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Who's watching the insurance companies?

With few exceptions, your insurance company does not set its own rates (unless you live in Illinois). It request the right to charge appropriate rates from your state's insurance department, which responds with legal approval and authorization, provided the requested rates are fair.

Every state has some sort of department, administration or agency that regulates and monitors every insurer operating within the state's borders. In addition to approving rates, your state's insurance department is involved in all insurance matters on behalf of private citizens and businesses. It also issues operating licenses to insurance companies and agents, based on their ability to meet the state's requirements for conduct and knowledge about insurance issues.

Your insurance company works closely with your state's insurance department to make sure you are getting the best and fairest possible service within the state's guidelines. Contact your state's insurance department (listed at the end of this guide) if you wish to know more about how it serves your interests.

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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 do not need to buy extra insurance from the rental company. In fact, 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.

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. Plus, do not buy a collision damage waiver (CDW) from the rental company assuming it is insurance. 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.

It's always a good idea to review your policy before renting a vehicle and, if necessary, contact your agent for clarification.

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What happens when I loan my car to someone? Is that person covered by my policy? Am I still covered?

Yes. Liability and coverage for physical damage (i.e., comprehensive and collision) always follow your car. So, if a friend borrows your car and has an accident, you're still protected against the cost of damages or injuries. Plus, if the driver of your car is insured, his or her policy will also be available to cover the cost of damages and injuries.

The same rules apply when you borrow someone else's vehicle-- your own insurance follows you no matter whose car you are driving. But the vehicle owner's policy is the key coverage if you have an accident.

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Am I covered for natural disasters or "Acts of God?"

Comprehensive insurance, which covers you for fire and theft, generally covers you against damage by flood, earthquake, hail and other natural perils, except when your car is overturned (which is technically considered a collision). If you have special concerns about the safety of your vehicle in the face of Mother Nature's wrath, contact your agent for information on catastrophic coverage.

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What should I make sure my policy includes? Do I really need to read all the fine print?

While you don't need a law degree or an agent's license to understand your policy, you should read it thoroughly. After all, it is a binding legal contract. If there is anything you don't understand, ask your agent to explain it to you. You have the right to know what's in your policy.

If you wish clarification beyond your agent's explanation, or if you want to be certain that the policy is completely valid, contact your state's insurance department.

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How can I challenge my insurers if they refuse to cover a claim?

Usually, insurers that refuse to cover a claim have a strong legal reason for doing so-- even if you disagree. First, contact your agent if you feel you are being treated unfairly because your agent is your strongest advocate in insurance matters. But if it is a legal problem, you may have to hire a lawyer.

Talk to your agent if you have a problem with your insurer, and talk to your state insurance department if you want more specific information on state regulations and legal precedents.

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What actually happens when I report an accident?

After an accident, you should call your agent as quickly as possible, to 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. While compensating you for auto repairs or medical expenses is easy and immediate, determining liability is more complicated. The adjuster will begin the settlement process, the length of which will depend on the cooperation of the other party.

The amount of compensation for your loss can vary according to the adjuster's analysis of the damage. You do not have to accept the first amount of money you are offered, if it is lower than the cost of your repair or recovery. While you may have to do some homework to prove your reported loss is valid, it's worth it to be certain your insurer lives up to the provisions of your policy.

Remember, negotiating with an adjuster is just business--insurers simply want to settle claims fairly in light of possible fraud. While it is your insurer's responsibility to root out false claims, you pay the price in the end. In fact, you spend nearly a dime on every dollar of your premium to cover the false claims of others. So, try to keep an open mind when working with your adjuster to settle on a price that's fair to both you and your insurer.

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Do I need special insurance for a classic car?

You should always talk to your agent about coverage of rare and valuable property. Since a classic car usually cannot be replaced, you'll probably want ample compensation if it is lost. A classic car, because it is rare or unique, may indeed require a special insurance policy.

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Under what circumstance do I not need certain types of auto insurance?

While most drivers today are generally insured for collision and theft, this coverage may not be necessary for every vehicle.

Liability insurance, as mentioned earlier, is essential and in many states required. But if you drive a clunker--an older car that isn't worth much money--you may be able to do without collision insurance. If you have an accident, repair costs could easily be higher than the value of your vehicle, thus "totaling" it. This means your insurer will pay you the total book value of your vehicle, and that could be far less than the cost of your vehicle's repair. So, collision insurance may not cover your loss adequately.

Since it depends on special circumstances, ask your agent for guidance.

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