Consumer Guide To Automobile Insurance
TO HELP YOU BUY AUTO INSURANCE
Obtain the broker’s
If you are reading this pamphlet, it was probably given to you by an
insurance broker or solicitor. (A solicitor is a person who works for a
broker. In the rest of this pamphlet we will use the term “broker” to
include both solicitors and brokers.) All brokers must be licensed by
the State of California Department of Insurance. To obtain a license, a
broker must take a class on insurance, pass an exam, and meet other
requirements. However, a few people try to sell insurance without a
license. Make sure your broker is currently licensed in California. By
law, a broker must include his or her license number on his or her
business card, and on any written price quote given to you. Obtain the
business card of each broker who talks to you about insurance! If the
broker says he or she does not have a business card, ask him or her to
write down his or her first, middle and last name, along with his or her
license number. Keep the business card or piece of paper along with your
other insurance papers. The California Department of Insurance website (www.insurance.ca.gov)
lists all licensed brokers. You can find out whether the person who
helped you buy insurance is licensed by checking this website, or by
calling the Department of Insurance at (800) 927-HELP or (213) 897-8921.
If you buy insurance from a person who does not have a license, you are
legally entitled to have any broker fee you paid refunded.
difference between an insurance company and an insurance broker.
Brokers are not insurance companies; they are independent insurance
salespersons. The broker represents you, the client. In order to find
insurance for you, a broker will usually review the premium rates and
coverages of several insurance companies. A broker will usually have the
words “insurance agency,” “insurance brokers,” “insurance brokerage,” or
“insurance services” in its business name. An insurance company is
responsible for paying any claims you have; a broker is not. An
insurance company will usually have the word “insurance company,”
“casualty company,” “indemnity company,” “insurance underwriters” or
“assurance company” in its name. Some insurance companies will use the
services of another business, called a “managing general agent” or
“general agent.” These businesses may perform underwriting, claims
handling and billing on behalf of the insurance company issuing the
policy. Remember, when purchasing insurance through a broker you could
be dealing with several different companies: 1) the insurance broker; 2)
a managing general agent; 3) the insurance company. In addition, if you
need to borrow money to help pay your premium, another type of company,
a “premium finance company,” may be involved.
Obtain and keep
important insurance papers.
When you apply for insurance, the broker will probably help
you complete an insurance application form. This form will be sent to
the insurance company. Read the application carefully before you sign
it. Do not sign the application if any information on it is missing or
incorrect, even if the broker says it is ok to do so, or that the wrong
information will save you money. An insurance company can sometimes deny
your claim if you signed an application with incorrect information.
Obtain and keep a copy of the application.
When an insurance company accepts an application, it
typically mails the actual insurance policy several weeks later. If you
need insurance right away or within a few weeks, the broker should
provide you with an insurance form called a “binder” or “certificate of
insurance.” These forms provide you with proof that you have insurance
coverage until the insurance company actually sends you the policy. A
binder or certificate should show the name of the insurance company, the
date your insurance takes effect, your name, a description of your
vehicle, the types of coverage you bought, the liability coverage limit
if you bought liability insurance, and deductibles if you bought
comprehensive or collision coverage. Obtain and keep the binder. Don’t
accept a broker’s word that you are covered or will be covered as of a
certain, future date; get it in writing. Every broker should be able to
give you a binder if you need coverage quickly.
You will usually have to pay some or all of the premium to
the broker when you apply for insurance. Obtain a signed receipt for
your premium payment.
Insurance company payment plans
Many people choose to pay their insurance premium in
installments. For these people, the insurance company may offer an
installment payment plan for a small, extra charge. However, not all
companies offer such plans.
Premium finance companies
Another option for people who can not, or prefer not to, pay
their insurance premium all at once, is to obtain a loan from a “premium
finance company.” With premium financing, you will pay a down payment to
the broker when you apply for the insurance. The finance company will
pay the full premium to the insurance company. After that, you will
reimburse the finance company over several months. Be aware that premium
financing typically includes a non-refundable fee and an interest rate
that is usually much higher than banks impose on credit cards. In order
to obtain premium financing, a premium finance application form must be
completed. Do not let a broker sign this form for you – obtain it, take
your time to read it carefully, ask the broker to explain anything you
don’t understand, then sign it if you still want to have premium
financing. The form will contain very important information – how much
you will have to pay, how often, how much the fees are, what the
interest rate is, and what the total principal and interest will be.
Once you sign-up for premium financing, it may be expensive to cancel
it. If a broker suggests using a premium finance company, be sure to ask
the broker about insurance companies that offer installment payment
plans. Even if an insurance company with an installment plan charges
more premium than an insurance company that does not have an installment
plan, your total cost of insurance may be less if you don’t have to pay
loan fees and interest to a premium finance company.
Broker fee disclosure and agreement
To charge a broker fee, a broker must have you sign a broker
fee agreement, and must give you a special broker fee disclosure. Obtain
copies of both of these documents.
Take your time and
Read all forms carefully, and take your
time. Don’t let anyone try to rush you. Ask questions – a broker should
take the time to explain everything slowly and with words you
understand. If a broker makes any promise to you, get it in writing.
Never sign any form that has empty spaces – have the broker draw a line
through those spaces before you sign the form.
Find out more about
insurance. Insurance is expensive.
You can save a lot of money, possibly hundreds of dollars each year,
year after year, by learning more about insurance. A good place to start
is at the Department of Insurance website at www.insurance.ca.gov, or by
getting brochures from the Department of Insurance help line, 1-(800)
927-HELP (4357) or (213) 897-8921. You can obtain pamphlets about many
insurance topics, such as different types of insurance, how to file
claims, and how to buy insurance.