MONEY car insurance

Never Pay for Rental Car Insurance by Accident Again

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Susan Werner—Getty Images

Sometimes saying no isn’t enough to avoid charges for rental company extras.

Car rental companies really want you to get car insurance from them. So much so that you might end up buying it unintentionally if you’re not careful.

Here’s what you need to know before you accept or decline a rental company’s insurance.

Do you need rental company insurance?

Car rental companies generally offer several coverage options, including:

  • A loss damage waiver (sometimes called a collision damage waiver), which isn’t technically insurance, but does relieve you from responsibility if your rental is damaged or stolen. This can cost $10 to $40 a day.
  • Personal accident insurance, which covers medical costs if you’re injured in an accident and provides a death benefit, and personal effects protection, which covers loss or damage to you and your passengers’ possessions in the car. These may be sold together or separately, and usually add up to $5 to $7 a day.
  • Liability coverage with higher limits than what the rental company provides automatically (if any). This generally costs around $15 a day.

Keep in mind that if you already have car insurance, your coverage generally extends to a rental car you book for personal use. If your policy includes comprehensive and collision coverage, that also covers damage to or theft of the rental car— at least up to the value of your own vehicle.

If you have a high deductible on your own collision and comprehensive insurance, you might decide to buy the loss damage waiver. That way, you won’t have to pay your deductible if you crash.

Any liability or medical coverage in your auto policy, such as personal injury protection, also applies while you’re in a rental, and your health insurance could cover car accident injuries. Homeowners and renters insurance usually cover belongings damaged in or stolen from your rental car.

Many credit cards also provide rental car insurance, although the coverage might be limited to certain types of vehicles and rental periods, and be secondary personal auto insurance — meaning your auto insurance company pays first, and then the credit card benefit kicks in.

Note that rental reimbursement coverage, which you may have through your car insurance, is a different type of insurance. It pays for a rental car when yours is being repaired after a car accident or other damage claim.

How you could get car insurance unintentionally

Sometimes saying no isn’t enough to avoid charges for rental company extras. At least 100 customers of Dollar Rent a Car or its sister company Thrifty Car Rental (both now owned by Hertz) accused the companies of charging them for coverage that they’d verbally declined, according to a 2013 New York Times story. Reported victims include an insurance lawyer and a retired insurance adjuster who handled claims for a car rental company.

After customers said that they didn’t want to buy car insurance or a loss damage waiver, rental company agents included the coverage anyway, the Times report says. Customers then signed forms accepting the protection without noticing the discrepancy. Agents typically receive a commission for selling such insurance, the story says. Lawsuits against Dollar and Thrifty are pending.

What does this mean for you? Before renting a car, find out what coverage you already have from your personal auto and homeowners or renters policies, as well as your credit card. Then, if you decline rental car company coverage, make sure the form that you sign says so.

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MONEY car insurance

Here’s How Much That Speeding Ticket Will Raise Your Insurance Rates

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Yuji Kotani—Getty Images

Your need for speed has a hefty price tag.

Misbehaving is perhaps one of life’s earliest pleasures: As soon as we learn “no,” we learn also to test whether or not we can get away with whichever mess tempts our wee hearts most at any given moment. The truth is, there are driving laws that all of us regularly disobey — the National Highway Traffic Safety Administration found that as many as 39% of drivers “enjoy the feeling of speed.” If forced to testify in a court of law, could you say with a clean conscience that you’d never purposefully done something a bit risky behind the wheel?

It turns out that some deviant behaviors can not only be dangerous, but incredibly costly — in terms of the ticket fee and its lingering impact on your car insurance rate. That’s right — your car insurance company takes your personal driving record into account more than any other single rating factor. (In most states, your credit score can also be a factor.)

4 Bad Behaviors That Will Cost You

First, a note on our methods: Using ZIP codes from all 50 states, we ran a mock profile to get an average base car insurance premium. Our sample driver was a single 35-year-old male homeowner with good credit and no accidents for the past five years. Then, we got him into some hypothetical trouble…

1. Littering From Vehicle

Average fine cost: Usually anywhere between $100 and $1,000 for the first offense. Most often considered a misdemeanor, tossing something especially heavy, or repeated offenses can land you in jail in many states. (Other potential punishments include litter cleanup.)

