What is the multi-car discount, how it’s good for agents, insurance companies and consumers alike, and other things to consider when dealing with it.

Two cars. Yup, they qualify.

Regardless of your driving record or what you drive, when shopping for car insurance you should be on the lookout for one thing: discounts, and plenty of them. While different companies offer different discounts, just about everyone out there has a multi-car discount. In fact, we can’t think of a single major standard auto insurance carrier that doesn’t offer it.

The multi-car discount is beneficial both to you and to the insurance company in several ways. If you qualify for it (and that’s pretty easy: just have more than one car in your household), you should definitely go for it.

Why Insurance Agents (and Companies) Like the Multi-car Discount

Any insurance agent doing his or her job is out there constantly scrambling for new business. At least just as important is retention. Established agents and companies alike make the clear majority of their income on renewals.  From their standpoint keeping clients is just as important as getting new ones.

Insurance companies know their customers are much less likely to drop them if they have more than one policy with them. Therefore, they are keen to do whatever it takes to get those multiple policies. This is the main impetus for companies to offer a multi-car discount.

“Multi-line” companies such as Allstate, State Farm and Farmers take this a step further. By definition, multi-line insurance companies sell other types of insurance such as homeowners, renters and life insurance in addition to auto insurance. Accordingly, they routinely offer additional auto insurance discounts if you buy other insurance lines from them because of the retention factor. This “packaging” philosophy is big deal among multi-line companies. Ask any of their agents.

Why the Multi-car Discount is Good For You

While you certainly can shop around and insure each of your vehicles with different companies, that’s a hassle at best. Wouldn’t it be much easier to find one good company and insure all your vehicles with them? You get a discount for it, so why not?

The multi-car discount usually applies to all vehicles driven by people residing at a common address. This typically includes spouses, but it can also include relatives or friends living with you. It’s not necessary for all the vehicles to be registered to the same person. Each driver in your household can have one (or more) car registered to them.

The multi-car discount is also particularly helpful if you have a teenage driver. Insuring teenagers is invariably expensive, but including your teen and his or her car in your multi-car discount can take quite a bit of the sting out of that. Indeed, it makes no sense for anyone to insure teens on their own when a multi-car discount is available. Some carriers will even qualify them for the discount even if they have to insure with a non-standard company. That is, of course, if they insure with a non-standard company affiliated with the aforementioned carrier. Most companies have at least one.

What’s more, the multi-car discount doesn’t necessary have to involve another “car.” Some companies will allow you to include a motorcycle or recreational vehicle to qualify for the discount. Ask your agent for more information specific to your company.

Other Multi-car Discount Considerations

In order to qualify for the multi-car discount, all of your vehicles need to pass underwriting on their own merit. This can exclude any kit cars, classic cars and commercial vehicles you may own (although other multi-car discounts are routinely available for the latter).

If you’re insuring a lot of vehicles in your household, you may want to consider an umbrella policy as well. An umbrella policy is an inexpensive way to effectively increase your liability coverage in a dramatic fashion, typically in increments of $1 million above and beyond the underlying policy limits. Umbrella policies cover both homeowners and auto policies, although other property and casualty lines may sometimes be included as well. Most companies require minimum underlying limits on the base policies and – of course – require that you have the underlying policies with them.

If you’ve acquired a lot of assets, you’ve also acquired a lot of risk exposure. An umbrella policy helps you cover that risk in an effective manner.

No fault auto insurance defined, where you need it, different types of bodily injury coverage and criticisms of the no fault auto insurance model.

In the US, many urban drivers need no fault auto insurance.

When dealing with auto liability insurance, most of the United States is familiar with the concept of “fault.” That is, if someone hits your car and is found liable, his or her insurance company will pay to fix your car.

However, there are states where this isn’t the case. Instead, in these “no fault” states, your insurance may pay for any accidents you have regardless of what happens. No fault insurance can strike many as an odd concept. Indeed, even many insurance agents who don’t operate in no fault states may be unfamiliar with it.

But if you live in a no fault state, or are planning to move to one, you should be familiar with the concept.

What is No Fault Insurance?

Most states operate in a “traditional tort” auto insurance legal environment. That is, whoever is found at fault pays for an accident. However, as the number of uninsured and underinsured drivers rose despite legal insurance requirements, by the early 1970s many began to question this model. The proposed fix? Let your insurance fix your car regardless of fault. Hence, no fault insurance, also some times known as “personal injury protection” (PIP).

Although exact details vary from state to state, in its basic form no fault insurance works in much the same way as a zero deductible full coverage auto insurance policy. If your car needs fixed, it’s fixed on your insurance. This, however, is a very general overview. If you live in a no fault state, it’s important to discuss the specifics with your insurance agent.

The concept of legal liability remains much the same in no fault auto insurance states. Fault is still assigned. The difference is if you’re found at fault, your insurance increases your rates after all claims are paid. If you’re not, they don’t.

