Frequently Asked Questions – Automobile Insurance

FAQ SHEET

PI-233 (R 04/2024)

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Frequently Asked Questions – Automobile Insurance

The Automobile Insurance Policy

What is automobile insurance?

Automobile insurance is a contractual agreement between an insurance company and an insured (policyholder). In

exchange for a premium, the insurance company promises to provide bodily injury liability coverage, property

damage liability coverage, and uninsured motorist coverage.

Who does the automobile policy cover?

The personal automobile policy provides coverage to the named insured, spouse, and other relatives living in the

home, and anyone who has permission from the insured to operate the vehicle.

What are the different parts of the automobile policy?

The first section of the policy is the "declarations page," which lists what coverages are in effect and the dollar

amounts of coverages. The next section of the policy includes the actual contract language, clearly describing the

insurance company's rights and responsibilities as well as the policyholders. The policy may also contain a third

section called the

endorsement section, which changes or modifies the policy. Certain general provisions are

required by law, but policies can be very different. It is important to read any policy issued to you as soon as you

receive it. If you have questions, contact your insurance agent or company for clarification.

Wisconsin’s Financial Responsibility Law

Is automobile insurance mandatory in Wisconsin?

Yes. All Wisconsin drivers are required to have an automobile insurance policy in force or, in limited situations,

other security that could be a surety bond, personal funds, or certificate of self-insurance when operating a motor

vehicle in Wisconsin. Details are available on the Department of Transportation's website

wisconsindot.gov/Pages/dmv/license-drvs/susp-or-rvkd/proof-of-insurance.aspx.

If I buy automobile insurance, what coverages are required in Wisconsin, and what are the minimum limits I can

purchase?

Your automobile insurance policy must provide the following minimum liability coverage:

• $25,000 for injury or death of one person

• $50,000 for injury or death of two or more people

• $10,000 for property damage

Wisconsin law also requires uninsured motorist coverage with a minimum limit of $25,000 for one person and

$50,000 for two or more people for bodily injury coverage.

You may want to protect your assets by purchasing more coverage than the minimum required in Wisconsin. Higher

limits are usually available, but you may have to pay an additional premium.

What is covered under bodily injury liability coverage?

This coverage does not protect you or your vehicle directly. If you cause an accident injuring other people, it

protects you from their claims up to the stated amounts for medical expenses, lost wages, pain and suffering, and

other losses. It will also usually pay if the accident was caused by a member of your family living with you or a

person using your automobile with your consent. It does not pay for bodily injury you may sustain.

What is covered under property damage liability coverage?

Property damage liability coverage pays for any damage you cause to the property of others up to the stated

amount provided by the policy (i.e., a crushed fender, broken glass, or a damaged wall or fence). Your insurance will

pay for this damage if you were driving your automobile or if it was being driven by another person with your

consent. Property damage liability pays if you damage government property like a light pole or signpost, up to the

limit you choose.

What is uninsured motorist coverage?

Uninsured motorist (UM) coverage applies to bodily injury you, your family, and other occupants of your vehicle

incur when hit by an uninsured motorist or hit-and-run driver. It also covers you and your family if injured as a

pedestrian when struck by an uninsured motorist or hit-and-run driver. It protects you by making sure money is

available to pay for your losses that were caused by someone else. The minimum amount of coverage required by

law is $25,000 per person and $50,000 per accident for bodily injury only.

You may want to purchase more than the minimum coverage required by law if you feel the need for more

protection. Uninsured motorist coverage does not cover property damage to your vehicle and does not

protect the other driver. Your insurer may sue the other driver for any money the insurer pays you because of the

other driver's negligence.

What is underinsured motorists coverage?

Underinsured motorists (UIM) coverage increases the bodily injury protection to you and the people in your vehicle

up to the amount of coverage you purchase if the at-fault party's bodily injury liability insurance limits are lower

than your UIM coverage limits. The maximum amount payable is the difference between the two limits.

Underinsured motorist coverage is not mandatory. Notice of coverage availability is required with the delivery of the

policy. Coverage may be rejected. However, if requested, minimum coverage limits of $50,000 per person and

$100,000 per accident are required.

What is medical payments coverage?

Medical payments coverage pays medical or funeral expenses for you or others injured or killed in an accident while

riding or driving in your automobile. Medical payments coverage usually covers only those expenses not covered by

health insurance, such as

copayments, deductibles, etc. It will pay for your medical and funeral expenses even if you

cause the accident.

Insurance companies must offer this coverage to you, but you can reject it. If you elect to have medical payments

coverage, the minimum limit is $1,000.

Physical Damage Coverage

What does collision coverage provide?

Collision coverage pays for physical damage to your vehicle caused by your vehicle colliding with an object,

including another vehicle, or if it overturns. In the event of an accident, collision coverage will pay to repair your

vehicle up to the amount equal to the value of the vehicle before the accident. Your insurer will pay for such

damage even if the collision is your fault.

