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Illinois Auto Insurance: 7 Things Illinois Residents Should Know About Auto Insurance

Auto insurance in Illinois can be complicated and confusing. Having a claim can be a painful process, but it doesn’t have to be. Below you’ll find 7 things you SHOULD know about your auto insurance policy and company. Understanding these items can save a lot of money, time and heartache in the long run.

1. How your insurance company determines your car's value after it's declared a "total loss."

Auto insurers in Illinois 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 Chicago, 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 auto 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.

Illinois requires auto insurers to pay for the sales tax when you replace your totaled vehicle with either a new or used car. See the bottom of this article for a list.*

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. 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.

4. 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. Your company will not know that you purchased auto insurance through another company. Keep in mind that your current company must allow you to cancel your policy if you have already purchased a new one.

What you can do: Call your insurance company or insurance agent 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.

5. Paying in installments could 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 a few dollars to your 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.

6. 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.

7. 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.

*States that require sales tax be paid by the auto insurance company as part of total-loss settlements (as of July 2002):

Alaska, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Vermont, Washington, West Virginia, Wisconsin.