Average hike in insurance rates: 11.18%.

2. Speeding in a School Zone

Average fine cost: The costs can vary widely, but often start around $200 – $500 with additional costs for each extra mile over the speed limit you’re driving. Often, in school zones, the fines and fees are simply doubled.

Average hike in insurance rates: 18.89%.

3. Reckless Driving

Average fine cost: Varies widely. Just what constitutes reckless driving? Individual states’ definitions vary slightly, but all sound a lot like this Kansas statute: “Any person who drives any vehicle in willful or wanton disregard for the safety of persons or property is guilty of reckless driving.” If you’re driving in a manner that you wouldn’t want your mom to see, chances are you’re driving recklessly. This can include speeding, tailgating, running stop signs or lights, distracted driving — even failing to use a turn signal.

Average hike in insurance rates: 63.93%.

4. Street Racing

Average fine cost: at least $1,000. Other possible consequences include having your license revoked, being arrested and having your vehicle impounded for 30 days or more. Also, many auto insurance companies will simply drop you if you’re found guilty of street racing. It’s serious business and seriously dangerous — while data are hard to collect and corroborate, the Center for Problem-Oriented Policing estimates that around 50 people die each year due to street racing.

Average hike in insurance rates: 73.32%.

Needless to say, any one of these expenses can impact your premium — any combination could send it through the roof. And while a 10% hike is considerably less than the 73% a racing ticket could cost you, the truth is that any preventable behavior that ups your insurance is just going to cause regret. What should you do if you’ve gotten a ticket for any of the above bad behaviors? Your best bet is to compare car insurance rates across companies if you’ve been slapped with one of these fines. And, of course, to solemnly swear that you’ll never behave so badly again behind the wheel.

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The Insane Reason You Could Pay 50% More For Car Insurance

Inside A Carmax Inc. Location Ahead Of Earnings Figures
Bloomberg/Getty Images Customers check out a vehicle on the sales lot at a CarMax Inc. dealership in Brandywine, Md., on March. 29, 2015.

It doesn’t even have anything to do with how well you drive

You probably figure that if you’re a bad driver and collect some fender-benders or speeding tickets in your DMV record, your insurance company is going to charge you accordingly. But what you might not have expected is that insurers also might slap you with penalties — sometimes hefty ones — if you’ve blown off paying a bill here or there.

Car insurance companies in all but three states — California, Hawaii and Massachusetts, where it’s illegal — use a driver’s credit history in the secret sauce of their underwriting formulas. People with bad credit are considered higher-risk customers, so insurers often charge them more, explains Jill Gonzalez, an expert at WalletHub, a personal finance site that just published a study showing what insurance companies in what states penalize drivers the most for poor credit.

WalletHub asked the five biggest car insurance companies in the country for quotes for two imaginary drivers who were identical except that one test case had excellent credit and the other had no credit history.

“There is a strong correlation between one’s credit characteristics and insurance losses,” Gonzalez says. “The insurance companies usually look at the the credit history to see how the insured can manage his or her risk exposure.”

Across the board, the difference between quotes given to the “great credit” versus the “no credit” driver varied by 49%, but some fluctuations were much, much greater.

Credit obviously isn’t the only factor insurers look at to determine premiums, and different companies assign varying degrees of importance to this characteristic. WalletHub’s study finds that Farmers Insurance seems to place the most weight on driver credit data, with a 62% difference between quotes given to WalletHub’s two hypothetical drivers. Even Geico, the insurer WalletHub says “seems to rely on credit data the least,” has a 32% fluctuation between the two driver scenarios.

The results also vary widely by state; in Connecticut, the impact of great credit versus no credit only contributes to a 15% fluctuation in premiums. In Michigan, however, it’s another story: WalletHub finds that credit status contributes to a 115% fluctuation in rates.

Gonzalez says the biggest issue consumers face is that a lot of companies aren’t up-front about their use of credit data in underwriting. “The problem we discovered is that not all of the companies are transparent in letting their customers know that credit scores impact insurance premiums to a significant extent,” she says.

WalletHub looked at the websites of the 10 biggest auto insurers to see how soon, how often and how prominently they advised customers that their credit would be a variable in the eventual premium price they were quoted. It says Progressive is the most transparent, but Gonzalez points out that a lack of transparency among many carriers means that drivers have to do a lot more homework if they have credit problems.

