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Sullivan Insurance

Auto Insurance Basics

Everything you need to know about auto insurance!



How much auto insurance do I need?  Most states require you to buy a minimum amount of liability coverage (Massachusetts Auto Insurance requirements are $20,000 per person / $40,000 per accident, New Hampshire Auto Insurance is not required in most cases, but coverage starts at $25,000 per person / $50,000 per accident).  You need FAR MORE liability insurance than the states require as the repair and legal costs associated with accidents are usually much higher than the minimum limits.  If you’re found legally responsible for bills that are more than your insurance covers, you will have to pay the difference out of your own pocket. 

Sullivan Insurance & Financial follows the Insurance Information Institute (I.I.I. or who recommends a minimum liability limit $100,000 per person and $300,000 per accident.  If your net worth is more than $300,000 (most people with a home, auto, and investments or retirement savings), you need additional liability limits, such as those found in an umbrella or excess liability policy - usually in the amount of $1,000,000 or additional limits necessary to protect your hard earned assets.  Umbrella policies pay when your underlying coverage limits are exhausted for both your home AND auto policies.  Sullivan Insurance & Financial recommends that EVERYONE purchase Umbrella/Excess Liability Policy (cost is low (around $180/year) compared to losing everything you own)!

In addition to liability coverage, most vehicle owners also purchase collision and comprehensive coverage.  Your coverage reflects the market value of your car and the cost of repairing it, and if you lease or have a lien holder they will require comprehensive and collision.

Finally, decide on a deductible -- the amount of money you pay on a claim before the insurance company reimburses you.  Typically, deductibles are $500 or $1,000; the higher your deductible, the lower your premium.  With Massachusetts Auto Insurance, you must have Comprehensive coverage in order to receive Free Glass coverage.


Auto Insurance Basics

The Basics of Auto Insurance

Auto insurance policies are actually a package of different coverages.  Most states require a minimum amount of certain types of coverage.  But if you're interested in protecting yourself from a lawsuit or from hefty repair bills, then it makes sense to buy more than what's required.


Liability insurance


Liability coverage is the foundation of any auto insurance policy, and is required in most states.  If you are at fault in an accident, your auto insurance liability will pay for the bodily injury and property damage expenses caused to third parties in the accident, including legal bills and pain and suffering. Bodily injury expenses include medical bills and lost wages.  Property damage expenses pay for the repair or replacement of things you wrecked. The third party may also decide to sue you in order to collect "pain and suffering" damages.


  ** Liability Lingo
Insurance types usually refer to liability coverage limits as a series of two numbers. For example, your agent might say that your policy carries liability limits of 20/40. That stands for $20,000 in bodily injury coverage per person, $40,000 in bodily injury coverage per accident.  


Check with the agency to find out what liability limits are required where you live.  Remember, if you cause a serious accident, minimum insurance will not cover you adequately. That's why it's a good idea to purchase more than what your state requires.


Uninsured motorist Liability (UM) coverage


Pays for your injuries if a hit-and-run driver or someone who doesn’t have auto insurance strikes you.  It is required in many states, including on the Massachusetts Auto Insurance Policy.  But, most people do not purchase enough – it costs pennies and you should have the same limit as your other liability coverage!  Check your policy!!!


Underinsured motorist (UIM) coverage


Similar to above….Coverage will pay out if the driver who hit you causes more damage than his or her liability coverage can cover.  In some states, UM or UIM coverage will also pay for property damages.  Again, most people do not purchase enough – it costs pennies, check your policy! 


UM/UIM - These coverages are extremely important as YOU actually benefit from them.  If you are in an accident with someone from a state that doesn’t have mandatory insurance (such as NH), this coverage is available for you or your family.  You should discuss this coverage with your agent as there have been cases where the policy will pay out even if you are only a passenger or as a pedestrian, and in many other situations that you should know about.


Collision and comprehensive coverages


If you cause an accident, collision coverage pays to repair your vehicle.  You normally can not collect any more than the actual cash value of your car at the time of loss.  Collision coverage is usually the most expensive component of auto insurance, but by choosing a higher deductible you can keep your premium costs down.  However, keep in mind that you must pay the amount of your deductible before the insurance company pays to repair your vehicle.  Insurance companies often will "total" your car if the costs of repairs exceed a certain percentage of the car's worth. The damage critical point is usually around 70 percent of the car's value. 

** Replacement Cost vs. Actual Cash Value
Replacement cost is the amount it would take to replace your vehicle/repair damages with materials of similar kind and quality, without deducting for depreciation.  Very few states have this option!

Actual cash value (ACV) is the value of your property at the time of loss.  Claims adjusters usually figure ACV by taking the replacement cost and subtracting depreciation. For example, an auto that costs $5,000 may have a reasonable "life" of 5 years. If it is destroyed after 10 years, its actual cash value will be substantially less than $5,000 because of depreciation.  Many insurers use special software to determine the ACV such as the NADA or Blue Book.