No fault insurance jurisdictions tend to be urban with large numbers of uninsured drivers, although there are exceptions. Currently no fault auto jurisdictions in the United States are: Florida, Hawaii, Kansas, Massachusetts, Michigan, Minnesota, New York, North Dakota, Puerto Rico and Utah. Three other states, Kentucky, New Jersey and Pennsylvania, allow drivers to choose either a no fault or a traditional tort auto insurance policy. All Canadian provinces and territories employ some form of no fault insurance.

Qualitative and Quantitative Threshold in No Fault Insurance

Because bodily injury claims are also paid by one’s own insurance rather than by someone else’s, there is no separate medical payments coverage in no fault states. That’s part of your liability coverage. However, some no fault states set a “qualitative threshold” on bodily injury claims, while others employ a “quantitative threshold.”

Quantitative threshold no fault insurance sets a monetary limit that must be spent on medical bills directly resulting from an accident before a tort can can be pursued. Qualitative threshold no fault insurance allows a tort only for particularly serious bodily injury categories, such as death or permanent disfigurement.

Criticisms of No Fault Insurance

In the 1970s approximately half the United States experimented with no fault auto insurance. However, over time several states returned to the traditional tort model. Why? Well, as it turns out no fault auto insurance does have a couple major drawbacks.

A common criticism of no fault auto insurance is that it’s expensive. Indeed, insurance rates in no fault states tend to be higher than rates in traditional tort states for similar policies. This could be due to any number of factors, including increased insurance company risk exposure in no fault states as well as the high number of uninsured drivers who tend to operate in no fault states.

No fault insurance states also tend to have fraud issues on levels simply not seen elsewhere. This is particularly true in New York and Florida, which have both experienced serious auto insurance fraud trends in recent years. The problem has been particularly bad in New York City, where no fault auto insurance fraud continues to comprise a significant amount of the city’s civil court caseload despite state attempts to address the situation.

What uninsured and underinsured coverage is, how it works, and why you need it – and what happens if you don’t have it.

Life can be hard enough. UM/UIM makes it simpler.

In a perfect world, everyone who drives a vehicle would carry adequate auto insurance coverage. Of course, in a perfect world there wouldn’t be any car accidents either, so would there be a need for auto insurance in the first place?

Philosophical nitpicking aside, ours is most definitely not a perfect world. Car accidents happen, and they can be caused by people who either don’t have enough liability coverage to cover your costs, or worse don’t have auto insurance at all.

What if this happens to you? Do you collect what you can from their insurance company and sue for the rest? Do you let your insurance company subrogate against them and hope for the best? Well, you can do any of those things, or you use your uninsured and underinsured motorist (UM/UIM) coverage.

What is Uninsured and Underinsured Coverage?

UM/UIM is a type of auto liability insurance coverage that specifically covers you against uninsured and underinsured drivers. Some states require UM/UIM coverage by statute as part of your legally required auto liability insurance. In these states it’s not an option. It’s still a good thing to have everywhere else.

UM/UIM coverage is expressed in the same way as general auto liability coverage, either with a three-pronged “split limit” dealing with bodily injury and property damage, or a “combined single limit.” Usually UM/UIM is written at the same levels as liability coverage for any given policy.

How Uninsured and Underinsured Coverage Works

If you’re in an accident in a “traditional tort” auto insurance state (and most states are), once fault is determined the at-fault party’s insurance company will pay for bodily injury and property damage claims up to the stated limits. This is all fine and good until the limits run out. For example if an at-fault party totals your Lexus in California, they may only have $5,000 in property damage coverage, the minimum required by California law. Well, $5,000 isn’t going to cover a totaled Lexus. Not even close.

The same concept applies if our at-fault party has no insurance at all. Make no mistake, the at-fault party is legally liable for the accident regardless of whether he has insurance or not. You and your insurance company are well within your rights to go after him, but litigation is often a slow process with no guarantee for recovery. In the meantime, you need to get back on the road.

To make up these shortfalls, you’ll need to file a UM/UIM claim with your agent. After the other guy’s insurance runs out, your UM/UIM coverage takes up the slack to get you back to where you were before the accident, a concept insurance professionals call “indemnification.”

The Value of Uninsured and Underinsured Coverage

In states where it’s not required, one may be tempted to drop UM/UIM coverage to save on premium. While this can be done, it’s generally not recommended. For one, because UM/UIM claims are less common than liability or full coverage claims since by definition it doesn’t come into play until another type of auto insurance coverage option is exhausted, it has a smaller risk exposure and therefore a smaller premium. Dropping UM/UIM rarely represents significant cost savings in and of itself.

For another, not having UM/UIM increases your risk exposure to uninsured and underinsured drivers. If you’re in an accident with an uninsured or underinsured at-fault party, you may find yourself with no choice but to either litigate or subrogate through your insurance company. Both may represent additional costs, either in the form of attorney fees or increased premium due to having to fix your car through a full coverage claim.

A history of car insurance coverage, a general overview of what it is, and it’s different components.

Car Insurance. Yeah, it's been around for a while.

A great deal can be written (and indeed, has been written) on car insurance. There are so many components to consider that one could easily fill a book. While exploring these components in detail is necessary, it’s also a good idea to take a look at car insurance coverage from a very general standpoint.

