New York Auto Insurance: What You Need To Know
By Ara Rubyan
How much insurance must I carry?
New York State law requires that motorists carry a minimum amount of liability insurance of $25,000 for bodily injury to one person, $50,000 for bodily injury to all persons, and $10,000 for property damage in any one accident. Mandatory "no-fault" coverage of $50,000 is also required. Many motorists carry higher liability limits and additional personal injury protection beyond these minimum benefits required by law. The law also requires all auto insurance policies to provide uninsured motorists coverage (for bodily injury), subject to the same minimums. In addition, SUM (Supplementary Uninsured Motorists) coverage can also be purchased, in amounts up to the bodily injury liability limits of an insured's own policy. An insurer must offer SUM limits of $250,000 per person per accident and $500,000 per accident ($250,000/$500,000) if a person has bodily injury liability limits of that amount or higher. Insurers may offer higher SUM limits if they wish.
What is the difference between "cancellation" and "non-renewal" of a policy?
Under the Insurance Law, a personal automobile policy must remain in effect for a required one year policy period. If an insurer decides not to renew the policy at the expiration of this period, this is a "non-renewal". However, if the insurer terminates the policy at any other time (which can only be done under limited circumstances), this is a "cancellation".
My policy has been canceled! Can the company do this?
For any new personal automobile insurance policy, an insurer may cancel for any reason within the first 60 days subject to the insurer’s established underwriting guidelines which are not required to be filed with the Insurance Department. Otherwise, a policy can only be canceled in mid-term (after 60 days on a new policy) for a few specific reasons: (1) suspension or revocation of a driver's license of the named insured or any other person who customarily operates an automobile insured under the policy (not including administrative suspensions); (2) discovery of fraud or material misrepresentation in obtaining the policy or in making a claim; or (3) nonpayment of premium. However, policies in the NYAIP (New York Automobile Insurance Plan a/k/a "assigned risk" plan) may be subject to certain additional criteria for cancellation.
My insurer says it won't renew my policy. What can I do?
Under the Insurance Law, when a non-commercial motor vehicle policy is non-renewed, a notice must be mailed to the policyholder between 45 and 60 days before policy expiration. In this way, the insured has time to take action to obtain other insurance, and may contact other agents, brokers or insurers writing direct business.
An insurer may non-renew up to 2% of its non-commercial motor vehicle policies, plus one policy for each two new policies written, during each calendar year. Any non-renewals by an insurer must be made according to the insurer’s established underwriting guidelines, which are not required to be filed with the Insurance Department. The Insurance Department closely monitors compliance with the aforementioned statutory 2% limitation via an annual report from private passenger automobile insurers.
Why am I in the "assigned-risk" plan, why is it so expensive, and how do I get out of it?
The NYAIP (New York Automobile Insurance Plan) is a mechanism through which consumers are assigned to an insurance company on an involuntary basis, if they cannot find an insurer in the voluntary market who will offer them a policy. The NYAIP consists of those policyholders which an insurer does not believe can be insured at a reasonable profit, generally because of poor driving records, having little or no prior driving experience, or having had a certain "frequency of claims".
The rates and availability of automobile insurance are established by a competitive insurance industry, based on verifiable loss experience data, and monitored by the Insurance Department. The rates for policies written through the NYAIP are generally higher, since the loss experience for these drivers, as a group, is consistently worse than the losses and expenses of those in the voluntary market.
If you are currently insured under the NYAIP, your insurer must continue to insure you for 3 years; however this does not limit you from looking to purchase another policy in the voluntary market at any time. New York State fosters an actively competitive voluntary automobile insurance marketplace, and we always encourage consumers to shop around to obtain the best available coverage and service at the most reasonable price. As insurance rates may vary considerably from one insurer to another, it definitely pays to shop around for automobile insurance if you are in the NYAIP or are not satisfied with your present insurer. You may contact several agents and brokers and those insurers that market their products directly to consumers.
Are my auto insurance rates affected by where I live?
Insurance rates are based upon the company's underlying costs, which include the number of claims and the severity of those claims. New York State is divided into approximately 70 rating territories to reflect differences in claim costs in those territories and other considerations. Traffic patterns, population demographics, and the cost of goods and services contribute to insured cost variations. For example, if Town A's loss experience is more severe than that of Town B, then auto premiums in Town A will be higher than those of Town B.
What discounts can I get on my car insurance?
There are a number of available discounts to help reduce the cost of an individual's auto insurance policy. Some of these are:
- Accident prevention course.
- Automatic seat belts or air bags.
