the cost to repair the
damage approaches or exceeds the vehicle's actual cash value. An insurer will
determine what your vehicle's actual cash value was by establishing its actual cash
value immediately before the accident occurred.
if you are the insured under the policy and your insurer has determined that
your vehicle is a total loss as a result of a covered claim, your insurer generally has
ten (10) business days to make you a cash settlement offer. if your vehicle was
stolen and is not recovered within thirty (30) days after the theft, your insurer will
make you a cash settlement offer for your vehicle thirty (30) days after receiving
notification of the claim.
if you are not the insured, but are a claimant under another's insurance policy, and
the other driver has been determined to be at fault, the insurer for the other driver
generally has ten (10) days to make you a cash settlement offer for your vehicle
after it has completed its investigation, determined their driver was at fault for the
accident and determined your vehicle is a total loss.
the offer from the insurer must be in an amount that reflects
the retail value less applicable deductions for a substantially
similar motor vehicle using a nationally recognized
valuation manual or using a computerized data bank
that produces statistically valid values for substantially
similar motor vehicles. Generally, insurers refer to the
national Auto Dealers Association (nADA) official
used car Guide, Kelley Blue Book or certified
collateral corporation (ccc) database to determine
your vehicle's actual cash value. the offer will use that
value, plus the applicable taxes and transfer fees, less the
amount of your deductible, if applicable. Alternatively, the
insurer may determine the actual cash value of your vehicle by obtaining a quote
for a substantially similar vehicle from a qualified dealer at a location reasonably
convenient to you. if the insurer uses the quotation to make its offer, it will add the
applicable taxes and transfer fees and then subtract the deductible if applicable. if
you decide to keep the damaged vehicle for salvage, there will be a deduction for the
amount of the vehicle's salvage value.
You may request that the insurer put its settlement offer in writing to you and
have them advise you of the method used to arrive at the offer. if you make the
request for a written settlement offer, the insurer will send it to you within seven (7)
business days of your request. upon receipt of the insurer's written settlement offer,
A Consumer Guide to Auto Insurance
you may either accept the offer or reject the offer, in writing, and make a counter-
offer based on quotes you have gotten from dealers for a substantially similar motor
vehicle, using ads you have found for a substantially similar motor vehicle or using
any other source of valuation for a substantially similar motor vehicle. if you make
a counter-offer, the insurer has five (5) business days within which to accept your
counter-offer or to provide you with a written explanation as to why your counter-
offer does not provide a more accurate valuation of the vehicle than the one relied
upon by the insurer.
once you have accepted a settlement offer, you will be asked to forward a copy of
the vehicle's title to the insurer. After the insurer receives the title, it will issue a
check in the amount of the offer. if there is a lienholder on the vehicle, the lien will
either be paid directly or a check will be issued to you and the lienholder.
if you elected to retain the damaged vehicle, you will retain the title to the vehicle
and the insurer will send you a check for the actual cash value, less the salvage
amount. Again, if there is a lienholder on the vehicle, the lien will either be paid
directly or a check will be issued to you and the lienholder.
What ·if ·I ·disagree ·with ·my ·insurer's ·decision ·to ·total ·my ·
vehicle?
it is important to remember that when you purchase insurance, you enter into a
contract and are bound by its terms. However, you have options available if you do
not agree with the decision to declare your vehicle a total loss. You should obtain
documentation to establish that the cost of repairs will not exceed the actual cash
value of the vehicle. You would do this by obtaining an estimate for the costs of
repairs (please be sure that the estimate addresses any hidden damage that may be
involved) and documentation to establish the actual cash value of the vehicle exceeds
the repair estimate as well as any potential hidden damages.
if all attempts to resolve the issue of whether your vehicle is a total loss are
unsuccessful, many policies provide the option of appraisal. in accordance with the
terms of the policy, you would hire an independent adjuster to evaluate your loss,
and your independent appraiser, along with the insurer's designee, would then select
a person to referee the dispute (an umpire). Agreement by any two establishes the
amount of the loss. independent adjusters are listed in the Yellow Pages. Because
you must pay the independent adjuster's fee, this last option may be more costly.
What ·is ·subrogation?
According to the American institute of chartered Property casualty underwriters
(AicPcu) "subrogation is the process through which an insurer assumes the right
to pursue a legal action against a party who may be liable to the policyholder." to
better understand what this means and how this works, here's an example:
You were involved in an accident with Mr. At Fault Driver, and your vehicle was
totaled. You have collision coverage on your insurance policy covering the vehicle,
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
and opted to allow your insurer to pay you for the actual cash value of the vehicle,
less your deductible. since you were not at fault, your insurer will pursue the At-
Fault Driver and his insurer to recover the amount it paid out on your behalf, as
well as your deductible.
