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Tuesday, January 6, 2009

Auto Insurance FAQ

Auto FAQs
Q: I have been temporarily displaced because my home was damaged by the hurricane. I'm concerned because I may have premium payments that are due since I left my home. Will my insurance company cancel or non-renew my homeowners and auto insurance policies for non-payment of my premium?A: Commissioner's Bulletin No. B-0056-08 encourages insurers to suspend the collection of premium payments because of the possible relocation of hurricane victims and other personal hardships sustained by residents of the affected hurricane areas. Insurance companies are not expected to forgive payment of premium, but companies are expected to grant policyholders an extended grace period for the payment of any premium that may be due. The bulletin also encourages companies to work with policyholders in the collection of past due premiums.
You should contact your agent and/or company to determine if you owe any premium and whether the company will grant you an extended grace period.

Q. My car was flooded. How do you determine if your car should be totaled?A. Whether your car will be totaled is determined on a case-by-case basis like any other loss. Normally, when the cost of repair plus the salvage value equals or exceeds the actual cash value of the vehicle prior to the loss, it will be considered a total. A primary factor is the amount of water in your car. Generally, if water covered your dashboard or electrical components, the car will be totaled.

Q. My car was totaled due to flood damage and I have full coverage on it. The company is going to pay the Blue Book value but I still owe substantially more than that. Doesn´t the company have to pay what I owe on the auto?A. No. The company is only obligated to pay the current market value of your vehicle. You can request that the adjuster explain to you how the value was derived to ensure that all of the vehicle´s equipment, features, upgrades and recent work was considered in determining the value. To cover the difference between the market value of your vehicle and what you actually owe, you would need an endorsement or separate policy, to provide guaranteed auto protection (GAP) coverage.

Q. What will happen to the vehicle´s title if my car is totaled?A. If you own the vehicle outright, you will have to sign the title over to the insurance company. In exchange, they will give you a check for the market value of the vehicle. If you still owe on a car loan, the insurance company will coordinate with you and your lender to have the title signed over to them. In most cases, the insurance company will establish contact with the lender and be advised of the amount owed on the loan. If the insurance company has determined that the market value of the vehicle is 10,000 and the amount owed the lender is 8,000, the insurance company will issue a check for 8,000 to the lender to release the lien on the car. The insurance company will then issue a 2,000 check to you to obtain your signature on the title.

Q. The insurance company requested that I tow my flooded vehicle to a specific location for inspection. Am I responsible for the towing charges?A. No. The insurance company should pay the towing expense by reimbursing you or paying the tow truck operator once the vehicle is delivered at the inspection site. You should not be responsible for the expense since you are assisting the insurance company in a prompt inspection of your vehicle, as well as protecting it from further damage.

Q. The insurance company agreed to repair my vehicle. Can the company require the use of used parts?A. In some cases, used parts and after market parts may be permissible, depending on the age, condition, and mileage of the particular vehicle. Most Texas personal automobile policies require the insurance company to pay the lesser of the following: actual cash value of the property; the amount to repair or replace the property with other of like, kind, and quality; or the amount stated in the declarations page of the policy.

Q. Since my car was flooded, I had to rent a vehicle. Does my auto policy cover the cost of renting a car?A. Your policy will provide coverage for renting another vehicle only if you have an endorsement on your policy for rental reimbursement coverage. Under this coverage, the insurance company will pay up to the limit shown on the endorsement for the reasonable amount of time it takes to repair or replace your vehicle.

Q. Is my vehicle covered for flood damage?A. Only if you carry other than collision coverage, also called comprehensive coverage, on your policy. This information can be found on your policy´s declarations page. If you do not have a copy of your policy, you may wish to check with your agent or company.

Q. What if I do not agree with the settlement offered by the insurance company, particularly the market value amount for my totaled vehicle?A. Ask the adjuster to explain how the settlement amount was derived. If you still disagree, the personal auto policy allows you to demand an appraisal of the loss. There is a specific provision in the policy for appraisal which lists the responsibility of both parties.

Q. My car was washed away in the flood. How do I find out where it is now?A. Contact the Unclaimed Autos department of the area police department. Also, your vehicle may have been towed to a storage facility without your consent. If the vehicle was towed without your consent, and the storage facility wants to charge you a fee, you might contact the Texas Department of Transportation (TxDOT) at 1-800-285-6997 (general information line).

Q. I´ve received a check from the insurance company, but am not satisfied with the amount. I plan to file a complaint to request additional funds be paid. Should I cash the check? If I cash the check, does it mean that I accept their decision and amount of payment?A. Be careful about endorsing a check before discussing your concerns with the company. Call the adjuster or company first before cashing the check. Some companies have a release from further liability disclaimer printed on the back of the check.

Q. How does replacement cost coverage work?A. Replacement cost coverage replaces or repairs your damaged property with new material and/or items of like kind and quality.

Q. Is replacement cost coverage available on all policy types?A. Replacement cost coverage is not available under a typical auto policy. Some insurers provide new car replacement for a limited number of years if the auto is insured when new. You should check with your agent or company to see if they offer replacement cost coverage on all policy types.

Q. If an insured vehicle is financed, how are claim checks issued? If issued to both insured and lien holder, how does insured collect?A. The loss payee endorsement requires the insurer to pay to the insured and the loss payee as their interest may appear. The insured and the loss payee may both be named on the check. The insured and the loss payee will agree on the release of funds.

Q. What is the insured´s recourse if the check made payable jointly to the lien holder and insured is sent directly to the lien holder and cashed without the insured´s knowledge or endorsement on the check?A. That is a legal question that the Texas Department of Insurance (TDI) cannot answer. However, your first step would be to contact the insurer and your lien holder. You can also contact the Texas Department of Banking at 1-877-276-5554 or visit its website at

Q. What determines if a flooded vehicle should be totaled?A. It is determined the same as any other loss. Normally, when the cost of repair plus the salvage value equals or exceeds the actual cash value of the vehicle prior to the loss, it will be considered a total loss.

Q. Does the insured have to agree to have their vehicle totaled if they will be "upside down" on their loan?A. The policy contract states how the loss will be paid and it is the insurance company that decides whether or not to total a car. If the cost to repair exceeds the actual cash value, the company will pay the actual cash value of the vehicle. The insured and the insurance company may negotiate the settlement in which the insured may retain the salvaged vehicle; however the insured would be responsible for the cost of repairs at that point. Insurance coverage for the difference between the actual cash value of a vehicle and the outstanding loan amount can be covered by a GAP endorsement or a separate GAP policy.

Q. Describe how the title on an insured vehicle is processed if the vehicle is determined to be a total loss from flood damage or from collision damage.A. For information about how titles are processed, please contact TxDOT at 512-465-7611.

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