- Factory installed anti-lock braking system (ABS).
- Anti-theft devices (such as alarm systems or ignition "cutoff" devices, certain electronic-tracking devices, or qualifying identifying window glass etching).
- Participation in a Combat Auto Theft (CAT) Program.
- Factory-installed daytime running lamps (DRL).
- "Careful Driver" or "Accident-Free".
- A "Multi-Policy" or "Account" discount.
- Driver Training (for operators under age 21)
Can my insurance company raise my premium due to an accident or traffic ticket?
Such an increase is known as a surcharge. Surcharges are based on the fact that a driver who has previously been at fault in one or more accidents, or has a record of traffic convictions, has an increased likelihood of being involved in future accidents.
Insurers "classify" drivers according to such criteria as age of driver, geographical location, mileage and type of vehicle. To further refine those classifications, many insurers use "merit rating plans", a point system in which increases are applied according to an individual driver's record (traffic convictions and accidents).
Surcharges are applied to liability (bodily injury & property damage), collision and no-fault (PIP) coverages, and are only allowed for:
- accidents involving bodily injury, or losses to property in excess of the accident reporting threshold ($1,000), where the insured driver is at fault, or
- convictions for certain violations which are chargeable under the Insurance Law.
A surcharge is used as a tool to properly price the exposure the insurer is writing, and not as a means to recoup payment made under a claim. The total dollar amount paid as the result of a claim does not affect the surcharge. An insured being surcharged for a particular accident will pay the same amount regardless if the damages were (for example) $2,000 or $50,000.
Why are auto insurance rates higher for younger drivers?
Insurance rates are based on the average experience of a group of persons with similar characteristics (classification). Young drivers historically have had poorer loss experience (both in the frequency of accidents and the cost of those accidents) than older drivers. By charging young drivers higher rates, those drivers pay their fair share of insurance costs and older drivers are not asked to subsidize them. In addition, rates are generally higher for males because, consistently, female drivers incur fewer and/or less severe claims than males.
Is my insurance company allowed to automatically include my son/daughter on my policy?
An insurer is permitted to consider all resident operators of an insured vehicle in the rating of an automobile policy, including a child, although he/she may only have a learner's permit. This is because insurers are permitted to use classifications that reflect a possible exposure for liability on the part of the insurer, in the event that bodily injury or property damage occurs due to that child's operation of the vehicle. Such a "limited use" classification, however, reflects the reduced likelihood of an incident due to "occasional" operation by a youthful driver, and is rated lower than if that person were the "principal operator". In addition, children living away at school (over 100 miles) are generally eligible for a reduced rate.
How do I know if I am being charged the right premium?
The New York State Insurance Department each year responds to numerous requests by individual insureds regarding the amount of premium charged for their private passenger automobile insurance policies. In the overwhelming majority of cases, it was found that insurers have rated the policy correctly, assuming that the information on which the policy is being rated is correct. Therefore, it is important that you review your policy declarations page(s), to ensure that the information is correct. By law, an insurer is required to include a Rating Information Form with your policy, explaining the items shown on your declarations. The dollar amount of all discounts and surcharges must be shown on the policy declarations page as well.
My insurance company is rating me based on something (an accident or traffic ticket) that didn't happen. Where does this information come from and how can I correct any errors?
In addition to driving records from the Department of Motor Vehicles, automobile insurers may obtain information about your insurance and driving history from other sources. One such source is CLUE (Comprehensive Loss Underwriting Exchange), an information database used by insurers. This system, which functions similar to a credit reporting agency, gathers data from insurers regarding their past and present insureds' claim histories. When an insurer writes and/or rates a policy, it may request a report on an applicant/insured from this system. The insurer does have the right to pertinent information regarding any risk they may consider accepting, which includes information on accidents and/or traffic violations.
An insurer must notify you whenever CLUE has been used in making any decision or change regarding your policy. The insurer should also verify any information on which it bases its underwriting decisions, regardless of the source. In any case, if information in a CLUE report has been used against you, you may ask your insurer for more information on how to obtain copy of your CLUE report.
What is a "deductible"?
A deductible is an amount that you agree to be responsible for in the event of a loss under the physical damage (collision or comprehensive) coverages of your policy. Deductibles are offered on some coverages to give insureds flexibility in the cost of insurance and the amounts they wish to be responsible for. You may reduce your auto insurance costs by raising the deductibles on physical damage coverages. You should review the amount of the deductibles you now carry on these coverages to determine whether it makes sense for you to absorb a larger portion of your loss in the event of an accident, in return for a lower premium charge. Under the law, your insurer is required to furnish you with information about how much you may save by adjusting your deductibles.
