12 Things your insurer wont tell you

Keeping secrets is fine when you're in grade school, but when it comes to taking care of your car, secrets are just what you don't need, especially from your insurance company. Here are 12 things your auto insurer won't tell you, and what you can do about it.

1. How they determine your car's value after it's declared a "total loss."

Insurers say they use three mechanisms to determine the value of a totaled vehicle: computerized vendor quotes, value books such as Kelley Blue Book, and a market search of the local area. However, the local area isn't specifically defined and an insurer may be unable to locate a replacement car within your neighborhood. If an insurer finds a replacement car outside of your living area, the valuation can be affected.

For instance, if you live in Philadelphia, the cost of replacing your car is going to be higher in the city than in the suburbs. The insurance company will consider quotes from those suburban towns as reasonable estimates. Insurers say their goal in totaling a vehicle is to allow the insured person to purchase, within their market, the same car they lost in the accident. But even they admit that they can use one, two, or all three mechanisms to determine the value of your car, which means you can't be sure exactly what value you'll end up with.

What you can do: If you disagree with your insurance company's value determination, there are several things you can do. First and foremost, if you have records of maintenance that show you've had the oil changed every 3,000 miles and had it checked routinely by a mechanic, copy those records and present them to the insurance company to show the car was in good condition. If you had any special parts installed or any upgrades done after the purchase of the car and you've been paying premiums on those improvements, make sure those are included in the insurance company's evaluation.

Get price quotes on replacement cars from at least three dealers within a reasonable driving distance and submit these to your insurance company. Ask the insurance company to provide you with a list of dealers within a specific distance who can sell you a car at the price it is quoting that will be equivalent to your car.

If you still aren't satisfied, you can step up the process and go to mediation or arbitration, which means presenting your case to a neutral party for assistance in reaching a compromise or, in arbitration, a binding decision, or you can take the issue to court.

2. You may be entitled to payment for sales tax and registration fees for a new car.

There are 29 states that require auto insurers to pay for the sales tax when you replace your totaled vehicle with either a new or used car.

What you can do: Count on having to make the request; don't depend on the insurer to offer to pay up front.

Even in states that do not require sales tax reimbursement, you should request it. Many auto insurers will not deny the request because the policy requires that they make you "whole," which means you should recover all of the costs for returning you to where you were before the accident.

Be aware, however, that the tax will be calculated based on the pre-accident value of your car. If the insurance company values your car at $10,000 and you purchase a new car for $20,000, the tax will be calculated on the $10,000.

3. You may be entitled to a diminished value claim in some states.

Diminished value is based on the idea that any car that has been in an accident, regardless of how well the repairs are done, is worth less than the exact same car that hasn't been in an accident.

What you can do: In 14 states, it's allowable for you to file a claim for that lost value. Thirty-six states and Washington, D.C., do allow insurance companies to exclude payments for diminished value, so if you live in one of those states, you won't get to claim the loss. But in Florida, Georgia, Hawaii, Kansas, Louisiana, Maine, Maryland, Massachusetts, North Carolina, South Dakota, Texas, Virginia, Washington, and West Virginia, you have a chance of getting a diminished value payment. Successful cases are also generally made against the at-fault driver's insurance by a third party.

4. You may be able to "stack" your coverage.

Stacking uninsured/underinsured motorist coverages means you can collect from more than one auto insurance policy that you hold. Most states forbid this practice, but 19 states either don't address the issue or allow stacking.

What you can do: You'll have to check the language of your policy to see if it's allowed.

There are two scenarios for stacking: First, if you have multiple cars on your policy with UM/UIM coverage on each, you can collect the limit of your UM/UIM coverage under as many vehicles as necessary to cover full payment for damages. Second, if you have more than one policy with UM/UIM coverage, even if they're from two different insurers, you can make a claim under each policy until all your damages are recovered.

5. How much making a claim could increase your rates.

Many insurance companies follow an industry standard of increasing your premium by 40 percent of their base rate after your first at-fault accident. So, for example, if the company's base rate is $400, your premium will go up by $160. Not all auto insurers play by this rule, though, and some may increase your individual rate by 40 percent. Regardless of what formula they use, in the majority of cases, your rates will go up.

What you can do: Some insurance companies have a "forgive the first accident" policy, but the qualifying variables are wide-ranging. You should ask when you buy your policy if there is a first-accident forgiveness policy and how to qualify.

