Automobile
Insurance
Guide
Page 1
Simply stated, automobile insurance is a contract between you and
your insurance company that protects you against financial loss if
you are in an accident. Auto policies contain a variety of coverages
that can be purchased depending upon your needs and wants. You
agree to pay the premium, and in return, the insurance company
agrees to pay for certain expenses as defined in your policy. Having
the right insurance coverage may prevent you from suffering a large
financial loss in the event of an automobile accident.
Is automobile insurance mandatory? Page 2
Pa’s required coverages Page 3
Pa’s optional coverages Page 3
How rates are determined Page 5
When you’re ready to apply for coverage Page 5
Things to keep in mind Page 6
Teen drivers Page 7
Mature drivers Page 7
Options for those without insurance Page 7
The following supplements are also available to you free of charge
and can be downloaded from our Web site:
Auto Insurance Glossary
Questions and Answers about Automobile Insurance
Comparison of Sample Premium Rates
An
Introduction
A glance at
what’s inside
A glance at what’s inside
Page 2
Drivers must purchase and maintain car insurance in order to legally
drive in Pennsylvania. Under Pennsylvania law, this is called maintaining
“financial responsibility” on your vehicles. A lapse in insurance coverage
may result in the suspension of your vehicle registration privilege for
three months, unless the lapse of insurance was for a period of less than
31 days and the owner or registrant proves to the Department of
Transportation (PennDOT) that the vehicle was not operated during this
short lapse in coverage.
If PennDOT determines that you operated your vehicle without the
required insurance, your driver’s license may be suspended for three
months. Also, your car’s license plate, registration sticker and driver’s
license must be surrendered to PennDOT in order to serve the
suspension. Restoration fees and proof of insurance must be submitted
prior to having either registration or driving privileges returned.
If you are stopped for a moving violation and it is determined that you
are operating your vehicle without insurance, you could face the
following penalties and expenses:
• A minimum of $300 fine for driving uninsured
• A three-month suspension of your vehicle registration
• A three-month suspension of your driver’s license
• Restoration fees to restore your vehicle registration
• Restoration fees to restore your driver’s license
• Vehicle impoundment
In addition, your vehicle may not be driven by anyone while the
registration is suspended.
The Pennsylvania
Department of
Transportation
can suspend
your vehicle’s
registration if you
do not maintain
the required
insurance on your
vehicle.
Auto
insurance is
mandatory
in the
commonwealth
Page 3
Pennsylvania’s
required
coverages
When you purchase private passenger automobile insurance, there are
certain coverages that are required and others that are optional. The
required coverages are:
Medical Benefits — This pays medical bills for you and others who
are covered by your policy, regardless of fault. The minimum limit is
$5,000 of coverage. Higher limits are available if you so choose.
Bodily Injury Liability — If you injure someone in a car accident,
this coverage pays their medical and rehabilitation expenses and any
damages for which you are found liable. The minimum limit is $15,000/
$30,000. The $15,000 pays for injuries to one person, while the
$30,000 represents the total available for one accident.
Property Damage Liability — If you damage someone’s property
in an accident and you are at fault, this coverage pays for it. The
minimum limit is $5,000 of coverage.
Some companies offer a single limit of $35,000 which meets the bodily
injury liability and property damage liability minimum requirements.
Limited or Full Tort — You can choose to have full or limited tort
coverage. Limited tort coverage offers you a savings on your premiums.
You are still able to recover all out-of-pocket medical and other
expenses; however, you are not able to recover certain damages - such
as payments for pain and suffering - unless the injuries meet one of the
exceptions to limited tort as defined in Act 6 of 1990, title 75, section
1705 (d). With full tort coverage selection, you retain unrestricted rights
to bring suit against the negligent party.
In addition, private passenger automobile insurance policies offer a
variety of additional optional coverages that can be purchased. These
include:
Uninsured Motorist (UM) — This coverage applies to you, your
family and your passengers for bodily injury if you are hit by an at-fault
uninsured motorist. This does not cover damage to property.