A Brief History of Car Insurance Coverage

In the larger insurance realm, auto insurance is part of what’s known as property and casualty insurance, or P&C. In addition to auto insurance, common types of property and casualty insurance include homeowner’s, renter’s and most commercial insurance products. The origins of P&C insurance in the United States dates back to colonial times, when groups of neighbors would establish simple communal burnout funds. One of the first of these funds was founded in Philadelphia by none other than Benjamin Franklin.

The first true auto insurance policy was a liability only policy written in 1897 in Dayton, Ohio, by Travelers. This policy, purchased for $1,000 (an astounding amount of cash in the day) simply covered the driver against accidental death, bodily injury and property damage. Fortunately for us, auto insurance today covers a lot more for a lot less.

As cars became more commonplace during the first years of the 20^th Century, auto insurers were beginning to determine auto insurance premiums based on demographics and risk. Both Farmers Insurance Group in California and State Farm Insurance in Illinois were founded in the 1920s and originally sold auto insurance policies to, you guessed it, farmers. Why? Well, at the time it was believed farmers were good drivers simply because they were farmers. Today auto insurance risk assessment is much more scientific, literally considering thousands of variables.

Liability Car Insurance Coverage

At a basic level, auto insurance is comprised of two main components: liability and full coverage. As it did for that guy in Dayton over a century ago, liability auto insurance today covers drivers against accidental death, bodily injury and property damage. It also covers against damages caused by uninsured and underinsured motorists. This coverage is known as UM/UIM.

Liability coverage is required in all 50 states, the District of Colombia, Puerto Rico and throughout Canada. Some states also require UM/UIM coverage. Exact coverage requirements vary, but many areas require only a small amount of coverage. These state minimum limits are generally inadequate for anything other than minor accidents.

Many insurance professionals recommend carrying liability limits of at least $50,000 for bodily injury to one person, $100,000 for bodily injury to any group of people and $50,000 in property damage in any one accident. This is expressed in industry standard “split limit” format as 50/100/50. Some companies also offer a combined single limit, or CSL, coverage. The rough CSL equivalent to a 50/100/50 policy is $100,000 CSL. Both of these limits well exceed all current legal requirements.

Full Coverage Car Insurance Coverage

Full coverage protects your own car against property damage in a wide variety of situations. As its name implies, collision coverage helps fix your vehicle if it is hit. Comprehensive coverage covers a wide variety of other perils, including theft, vandalism, animal strikes and auto glass damage.

No government entity in the United States legally requires full coverage, however most auto lenders require it as part of their lending agreements. Failing to do so opens you up to “force placed” insurance, which is extremely expensive. If you’re making payments on your car, keep full coverage. It’s worth it.

What is rental reimbursement, when to rent a car, why you may not want the rental company’s “insurance”, and using the coverage.

She may need a rental car after her accident.

Consider this: you got hit and your car sustained some pretty decent damage. No one was hurt, thankfully. You filed a claim on your vehicle, the adjuster took a look at it and everything is in order. The shop says you’ll have your ride back in a few days.

That’s all fine and good, but you still need a car to get to work. What are you going to do in the meantime? Take the bus?

Borrow Uncle Maynard’s ’72 Pinto?

Fortunately many insurance companies are way ahead of you on this. They offer rental reimbursement coverage.

How Rental Reimbursement Works

Rental reimbursement coverage, also known as “loss of use,” is an optional auto insurance coverage which is often considered in the same breath as towing or roadside assistance coverage. It’s not required by anyone and often overlooked, sometimes even by agents. However, like towing and roadside assistance, it’s not very expensive and real nice to have when you need it.

As with any other coverage there can be differences between companies. Rental reimbursement coverage is typically offered on a per diem basis. This reimbursement is typically capped at around $25/day for a set amount of time, say six weeks. You go to any car rental establishment, pick up a rental on your own dime and your insurance company reimburses you directly.

It’s pretty straightforward.

Renting a Car With a Common Pitfall

However, renting a car often poses its own set of insurance-related challenges. Regardless of why you’re renting a car in the first place, most car rental agencies will try to upsell you on their own insurance. Keep in mind, this is often not technically “insurance” per se, but a reimbursement scheme for any damages they may charge you.

Many people take this insurance not realizing their own insurance company would cover them in a rental at the same levels of coverage they have with their own car. In addition this is usually the case if you’re renting anywhere in the United States or Canada. It’s good stuff to know both if you’re in an accident or if you’re going on vacation. Before paying for a potentially unnecessary “service,” ask your agent if your policy covers you driving a rental.

Also keep in mind most auto rental companies won’t rent to anyone under 25, period. If this applies to you, that Pinto may be your only option despite your rental reimbursement coverage.

To Rent or Not to Rent

One nice thing about rental reimbursement coverage is that often times you don’t need to actually rent a car to qualify for it. If you file a rental reimbursement claim and are approved, the insurance company just sends you a check. They’re not going to follow up to see if you actually rented a car.

Since it’s technically a loss of use coverage, you could use the money to compensate a family member for temporary use of their car. Alternatively, you could just pocket the money if you so desired. It’s entirely up to you. Check with your insurance agent to make sure this is OK first, but chances are it is.