Collision premiums are generally based on the make, model, and year of your vehicle. You should evaluate the

current market value of your vehicle and your ability to afford a similar vehicle should it be destroyed before you

purchase this coverage. You may not need this coverage if your vehicle has decreased in value or if you can afford

to replace it.

What does comprehensive coverage provide?

Comprehensive (sometimes called "other than collision") coverage pays for damage to your vehicle resulting from

fire, vandalism, water, hail, glass breakage, wind, falling objects, civil commotion, or hitting a bird or an animal.

Damage from striking a deer is a relatively frequent accident in Wisconsin. It is important to know that most policies

cover hitting an animal under comprehensive, not collision, insurance.

Comprehensive coverage also pays if your vehicle or parts of it, such as a battery or tires, are stolen. Flood damage

to your vehicle is also covered if your automobile insurance policy includes comprehensive coverage. If you carry

collision without comprehensive, you are not covered for flood damage.

How is the deductible for comprehensive or collision coverage applied?

Deductibles for comprehensive or collision coverage are applied for each occurrence. A deductible is the dollar

amount you must pay toward the loss before the insurance company begins to make payments on the loss.

For example, if you suffered a comprehensive loss (you hit a deer) and that same day suffered a collision loss (a

shopping cart hit your vehicle), your policy allows the insurer to apply two different deductibles.

If I have my vehicle financed, do I need to purchase automobile insurance?

If you finance the vehicle, the financial institution (lender) will require you to have automobile insurance. The terms

of your loan will most likely require you to provide comprehensive and collision insurance. This is because the lender

considers your vehicle collateral for the loan. If your policy lapses, the bank will force coverage (obtain a policy) and

add it to your loan. Forced coverage protects the bank, not you, for their interest in the vehicle and nothing else. The

cost of this insurance is much higher than you would pay if you bought your own policy through a standard carrier.

The Claims Process

Can I require the insurance company to replace my vehicle?

The personal automobile policy is not a replacement policy. Coverage for your vehicle is based on actual cash value.

Actual cash value (ACV) of your vehicle is based on the value of your vehicle at the time of the accident, considering

its current market value. Therefore, the insurance company must repair the vehicle based upon its actual cash value,

not its replacement cost.

What is meant by aftermarket parts?

Automobile repair shops may use aftermarket and/or used parts when repairing or replacing a damaged part (i.e.,

bumpers, bumper covers, associated bumper parts, etc.). Aftermarket parts are produced by companies other than

the original equipment manufacturers (OEM). Parts manufactured by the original equipment manufacturers are

known as OEM parts. OEM parts are those that would have been original to the vehicle when it was manufactured.

Automobile insurance contracts do not generally specify what parts will be used. You may request aftermarket parts

not be used to repair your vehicle, but you will likely be responsible for any repair costs exceeding the final claim

settlement negotiated with the insurance company.

The insurance company is totaling my vehicle. How can I make sure I get what it is worth?

An insurance company considers a vehicle a total loss if repairs would cost more than the vehicle is worth. An

insurance company will use various sources to value your vehicle including, but not limited to, the National

Automobile Dealers Association Used Car Guide ("Blue Book") or the CCC Information Services, Inc., guide. The

company's offer, therefore, might not recognize your vehicle's condition, special features, or value in the local

market. A company is more likely to increase its offer if you can show your vehicle would sell for a higher price in

your area. Keep the lines of communication open. Get several used vehicle dealers to write price quotes for a similar

automobile. Used-vehicle ads can also build your case. Remember these quotes and ads provide asking prices

and the actual value or sales price could be lower.

The other driver's insurance company wants me to sign a release on my injury claim.

Sign the release when you are satisfied with your total settlement. Get a letter from your doctor estimating the cost

and length of your future medical treatment. You may, of course, consult an attorney before accepting a settlement.

You have three years after the accident to either settle your claim or file a lawsuit.

What is meant by comparative negligence?

Wisconsin has a comparative negligence law meaning responsibility is frequently shared. The comparative

negligence law is based on a percentage of negligence. This means you may recover damages from the other party

providing your negligence is not greater than the other party, but your damages shall be reduced by the percent of

negligence attributed to you. You are barred from recovery if your negligence is greater than the other party's

negligence.

Cancellation/Nonrenewal

Can my insurance company cancel my automobile insurance during the term of my policy?

An insurance company may cancel a new policy at any time within the first 60 days and is not required to provide

you with a reason for the cancellation. Cancellation is permitted during the terms of the policy if the premium is not

paid when it is due, if the company discovers fraud or material misrepresentation made by you or your

representative in obtaining insurance, if the company discovers that you pursued a fraudulent claim under your

policy, or if significant changes have occurred in insuring characteristics. For the situations discussed above, no

cancellation is effective until at least 10 days after the insurance company mails or delivers to you a written notice

of cancellation.

When is it allowable for my insurance company to elect for nonrenewal of my automobile insurance policy?

Nonrenewal refers to the termination of a policy at the expiration date. If an insurance company decides it does not

want to renew your policy, it must mail or deliver to you a nonrenewal notice at least 60 days before your policy's

expiration date.