6. Your credit history can dramatically affect your auto insurance premium.

According to a 2001 survey of the top 100 insurers in the country by Conning & Co., 92 percent of responding insurers use credit information to create an "insurance risk score," which they then use as a factor to determine your auto insurance rate. The theory is that there is a direct correlation between your insurance risk score and the likelihood that you will file a claim. Insurance scores are intended to evaluate your stability, meaning if you pay your bills in a timely fashion and have had the same credit accounts for long periods of time, you're considered more stable than someone who pays late or sporadically and who opens and closes accounts frequently.

What you can do: Unfortunately, your insurance risk score is not available to you, but it may be similar to your credit score. If you have unusual credit activity that is limited in its time frame, you will benefit from waiting a month for activity to return to normal before buying auto insurance, so your score returns to normal. If your credit history is shaky, be prepared to pay higher premiums since your insurance company may deem you a higher risk.

7. You must officially cancel your insurance policy when you switch insurers.

Most auto insurance companies state in your policy that you can cancel your coverage at any time by notifying the company in writing of the date of termination. However, most consumers assume that if they decide to terminate the policy at the end of the coverage period, all they have to do is ignore the bill. The insurance companies don't see it that way. They will send you another bill for the next premium payment, and when you don't pay it, the company will cancel you for nonpayment, which goes on your credit record.

What you can do: Call your insurance agent or the company and let them know you are canceling your policy. Be sure to give them a specific date, or you may end up uninsured for a period of time. The company will then send you a cancellation request. Most often, the form is already filled out and all it requires is your signature. Make sure you read it to check for errors.

You may also have to prove to your former insurance company that you have new coverage, and if you've financed a car through a dealership, the dealer will need to know your new policy information, since purchase contracts often require proof of insurance coverage.

8. You can wait to add your teenager to your policy until he or she is licensed.

In most cases, insurance companies don't require you to add your teenager to your policy until they have their driver's license. The exception may be if you are in a high-risk pool; you may then have to add your child when they receive their permit.

What you can do: If you forget to tell your insurance company that you have a licensed teen and you have to file a claim for them after an accident, they will still be covered, but your insurance company is entitled to then charge you back premiums from the date your teen received a license.

You are not required to add your teenager to your policy just because he or she has reached driving age.

9. Paying in installments will usually increase your overall bill.

"Fractional premium" fees are usually charged when you divide your annual premium payment into installments rather than pay for a year of coverage all at once. Payments are usually offered on a six-month, quarterly, or monthly basis, but almost every insurance company charges an administrative fee for breaking up the payments. It can be as little as $10 per payment, but the more you break it down, the more it adds up.

What you can do: Be sure to ask up front when you apply for the policy what the fees are for paying in installments. If the fees are small enough, it may be worth it. However, remember that insurance companies can cancel your policy for late payment if you forget one of your installments, many times with minimal notification. If you can pay the premium up front, it may simplify the process and save you a few dollars.

10. How much your car model affects your premium.

You won't get these numbers from your insurer; in fact, you may not be able to get them at all. But the auto insurers do have a premium rating system for every car model, based on ratings received from the Insurance Services Office. Cars are rated from three to 27, and the higher the number, the higher your premium. The ISO says it won't release the numbers to the public because its employer is the insurance company, not the consumer.

What you can do: You can contact your insurance company if, for example, you are buying a new car, and ask if it will tell you what the difference in premiums is for cars you are considering.

11. You'll pay for your friend's bad driving.

If your friend borrows your car and crashes it, you'll have to file a claim with your insurance company. You'll have to pay any deductible that applies, and your rates will probably go up as a result of your claim.

What you can do: If the person who took your car didn't have permission to take the vehicle, in most cases you won't be held liable for the damage. But if your friend is uninsured and causes damage that exceeds your policy limits, the injured party can come after you for medical and property-damage expenses. Best bet? Don't loan out your car.

12. Your personal property in your car isn't covered by your auto insurance.

Stolen or damaged items like compact discs aren't covered by your auto insurance.

What you can do: You'll have to file a claim on your home insurance. Most home insurance policies will cover smaller, less expensive items such as CDs. However, if you carry expensive items such as computer equipment, you'll need to ask about a rider to your home insurance policy. You'll also be in better shape if you have photos or video of the items.