Most state Auto Insurance only provides coverage on an ACV basis.  That said, there is another option called Stated Value or Agreed Value.  Although these types of valuation normally require a written appraisal of your vehicle – if you just updated your 1969 Mustang with over $50,000 of a new engine, parts, body work, etc. – it pays to make sure in the event of an accident you know how the insurance company is going to value your vehicle.  In this case, if you didn’t have an Agree or Stated Value policy – the NADA ACV is most likely going to be MUCH LOWER than what it cost you to restore your baby back to original condition! Make sure to ask your agent which kind of coverage you have on your other policies.


Limited Collision


Provides same coverage as with Collision coverage as long as driver is not 50% or more at fault for accident (only available in MA) - Look at this option BEFORE you just drop collision – it has saved many clients their automobiles or more importantly their new down payment!!



Comprehensive coverage will pay for damages to your car that weren't caused by an auto accident: Damages from theft, fire, vandalism, natural disasters, or hitting a deer all qualify.

Comprehensive coverage also comes with a deductible and your insurer will only pay as much as the car was worth when it was damaged, so be careful here.  Comprehensive is relatively inexpensive, so you should consider a low deductible.


Loan Lease/Gap Coverage:  This coverage pays the difference between the ACV of your vehicle and the amount of money you have financed or still owed to a bank.  This is a critically needed if your are “up-side-down” in your financing, or in other words you owe more than your vehicle is worth. This important coverage can be added to your auto insurance policy in most states and it is very inexpensive ($50/year), which you can remove when it is not needed.  The car dealer is going to charge you $300! 


Insurers normally will not pay out more than your car's book value, so it's helpful if you know this value.  Check the NADA (National Automobile Dealers Association) or Kelley Blue Book or the.  If your car is worth less than what you're paying for the coverage, you're better off not having collision and comprehensive coverage.


Special Note for Rental Vehicles:  Your personal auto policy coverage is extended to the rental vehicle inside the continental U.S., but since the coverage is on ACV basis there is NO COVERAGE for any additional fees or lost revenue while the rental vehicle is being fixed, nor for any contractual issues you may be responsible for.  Therefore, if in an accident with a rental vehicle your insurer will only pay to fix or replace the vehicle – so consider this when you are offered the additional coverage offered from the rental company.  There is NO COVERAGE extended to vehicles rented anywhere outside the continental U.S. (except if company approves – and I would get that in writing!).  Lastly, normally carriers assume your regular vehicle is parked in your garage while you are renting a vehicle – if someone else is using your vehicle while you are renting a vehicle – your auto policy may not be extended to cover the rental!  ASK YOUR AGENT FOR MORE INFORMATION ON THIS SUBJECT!  There is a lot you need to know before you sign your contract!


Medical payments, PIP, and no-fault coverages


Medical Payments will pay for your and your passengers' medical expenses after an accident.  These expenses can arise from accidents while you're driving your car, someone else's car (with their permission), and injuries you or your family members incur as pedestrians.  The coverage pays regardless of fault, but if someone else is liable, the insurer may seek to recoup the expenses from the liable party.


Med-Pay is very inexpensive and in most cases $25,000 of coverage is only approximately $25 per year.  Why EVERYONE doesn’t have this coverage I do not know, but we strongly advise that everyone purchase the maximum amount of Med-Pay that can as this is one the most highly used options on your policy and can help out with your PIP.


Personal injury protection (PIP) and broader "no-fault" coverages are expanded forms of medical payments protection that may be required in your state (such as MA).  Some states have optional PIP or no-fault coverage.  Expanded features include lost wages and payments for childcare.


Add-on features (additional premium required)


Several supplemental auto coverages are available for additional premium.
* Rental reimbursement, a common add-on, covers vehicle rentals required because your car is damaged or stolen.  Everyone should also have Rental Coverage – clients often regret not having this coverage when their rental bill comes in!
* Coverage for towing and labor charges in case of a road breakdown is also common.

* Optional OEM Endorsement will cover the amount necessary to replace any damaged “crash part” which can not be repaired with an OEM part on any auto to which the endorsement applies. 

“Crash Part” is defined as a part of sheet metal or plastic that constitutes the visible exterior of the vehicle, including inner and outer panels.  Coverage for glass or mechanical parts is excluded.

NOTE:  Whenever repairs are to be made to a vehicle using parts not made by the OEM, state law in MA requires that notice must be given by the appraiser and the repairer to the owner PRIOR TO repairs being made.

* Under the new 2008 Massachusetts Auto reform – there are many new and exciting coverage options!  Basically if you have seen it advertised on T.V. it is now available in Massachusetts (disappearing deductibles, accident forgiveness, replacement cost coverage, etc.) – but not all insurance companies offer the same discounts, so you need someone like Sullivan Insurance & Financial who has access to over 42 insurance companies and knows the market place well!