Am I protected by my insurance
when I drive a rental car?
Your motor vehicle liability insurance policy covers you for bodily injury and property damage liability, as well as no-fault, when you drive a rental vehicle. However, this coverage is provided on an "excess" basis, which means that your policy will cover you if the amount of damage or loss exceeds the insurance coverage provided by the rental vehicle company. If the vehicle was rented in New York State, the rental vehicle company must provide the minimum required coverages (see above "How much insurance must I carry?").
A rental vehicle company may hold a renter responsible for damage to, or loss of, rental vehicles, including loss of use. However, your motor vehicle liability policy may provide this coverage, subject to certain exclusions in the policy and certain other exceptions (See Collision Damage Waivers (or Optional Vehicle Protection) and Rental Vehicle Coverage: Some Questions and Answers.). It is important to know that you as a renter may be held fully responsible for damage to a rental vehicle unless an "optional vehicle protection" is purchased from the rental vehicle company, or you have insurance coverage under your motor vehicle insurance policy or through your credit card.
What if I don’t have a motor vehicle insurance policy when I rent a motor vehicle?
Rental vehicle companies in New York are required to maintain insurance or self-insure in the amount of the minimum liability limits specified in the law. However, people who frequently use vehicles that they do not own, such as for business use, or who rent cars often, may want to consider purchasing liability coverage above the minimum limits. Some insurers offer "Non-Owned Automobile Liability Coverage" policies, which provide bodily injury and property damage liability coverages to the insured individual.
Some rental vehicle companies are licensed as insurance agents to sell supplemental liability coverage, at higher limits than the amount provided by the rental vehicle company. In addition, other coverages may also be offered through the rental agency, such as accident and health and personal effects coverages.
What happens if I am injured by an uninsured vehicle?
Uninsured Motorists Coverage protects you, your family members who live with you, and occupants of your car, in the event they are injured as the result of negligent actions by an uninsured vehicle or hit-and-run motorist, in accidents occurring in New York State.
A claim may be filed with your auto insurance company under this coverage if anyone in your car is injured by the driver of an uninsured vehicle or a hit-and-run motorist, or if you or a member of your family is injured while in an uninsured vehicle, or injured as a pedestrian by an uninsured or hit-and-run motorist. If you do not own a car, but a relative in your household does, you may be covered under that policy. If no other coverage is available when injured as a pedestrian by an uninsured vehicle or hit-and-run driver or as an occupant of an uninsured vehicle in New York State, you may still be eligible for uninsured motorist protection from the Motor Vehicle Accident Indemnification Corporation (MVAIC).
You may also wish to consider purchasing Supplementary Uninsured Motorists (SUM) coverage in order to protect against out-of-state accidents, or the possibility of an accident involving another motor vehicle whose owner or operator was negligent and who may be insured for third-party bodily injury, but only at relatively low liability limits, in comparison to your own.
May an insurance company charge installment fees?
Insurers' rate calculations are based on expectations of investment income as well as anticipated loss experience. These calculations are also based on the assumption that the full premium is received at the beginning of the policy period. By not receiving the full premium up-front, the insurer is losing some of this investment income, as well as incurring additional service costs. Therefore insurers charge fees to make up for some of this lost income. The Insurance Department's standing opinion, first expressed many years ago, is that premium installment payments are consumer credit transactions and therefore do not fall within the jurisdiction of the Insurance Department or the Insurance Law. All such fees, including those for bounced checks and late payments, are subject to The New York State Banking Law.
I am going to a broker to purchase an insurance policy. What should I know or ask to make an informed decision?
Ask whether the person you are talking to is a licensed broker or agent (producer). If possible get a look at his/her license and jot down the insurance license number and the expiration date. If the license is not current, do not enter into any transaction with this person.
- The temporary ID card for your new policy must have the name and address of the producer as indicated on the license.
- Avoid paying a premium in cash and always obtain a breakdown of all moneys paid to the producer, signed by the producer (a detailed receipt). Also, insist that any non-premium related charges be paid separately.
- Always list the purpose of the payment on the check.
- Always fill out the application honestly.
- Never sign an incomplete application.
- Never sign any document without reading it.
- Always obtain a copy of the application and any other documents which you signed.
Be aware that producers often charge service fees. For a service fee to be collected, the insured must agree, in writing, to the amount charged. For NYAIP business, the producer's fee is limited to $40.00 per year plus the actual cost of the use of the Electronic Submission Procedure (TML), DMV Reports for non-New York operators, Express Mail, and Certified Mail.