What ·happens ·if ·the ·at ·fault ·driver's ·insurer ·refuses ·to ·
honor ·the ·subrogation ·request?
Under Maryland law, all insurers that issue, sell or
All insurers
deliver motor vehicle liability or physical damage
that issue, sell or
insurance policies in the state are required to
deliver motor
enter into arbitration and settle all motor vehicle
physical damage claims in accordance with an
vehicle liability or
auto subrogation program sponsored by an
physical damage
arbitration organization chosen by the insurer
insurance policies in
requesting the arbitration. When the insurers
the state are required
proceed to arbitration, each insurer presents its
to enter into
claim file to the arbitrator, who after review, issues a
arbitration.
determination. the determination may indicate that
the insurer's policyholder was responsible for the accident
or that the insurer failed to meet its burden of proof with regard
to fault. the arbitration decision is binding only for the property damage aspect of
the claim.
How to File
a Complaint
the Maryland insurance Administration's primary role is to protect consumers
from illegal insurance practices by making certain that insurers and producers doing
business in Maryland act in accordance with state insurance laws. You may contact
the insurance Administration to file a complaint against an insurer or producer who
you believe is not acting in accordance with Maryland law.
Maryland's insurance laws not only govern insurers' conduct -- they also protect
Maryland consumers. insurers are prohibited from settling claims in an arbitrary
and capricious manner. this means that insurers' claim settlement practices must
be fair, nondiscriminatory and adhere to Maryland insurance laws.
if you feel that your insurer has acted improperly, you have the right to take action
by filing a complaint with the Maryland insurance Administration. However, some
disputes may be governed by your policy's terms and may not be a problem the
insurance Administration can resolve for you.
Complaints must be received in writing. Please provide as much detail as possible,
including copies of pertinent documents. A trained, professional investigator will
A Consumer Guide to Auto Insurance
handle your complaint. the investigator will contact the insurer/producer to try to
resolve the issue. Meanwhile you will be advised of the steps being taken on your
behalf. complaint files are not closed until the insurance Administration has made
a determination regarding the complaint.
the MiA also established a rapid response Program designed to help certain
consumers resolve property and casualty claims (such as auto and homeowners
claims including those made under commercial lines policies) quickly and
without having to file a formal written complaint. For more information about
this program, please contact us at 410-468-2340 or 800-492-6116 ext. 2340.
Participation in the rapid response Program is voluntary and does not affect your
right to file a formal complaint.
For additional information or if you have a complaint, please contact the Maryland
insurance Administration's consumer complaint investigation Division at
410-468-2000 or toll-free at 800-492-6116. consumers also may file their
written complaint in person or by mail at:
Maryland insurance Administration
consumer complaints investigation
525 st. Paul Place
Baltimore, MD 21202-2272
consumers may also file a complaint by going online to the Maryland insurance
Administration's web site at www.mdinsurance.state.md.us and under consumer
information click on File a complaint.
note: this publication was produced to help consumers better understand auto
insurance. this publication, however, should not be considered a substitute for you
reading and familiarizing yourself with your auto insurance policy.
Auto insurance policies are contracts with many different parts and
terms. As each consumer's needs are different and few auto
insurance policies are alike, many consumers benefit from
the advice of a knowledgeable insurance producer. other
consumers, however, are comfortable dealing directly with
an insurer's customer service representative, who can answer
questions and provide advice.
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
notes
A Consumer Guide to Auto Insurance
notes
0
Maryland Insurance Administration · 800-492-6116 · www.mdinsurance.state.md.us
this consumer guide should be used for educational purposes only. it is not
intended to provide legal advice or opinions regarding coverage under a specific
insurance policy or contract; nor should it be construed as an endorsement of any
product, service, person, or organization mentioned in this guide.
Persons ·with ·disabilities ·may ·request ·this ·document ·
in ·an ·alternative ·format.
I nsurance
admInIstratIon
525 st. Paul Place
Baltimore, MD 21202
410-468-2000
800-492-6116
800-735-2258 ttY
www.mdinsurance.state.md.us
·
Martin ·O'Malley ·
R. ·Steven ·Orr ·
Governor
commissioner
·
·
Anthony ·G. ·Brown ·
James ·V. ·McMahan, ·III ·
Lt. Governor
Deputy commissioner
MiA-A-1