Underinsured Motorist (UIM) — This coverage applies to you,
your family and your passengers for bodily injury if you are hit by an at-
fault motorist who does not have enough insurance to cover your claim.
This does not cover damage to property.
Pennsylvania’s
optional
coverages
Page 4
Stacking of UM or UIM — This coverage allows you to either multiply
the amount of uninsured or underinsured motorist coverage by the number
of vehicles on your policy or to receive uninsured or underinsured motorist
coverage from more than one policy under which you are insured. It costs
extra to stack uninsured or underinsured motorist coverage.
Funeral Benefit — This coverage pays, up to a certain dollar amount,
money for funeral expenses if you or a family member dies as a result of
an auto accident.
Income Loss — This coverage pays a portion of your lost wages when
injuries sustained in an auto accident keep you from working.
Collision — This benefit pays to repair damage to your car as a result of
an accident. Most banks or lenders require you to buy this coverage to
receive a car loan. Under Pennsylvania law, the insurance company
applies a $500 deductible unless you request a lower amount. Generally
speaking, the higher your deductible, the lower your premium.
Comprehensive — Generally, this pays for theft or damage to your car
from hazards including fire, flood, vandalism or striking an animal. Most
banks or lenders require you to buy this coverage to receive a car loan.
There are various levels of deductible that may be purchased.
Extraordinary Medical Benefits — This coverage pays for medical
and rehabilitation expenses that exceed $100,000. It provides a maximum
of $1 million of coverage.
Accidental death benefit — This benefit is paid to the personal
representative of an insured if the bodily injury from a motor vehicle
accident results in death within 24 months of the date of the accident.
Rental reimbursement coverage — This pays for an individual’s
expenses, up to the limit on their policy, to rent a vehicle if they have a
covered comprehensive or collision loss.
Towing coverage — This reimburses an individual, up to the limit on
their policy, for towing and labor costs for a covered disabled vehicle.
This coverage is usually only available if comprehensive and collision is
carried on the vehicle.
Gap coverage — This will pays the difference between an insurance
company’s payment for a totaled vehicle and the balance of a vehicle loan.
This coverage is traditionally only available when an individual is
purchasing a new vehicle.
Pennsylvania’s
optional
coverages
You can
choose to
purchase
optional
coverages to
customize yoru
auto insurance
policy
Page 5
How rates
are
determined
When you’re
ready to
apply
When you are ready to purchase insurance, the insurance company or
producer (agent) will ask you a series of questions and, based on your
answers, will decide whether or not they will accept you as a
policyholder. This practice is known as underwriting. By law, insurance
companies may not unfairly discriminate by using underwriting
standards based on things such as race, religion, nationality or ethnic
group, age, sex, family size, occupation, place of residence or marital
status. Based on your answers and your circumstance, the appropriate
rate to charge you for your premium will be determined.
Certain items will be taken into consideration when figuring your
premium, such as the type and age of the vehicle, safety features, where
the vehicle is garaged, the average number of miles driven in a year, the
coverages and limits chosen for the policy and the driving history of the
drivers, to name a few. Some companies do use credit information for
underwriting, but are prohibited to use it at renewal time. By law,
insurance companies are prohibited from unfairly discriminating
between individuals of the same class and of the same hazard in the
rates they charge, and may not charge different rates based on an
applicant’s race, religion or national origin.
You need to know what coverages you want, what limits of liability you
require and what deductibles you desire. Also, you need to have the
following basic information available on all drivers in your household:
• All drivers’ names, ages, sex and marital status
• Driving record (accidents and moving violations)
• Annual mileage driven
• Full vehicle identification number
• Year of vehicle
• Cost of vehicle
• Special equipment, such as anti-theft devices, airbags, etc.