If you are unhappy about a service fee, you can attempt to negotiate with the producer or attempt to find another producer whose service fee policy is acceptable to you.
Study any other fees carefully. Some producers sell "Motor Clubs" which provide towing and possibly other services. Many of these clubs provide very limited services for a higher cost when compared with the better known national auto clubs. Also, you may already have towing services from another source. These services are not required for insurance purposes.
My broker gave me a quote on my automobile insurance, but when I got the policy the premium was much higher. Do I have to pay the premium that the insurance company is asking for? Why?
Yes, you have to pay the premium that the company is asking for. The company must charge the premium in accordance with the rates that they have on file with this Department. There are several reasons why the company's premium may be higher than the quote provided by the broker. For example, the company may be applying a surcharge for an accident or ticket that the broker was not aware of. If you feel that your broker gave you an erroneous quote deliberately in order to sell you the policy, you may file a complaint with this Department.
The insurance company pays the broker a commission on my policy, why do I have to pay a broker's fee?
The broker is permitted by the Insurance Law to charge a fee over and above premiums, with the insured's signed consent. In order for the broker to collect a fee, the insured must sign an agreement acknowledging the amount to be charged. Once the proper form is signed, there is no limit on the amount to be charged, provided that the amount is acknowledged in the agreement. The New York Automobile Insurance Plan (Assigned Risk Plan) limits the broker's fee to a maximum of $40.00 for applications placed through the Assigned Risk Plan. Also, with an assigned risk policy, the broker may pass along to the insured the actual charges for plus the actual cost of the use of the Electronic Submission Procedure (TML), DMV Reports for non-New York operators, Express Mail, or Certified Mail. The insured does have the right to shop around for a broker who does not charge a fee.
I was involved in an accident and the police report provided a three digit code for the other party's insurer. How do I find out what company is represented by this code?
Please select this link to locate the name and address of the company in question. You may also contact this Department at 212-480-6400 or 1-800-342-3736.
I had an accident or loss. How do I submit a claim?
Send a letter to the insurance company that you wish to file the claim with and ask for a claim form. You must also notify your own carrier.
What is an adjuster?
There are two types of adjusters licensed by this Department, independent and public.
An Independent Adjuster handles claims on behalf of an insurance company. This person receives either fees or compensation from the company for which he/she is hired to review (adjust) claims.
A Public Adjuster is hired by the claimant to evaluate the loss and negotiates a loss payment on his or her behalf with either the insurance company or its adjuster. The Public Adjuster's fee is based on an agreed percentage of loss, limited to twelve and one half percent (12.5%), and must be listed in a signed agreement.
What is an appraisal clause?
The appraisal clause is a provision which may be in your policy and is used to resolve a dispute where the only question is the amount of damages. The clause provides that the claimant and the company each pick an appraiser and the appraisers are left to come to an agreement. For issues that cannot be resolved by the appraisers, an umpire is chosen to make a determination.
I was involved in an accident or my car was stolen. How much is my automobile worth?
You may obtain a value for your automobile by writing to this Department and including the following information:
- The Vehicle Identification Number(VIN);
- Year, make, and model;
- Four door/two door/station wagon/hatchback;
- Engine size, e.g., 4, 6, or 8 cylinder;
- All major options - a/c, p/w, a/t, or m/t, etc.;
- Date of loss;
- A daytime phone number where you can be reached should additional information be needed.
After your request is processed, you will be mailed a valuation based on the Red Book and the NADA book retail values.
Does the insurance company have to utilize the Red Book and the NADA book when valuating a total loss?
No. Pursuant to Regulation 64, insurance companies are allowed to use a number of different methods when valuing a Total Loss. Although the average of the Red Book and the NADA book is an allowable method available to insurers, it is not the only one. Some of the other methods include a market survey or obtaining "a quotation for a substantially similar vehicle, obtained by the insurer from a qualified dealer located reasonably convenient to the insured."
What is my "right of recourse"?
Pursuant to Regulation 64 concerning the calculation of most vehicle total losses, you have 35 days from the date of mailing of the settlement check to deliver a letter to the company stating that you are unable to find a comparable vehicle for the offer made. Then the company (or you) must find a substantially similar vehicle (same year, make, model, condition, and similar mileage) that is available for sale and either pay the difference, or with the insured's permission buy the vehicle.
[The information on this page was adapted from the New York State Insurance Department.]
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