“Consumers with no credit have to do some serious research before deciding on an insurance company,” she says.

MONEY car insurance

The One Way Roommates Won’t Save You Money

handing car keys
Getty Images

'Dude, Can I borrow you car?'

When interviewing potential roommates, it’s common to ask about ability to afford the rent and proclivity for partying. But you also might want to consider how sharing your home can impact your car insurance quote.

Drivers and your auto policy

Insurance companies base rates on factors that have been shown to impact the likelihood and cost of an accident or other claim, including your car model, location, miles driven, and the ages and driving record of people who drive the car.

When it comes to insuring drivers, it’s not just about who you want or expect to drive your car.

“We ask that you list all drivers in your household who have access to your vehicle, including your spouse, relatives, licensed children, and roommates,” insurer Esurance notes on its website. It adds you might also need to add other friends who frequently drive your car.

Why you should list other drivers

Remember that insurance follows the vehicle, not the driver. So if someone has an accident while driving your car, your insurance would apply first.

But your insurance company may reduce coverage for a driver not listed on your policy in states that allow this, Esurance adds. “In other words, if you don’t list your buddy who borrows your car now and then and an accident occurs, you could be responsible for paying any damages that exceed the reduced coverage.”

If someone borrows your car without your permission, that person’s insurance generally would apply before yours, although it usually must be “clear that you expressly deny permission,” Esurance says.

How other drivers will impact your rates

Adding a driver who is young or has a checkered driving history could raise your rates, Esurance says. “On the other hand, if the other driver wins the Best Family Driver Award year in and year out, your premium likely won’t rise. In fact, with the additional (good) driver, your rates could even go down.”

An additional way other drivers can impact your rates, of course, is by causing an accident while driving your car, resulting in a claim on your policy. Or, imagine they back into a pole and you need to make a collision claim for the damage. Guess who’s responsible for the deductible? You.

A final caution

Finally, don’t lend your roommate your car for her job delivering pizzas unless you have coverage for business use.

As Progressive notes: “Personal auto policies typically don’t cover anyone for conducting business with their vehicles.”

The upshot is that driving record may be another factor to consider when looking for a roommate, because it could raise, or even lower, your auto insurance quote.

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TIME

Here’s What a Ticket Does to Your Car Insurance Rate

Car driving through intersection with photo enforced camera radar.
Theo Fitzhugh—Alamy New technology aims to help drivers avoid getting speeding tickets from one of these roadside cameras.

Demographic differences play a big role

Getting a traffic ticket is bad enough, but what’s even worse is getting stuck with higher insurance premiums as a result. Whether or not a ticket will mean those costly extra charges, though, depends on a few things — and they’re factors that are largely out of your control.

In a new survey, InsuranceQuotes.com digs into the demographics of who pays higher insurance premiums after getting a ticket, and it finds that not all drivers are created equal.

First, the good news: Just under one in five drivers will be stuck paying higher premiums after getting a ticket, compared to nearly a third just two years ago.

When it comes to avoiding a premium hike after the fact, being older helps. InsuranceQuotes finds that drivers under the age of 50 are three times likelier to pay higher rates after a ticket than those 50 years old and older. Part of this could be due to how often insurance companies take a peek at your driving record: Younger drivers — who have a reputation for riskier driving — are checked more frequently than older drivers.

But drivers under the age of 30 are actually less likely to get tickets in the first place than those between the ages of 30 and 49, the survey finds.

Wealthier drivers are also more likely to get ticketed. Those with incomes of $75,000 or higher were the most likely income bracket to be ticketed — although they’re less likely that the poorest drivers to see a subsequent rise in their insurance rates.

While 21% of the wealthiest drivers paid higher premiums after a ticket, 24% of those earning under $30,000 a year had to pay higher rates. Drivers who earn between $30,000 to just under $50,000 fare the worst: 27% of those who got tickets saw higher rates.

In terms of income brackets, the sweet spot seems to be the upper-middle income bracket, as just 7% of those who earn between $50,000 and just under $75,000 paid higher premiums after a ticket.