Page 6
Things to
keep in mind
Inquire about discounts (such as multiple policies with the same
company, multiple vehicles, airbags, anti-theft device, etc.) and/or
surcharges the company applies. Not all companies will offer the same
type of plans or have the same underwriting rules (eligibility/
acceptability guidelines). Therefore, it is critical to ask for this
information.
Make sure you know the length of the policy term. Policies can be six
months (semi-annual) or one year (annual), depending on the insurance
company.
Many companies have their own payment (installment) plans that allow
you to pay the premium over a period of time, sometimes for a fee. If
you decide to buy a policy on an installment plan, find out the
applicable service fees.
If you use a premium finance company to pay for your insurance, the
monthly payments may be easier; but the total of payments will be
larger. Finance agreements are separate contracts that often include a
limited power of attorney that gives the finance company some
authority over the termination of your policy. Moreover, if the policy is
cancelled, the insurance company must remit all return premiums to the
finance company, who will apply them to your account.
Ask about higher deductibles. By requesting higher deductibles on
comprehensive and collision coverage, you may be able to lower your
costs. However, remember that the deductible you choose is what you
are responsible for paying out of your pocket in the event you file a
claim against your automobile insurance policy.
Should you drop comprehensive and/or collision coverage on an older
car? It may not be cost-effective to have comprehensive or collision
coverage on cars worth less than $1,000 because any claim you make
would not substantially exceed the annual premium cost and deductible
amounts.
Personal effects and equipment such as cellular telephones, compact
discs, CD players and custom stereo speakers and systems that are
not permanently installed in the vehicle by the manufacturer generally
are not covered, unless specifically declared and added to the policy.
Read what you sign. Remember, you are ultimately responsible for the
accuracy and completeness of the information on your application.
Page 7
Mature
drivers
Teen
drivers
Options for
those
without auto
insurance
Insuring a teen driver is often an additional cost for many parents. Some
companies require that a teenager be added to the policy upon
obtaining his/her learner’s permit. Check with your insurance producer
(agent) or company to determine their requirements. Many companies
consider drivers under the age of 25 a higher risk, and this often
translates into higher premiums.
Your child may be eligible for discounts. Ask your insurance company if
they offer discounts for good grades or completed driver education
courses.
Taking a driver safety training course is an excellent way to keep your
driving skills sharp and it can also earn you a reduced rate on your
automobile insurance, if your carrier offers such a discount.
Pennsylvania law requires insurance companies to provide at least a five
percent premium discount for each vehicle on a private passenger
automobile policy under which all named policyholders are 55 years of
age or older and have successfully completed a driver improvement
course that meets the standards of PennDOT. 75 Pa.C.S. § 1799.2.
Individuals must take an approved course every three years to continue
to be eligible for the discount, and they may be disqualified if within the
three years of completing the course they are involved in a chargeable
accident, convicted of a moving violation or are convicted - or have -
Accelerated Rehabilitative Disposition (ARD) for driving under the
influence of alcohol or a controlled substance.
Insurance companies recognize that mature drivers face unique
challenges as they get older, and they may reward those mature drivers
who take the initiative to minimize risk by enrolling in approved driver
training courses.
Pennsylvania’s Assigned Risk Plan is a program that offers automobile
insurance to those who are unable to obtain coverage. All insurance
companies writing automobile insurance in the commonwealth are
required to participate in the plan. Applicants are assigned to insurance
companies in proportion to the amount of business each company
writes in the commonwealth. You may contact the plan’s customer
service office at (401) 946-2800 or, toll-free, at (800) 477-6146.
Automobile Insurance Guide
Brought to you by the Pennsylvania Insurance Department
For more information and additional resources,
log onto www.insurance.pa.gov,
call us toll-free on our automated hotline at 1-877-881-6388,
or our regional office listed below:
Harrisburg Regional Office
Room 1321 Strawberry Square
Third and Walnut Streets
Harrisburg, PA 17120
(717) 787-2317
fax (717) 787-8585
TTY/TDD: (717) 783-3898
03/2008