Does an insurance company have to say why it refused to renew my policy?

Yes, the nonrenewal notice must provide the reason for the insurance company's decision for nonrenewal of your

policy.

Does my automobile insurance policy have a grace period?

Unlike health insurance policies, automobile insurance policies do not have a required grace period. The premium is

due to the insurance company on the date identified on the premium notice. If the premium is not received by that

date, the policy automatically terminates.

Can credit history be used as a reason to nonrenew or refuse to renew my automobile insurance?

Insurers may use credit information as part of the criteria they consider when underwriting personal lines insurance.

However, it is the position of the Wisconsin Office of the Commissioner of Insurance (OCI) insurers should not use

credit information, whether they use

credit reports or credit scoring mechanisms, as the sole reason to refuse an

application, cancel a new insurance policy in its first 60 days of coverage, or for nonrenewal of an existing policy.

What can I do if my insurance company cancels or elects for nonrenewal of my policy and I cannot find another

insurance company that will write automobile insurance for me?

If you have tried several insurance companies and cannot find coverage, you may be insured through the Wisconsin

Automobile Insurance Plan. You may apply through any licensed property and casualty insurance agent. For general

information on the plan, you may call or write to:

Wisconsin Automobile Insurance Plan (WAIP)

20700 Swenson Drive, Suite 100

Waukesha, Wisconsin 53186

1-800-827-5964

waip.org

Rating

How much will my insurance cost?

Premiums or the amount you pay for insurance can vary. The type of vehicle you drive, driving record, age, gender,

where you live, and how much you drive usually affect the cost.

What affects the price of automobile insurance?

When determining the rate for an automobile insurance policy, insurers separate drivers into categories called

classifications. Drivers are classified based on several different characteristics including, but not limited to, age and

gender, marital status, where the vehicle is garaged, driving record, make and model of the vehicle, prior insurance

coverage, and annual miles driven. History has shown drivers with certain characteristics, such as a poor driving

record, have a greater chance of being involved in an accident, and the drivers in those classifications must pay

higher

rates. While some of the classification criteria (such as age and sex) are out of your control, others, such as

driving record and type of vehicle driven, are within your control.

Can the driving and accident records of my child and spouse have an impact on my ability to buy automobile

insurance?

Yes, the driving record of any licensed driver in the household could affect the decision of the insurance company to

insure your vehicle(s). Their records can cause you to be turned down for insurance coverage or to pay higher

insurance premiums.

Is there a way I can reduce my premiums?

Every automobile insurer has its own package of special discounts to attract particular customers. Most insurance

companies provide discounts for at least some of the following: accident-free drivers discount, a package discount

for insuring your home and automobile with the same company, multi-vehicle discount, good student discount,

nonsmokers discount, or passive restraint discount (for vehicles with airbags or automatic seat belts). You may also

consider higher deductibles for your comprehensive and collision coverages.

Can my insurance company raise my premium due to an accident or traffic ticket?

Your insurer may charge an extra fee, a surcharge, if you are involved in a chargeable accident or were ticketed for

a traffic violation. Surcharges must be applied uniformly and are required to be filed with OCI. However, OCI plays

no role in your insurance company's decision to raise your premiums.

A surcharge is used as a tool to properly price exposure the insurer is writing and not to recoup payment made

under a claim. The total dollar amount paid as the result of a claim usually does not affect the surcharge.

Miscellaneous Automobile Insurance Questions

Will my Wisconsin policy with the state-required minimum liability limits protect me if I drive to another state

requiring higher minimum liability limits?

Your Wisconsin policy limits will be interpreted to provide at least the minimum limits required by the laws of the

state in which you are operating your vehicle.

When I buy an additional vehicle or replace a vehicle, does my policy automatically cover it?

Yes, but you need to be aware of certain limitations. An additional vehicle automatically has the same coverage as

the vehicle with the broadest coverage provided by your policy. Example: You already have two vehicles. One has

just liability coverage. The other has liability, collision, and comprehensive—the broadest coverage afforded by the

policy. Therefore, if you buy a third vehicle, it automatically will have liability, collision, and comprehensive.

A replacement vehicle automatically has the same coverage as the vehicle it replaced. For example: You have two

vehicles. You trade in the older vehicle, which has only liability coverage, for a new vehicle. This means the new

vehicle automatically has only liability coverage.

Be sure to notify your insurance agent or company as soon as possible that you have added or replaced a vehicle

and which coverages you want for the new vehicle. The personal automobile policy requires the policyholder to

notify the agent or company within a specified number of days. It is best to call your agent before picking up your

vehicle to make sure you have the coverages you want.

What can I do if I have a problem with an automobile insurance company?

You should first attempt to resolve your concerns with your insurance agent or with the company involved in your

dispute. If you do not get satisfactory answers from the agent or company, contact OCI. A complaint form is

available at

oci.wi.gov/complaints. Make sure you include detailed information about your insurance problem. Be

sure to include the correct name of the insurance company involved in your complaint. Many companies have

very similar names; listing the wrong name may delay the investigation of your complaint.