Also, racking up more than one moving violation also increases the likelihood of having to pay more for insurance. While the most common citation, by far, is speeding, other common infractions include driving without a license, not using a seat belt, running a red light or stop sign, or using a cell phone while driving. InsuranceQuotes finds that, among drivers who have been ticketed over the past five years, just over 10% accrued four or more tickets.

MONEY car insurance

When it Makes Financial Sense to File an Auto Insurance Claim—and When It Doesn’t

When to file a car insurance claim
Guido Mieth—Getty Images

How to tell if the bump in your premiums will exceed the money you'll get back

Getting into a car accident is bad enough—you’re shaken, your vehicle is damaged, and worst of all, you or someone else may be hurt. Adding insult to injury, auto insurers these days are hiking policyholders’ rates sky-high after just one accident, even when a driver has an otherwise impeccable record.

A single claim boosts the premium by an average of 41% nationwide, according to a recent study by InsuranceQuotes.com. And in some states, the jump can be as much as 76%. (Massachusetts, California, and New Jersey are the worst.)

Considering that the average premium is $815, a fender-bender could cost you an additional $334 to $619 per year.

Even simply calling your insurer to discuss your options can have consequences. “As soon as you start talking about something that just happened, it goes on your record—it’s called an inquiry,” says Amy Danise with Insure.com. “If you build up inquiries, even if you never get a dime from a claim, you can still be viewed as high-risk, and that can affect your rates.”

All this means that you’ve got yet another thing to think about after a crash: whether you should file a claim or pay repair costs out of pocket. This road map can help you make at least that part of the situation easier.

When You’ve Had an Accident and Someone Else is Involved

You’re better off claiming, says Laura Adams, senior analyst for InsuranceQuotes.com.

If you’re at fault, and you hit another person or vehicle, he has the right to make a liability claim against you, and he could potentially sue. With insurance, you’re entitled to a legal defense and coverage of a judgment against you up to a certain amount. “The average liability claim is $15,000,” says Adams. “In those cases, it’s hard to conceive of a situation where you wouldn’t want to make that claim.”

Even if the damage seems minor, and you and the other driver agree that you’ll handle everything yourselves, that approach can backfire. “I’ve heard of cases where the other person called later and said, ‘Send me $3,000,’” says Insure.com’s Danise.

And if you wait too long to loop your insurer in—say, after you’re notified that the other driver has filed suit against you—the insurer could deny your claim entirely.

“You’re better off saying, ‘Here’s my insurer, here’s my policy number,’ and handing it off so the insurer can deal with that person,” says Danise.

150218_FF_CarAccident_ClaimPrice

When You’ve Had an Accident and No One Else Is Involved

Let’s say you back into your garage door or hit a guardrail when you skid in the snow. You’re at fault, but the only car affected is yours.

As long as you’re fairly sure there won’t be any lingering medical issues, you’re better off paying out of pocket if you can afford it.

Of course, the more money it costs to fix, the less you can probably afford it—and the more it will raise your rates.

For property damage claims of under $1,000, rates will go up 18% on average, according to numbers from Insure.com. For claims over $1,000, it’s more like 29%.

Not sure? Check out the “When to Make an Insurance Claim” calculator at InsuranceQuotes.com to see how it looks in your state.

When Your Car was Damaged, but Not in an Accident

If a tree limb falls on your hood or your car gets burglarized, that’s not your fault—and insurance companies generally won’t punish you for it.

Even if you file a comprehensive claim of $2,000 or more, you’re looking at an average rate hike of just 2%, or about $18, according to InsuranceQuotes.com. So if the damage goes above your deductible by more than a few hundred dollars, there’s no harm in claiming it.

…And If You File a Claim For Any Reason and See Your Rates Rise as a Result

Ask your insurer for the surcharge schedule—which should tell you how long it will be before your premiums return to normal levels.

Also, remember that not all insurers give accidents the same weight, so you can always shop around for a cheaper policy.

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MONEY Insurance

The Best and Worst States to Have a Fender Bender

fender bender
Getty Images

Even just one car accident can send your insurance premium soaring, a new survey finds. Especially if you live in Massachusetts, California, or New Jersey.

Filing just a single claim for more than $2,000 after a car accident can raise your auto insurance premium by more than 40% on average, according to a new study by insuranceQuotes.com, and you can expect your premium to nearly double if you file two.

The study looked at insurance premiums for a college-educated, 45-year-old woman who has never filed a claim. For that driver, a bodily injury claim will raise premiums by 45% on average, while a property damage claim will hike them by 41%. However, a comprehensive claim, such as theft or damage from falling objects, will cause only a 2% price increase.

Typically, sharp premium hikes kick in only if the accident is the driver’s fault, the study notes. If the other driver’s policy covers the claim, a policyholder will likely avoid such higher costs.

Because of different regulatory environments, the penalty varies widely depending where you live. In Maryland insurance premiums increase an average of 22% after one accident claim, the lowest hike in the nation. That’s an enviable number for drivers in Massachusetts, where premiums are closely tied to driving records. Bay State residents face a 76% increase, the highest in the nation.

For consumers, the lesson is simple: After a minor accident, you might be better off covering repair costs out of pocket rather than tapping your insurance policy.

“If there are injuries involved, you almost certainly want to file a claim,” says Michael Barry, vice president of media relations for the Insurance Information Institute, adding that bodily injury costs are often five times the payout of a property damage claim. “If it’s a fender bender, you might not want to.”

By dishing out the cash to repair a bumper, you could avoid the long-term financial hit of years worth of higher premiums. (One possible exception: Look at your policy to see if you have accident forgiveness, advises Barry.) You can run the numbers with insuranceQuotes’s “Should I Make a Claim?” calculator.

In these 10 states in particular, you might be better off taking the hit.

States With the Highest Premium Hikes After a Single $2,000 Claim
State Average annual auto premium Average increase
Massachusetts $977 76.3%
California $750 75.4%
New Jersey $1,220 62.4%
North Carolina $611 51.7%
Minnesota $719 47.9%
South Dakota $557 44.8%
Iowa $561 41.6%
New Hampshire $717 39.5%
Washington $810 39.5%
Virginia $692 37.5%

Whereas in these 10 states, a single accident won’t be as costly.​

States With the Lowest Premium Hikes After a Single $2,000 Claim
State Average annual premium Average increase
Maryland $996 21.6%
Michigan $1,049 23.4%
Montana $658 24.6%
Oklahoma $737 24.6%
Mississippi $748 25.9%
Nebraska $617 27.6%
New York $1,152 27.8%
Missouri $684 27.9%
Alabama $659 28.6%
Maine $582 29.1%

Sources: Average premiums via National Association of Insurance Commissioners (NAIC); insuranceQuotes.com.

Though many factors go into determining your premiums, the number and severity of insurance claims is a starting point for insurers, which then factor in variables like your age, driving record, and type of vehicle.

If you live in Detroit, any increase to your premium will add to an already substantial financial burden. According to carInsurance.com, drivers in the 48227 zip code in the Motor City already pay $5,109 annually, the highest average premium in the country. You can check out the website’s car insurance calculator to see how your zip code compares to that of Normal, Ill. (61761), whose residents only pay $827, the lowest in the country.

UPDATE: This post was updated to add more details about the study and to clarify the averages.

TIME Money

Why You Might Need More Car Insurance Than You Have

Car accident
Zero Creatives—Getty Images/Image Source Woman on mobile phone after car accident

That fender-bender could be more of a headache than you think

Being in a car accident, even if you’re lucky enough to escape without injury, still stinks — especially if it isn’t your fault. But what’s even worse than the inconvenience and the hassle factor is the reality that, in many states, you might not be completely covered by insurance, even if you’re a responsible driver who carries insurance.

That’s because there’s often a gap between the minimum states require drivers to carry and the amount that would be necessary to cover the cost of an accident, especially if anyone in your car is injured. Even something as minor as taking an ambulance ride to the hospital to get checked out can run into the hundreds of dollars, and costs obviously escalate depending on the severity of any injuries.

Personal finance website WalletHub.com just put together a ranking of the financial risk you face when you get behind the wheel, analyzing all 50 states and the District of Columbia to find out the legal minimum of insurance coverage drivers must carry as well as how many drivers in that state don’t bother to get insurance.

In short, stay out of of Florida and Oklahoma. Florida’s insurance requirements are lower than most other states, and 24% of drivers on the roads there are cruising around without insurance (which, yes, is illegal). In Oklahoma, requirements aren’t as low, but a whopping 26% of drivers don’t bother buying insurance. In Tennessee, Michigan, New Mexico and Mississippi, more than one in five drivers have no insurance.

How can you protect yourself? Unfortunately, it’s likely to cost you.

“In most states, drivers can purchase uninsured motorists coverage to cover their own bodily injuries and/or property damage if the at-fault driver has no insurance,” says WalletHub managing editor Karl Eisenhower.

In fact, in 21 states, you’re required to carry this type of coverage. In some states, you have to carry this insurance to cover property damage costs, while others make you carry coverage for medical costs if you’re hit by an uninsured driver. Eight states make you carry both. Drivers also have the option — and in a handful of states, the obligation — of buying insurance for personal injury protection or medical payments. “[These] will cover your medical bills after an accident regardless of fault,” Eisenhower says. “If you carry one of these . . . you can be certain any medical bills will get paid quickly.”

In states like Florida, where the minimum liability a driver has to carry is a mere $10,000 in coverage per injured person, or $20,000 per accident, getting into an accident with somebody who does have coverage but not enough of it could be a concern, too.

“Underinsured motorists coverage will protect you if your damages exceed the limits of the at-fault driver’s liability policy,” Eisenhower says. In the states of California, Massachusetts, New Jersey and Pennsylvania, a driver only has to have $5,000 worth of coverage for property damage — hardly enough to make you whole if you’re driving a luxury car or your vehicle is totaled.

“Just because someone doesn’t have sufficient insurance doesn’t reduce that person’s responsibility if he or she causes an accident,” Eisenhower adds. Unfortunately, this means you’d have to spend the time and money suing them — and be out-of-pocket for potentially thousands of dollars in the meantime — before getting compensation. If you have extra coverage for uninsured or underinsured drivers, “suing to reclaim costs is the insurance company’s headache, not yours,” Eisenhower points out.

MONEY Insurance

Google May Help You Get Car Insurance

Evidence is mounting that Google will launch an auto-insurance comparison service in the US. A perfect choice for your driverless car!

MONEY Insurance

Why Even a Fair Insurance Claim Will Send Customers Packing

The insurance claims process is so painful and outdated that about half of customers who confront it bolt no matter what.

The financial services industry has been among the slowest to embrace the mobile and other technologies that many consumers crave. Within the industry, insurers probably have been slowest—and their old-fashioned ways are stirring a high level of churn.

Insurance customers are generally pleased with their provider. Only 14% of those who submitted a claim in the past two years are unhappy with how it was handled, according to a report from Accenture. As you might expect, a high rate of those—83%—plan to switch providers. But even among the vast majority who filed a claim and were satisfied, 41% say they are likely to switch insurers in the next 12 months, the report found.

Why would satisfied customers switch? In general, their claims experience, while satisfactory, left them feeling it should have been better. “The bar has been raised and insurers now need to handle claims in a way that not only satisfies policyholders but also differentiates them from other insurers,” says Michael Costonis, global head of claims services at Accenture, a research and consulting firm.

Technology exists that would greatly streamline the claims process, he says. Consumers understand that, and when they file a claim and confront the old way of doing things they resolve to look for something better. For example, Costonis says, in the case of an auto accident, sensors could summon assistance automatically, notify a garage, and get a tow truck on the scene—all without a phone call. Your car could be fixed and delivered to your door, and if any money was due to you it might be put in your account without the tedious paperwork.

Customers expect quick claims and fair pricing. But they also want transparency and this is where technology can make a big difference. “More and more, especially with younger customers, this takes the form of providing anywhere, anytime access online or through mobile apps,” Costonis says. In the study, 44% said they would switch providers to be able to use digital channels to monitor the claims process.

Broader use of technology could help in other ways too. Three in four customers are willing to share more personal information in order to get better rates, the study found. Insurers could easily gather information about the condition of cars and customer driving habits. They could also gather information collected by smoke, carbon monoxide, humidity, and motion detectors. Such data could help them help their customers manage risks and wind up filing fewer claims—and that is the Holy Grail because customers hate the process and insurers lose a high percentage of those who file a claim no matter what.

Related: How to make sure you have enough insurance coverage

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