Shopping for Auto Insurance?

In recent years, all rates for automobile insurance in Massachusetts have been set by the Commissioner of Insurance under what was known as the "fix-and-establish" system. Under this system, companies were not allowed to compete for drivers by charging lower premiums.

Beginning April 1, 2008, Massachusetts automobile insurance companies will begin setting their own rates (just like they do in many other states, such as with New Hampshire Auto Insurance). This means that if you request premium quotes for the same coverage from several different companies, you will most likely receive slightly different quotes from each of them, as well as several different discounts and additional coverage options. You will then be able to choose the best rate for the coverage you want. You should also have all your personal insurance coverage (Auto insurance, home insurance, motorcycle insurance, boat insurance, etc.) within one agency and with one insurance company because of the many new discounts available.  If you would like to review your options, please contact Sullivan Insurance & Financial for your MA and NH Auto Insurance

Will My Massachusetts Auto Insurance Coverages Change?

Although the minimum limits and basic coverages will not change, insurers providing Massachusetts Auto Insurance will now be permitted to offer additional coverages, higher limits, and lower or waived deductibles. Therefore, you may have more choices available to you, and may want to shop around if there are additional coverages you wish to purchase.  Sullivan Insurance & Financial has access to over 42 insurance companies, so we are very familiar with all the different coverage options available – including some unique coverage options.  Basically if you have heard about it on a TV Commercial, some carrier in Massachusetts will mostly offer it (disappearing deductibles, accident forgiveness, replacement cost coverage, etc.).  Just make sure you understand this new coverage or any new rating issues with your insurance carrier or have your agent explain the differences.  Make an informed decision!


Will Massachusetts Auto Competition Lower My Premium?


Competition is designed to encourage insurance companies to offer their lowest possible premium to each driver. Although the majority of Massachusetts policyholders will probably benefit from reduced rates under the new system, the amount that you pay will depend on your individual risk factors, such as your driving record, the territory in which you live, and other rating factors approved by the Commissioner. While every policy is different, maintaining a clean driving record should decrease your rates.


How will My Driving Record Effect My Insurance


As of April 1st, 2008, Massachusetts drivers will have the benefit of a competitive automobile insurance market. This means that the old system where automobile rates are set by the Commissioner of Insurance no longer exists. In a competitive market, insurance companies may set their own rates. In addition, insurance companies may choose to develop their own Merit Rating Plan or they can decide to continue to use the existing Safe Driver Insurance Plan (SDIP). In any event, all insurance company rates and Merit Rating Plans must be approved by the Commissioner of Insurance.


What is a Merit Rating Plan?


Under the new competitive market system, insurance companies will be permitted to develop their own rules - known as Merit Rating Plans - to determine if and how they will impose surcharges on your premium for at-fault accidents and traffic violations. For example, an insurance company's Merit Rating Plan might offer an accident forgiveness option where surcharge points will not be applied for your first at-fault accident under certain circumstances.

An insurance company's Merit Rating Plan shall not: Use any at-fault accident or traffic violation that is greater than 6 years old from the policy effective date, or


·    Increase premium for at-fault accidents or traffic violations for more than 5 years. For more information on individual insurance company Merit Rating Plans, contact the insurance company or insurance agent directly.


What is the Safe Driver Insurance Plan (SDIP)?


Companies can also choose to adopt the existing SDIP system as their Merit Rating Plan. The SDIP is the point based system that lowers premiums for drivers with clean driving records, and increases premiums for drivers with traffic violations and at-fault accidents. Auto policies written through the Massachusetts Automobile Insurance Plan (MAIP) use the SDIP system as the company's merit rating plan.


Driving Safely Can Reduce Your Premium


Companies are free to create Merit Rating Plans or use the existing SDIP. These plans lower your premium based on years of incident-free driving, or raise your premium based on at-fault accidents and traffic violations. Most insurance company Merit Rating Plans and the SDIP provide good driver discounts to drivers with clean driving records. Driving safely and maintaining a clean driving record will almost certainly reduce your automobile insurance premium.


Application of At-Fault Accident Surcharges to Your Record


Insurers are required to determine if a driver is more than 50% at fault for an accident by applying the Standards of Fault (211 C.M.R. 74.00). These standards are common accident types under which you are presumed to be more than 50% at fault. For example drivers are presumed to be more than 50% at fault when operating a vehicle which collides with the rear section of another vehicle.


If your company determines that you are at fault for an accident, it will send you a Surcharge Notice. This notice includes instructions for appealing the surcharge to the Board of Appeals at the Division of Insurance. Surcharge points remain on your driving record unless you successfully appeal the surcharge.


If you receive a Surcharge Notice naming the wrong operator, call your insurance company. Your insurer will rescind the incorrect notice and reissue the notice to the correct operator.

Under the new competitive system, insurers will still be required to report all at-fault accidents to the Merit Rating Board (MRB).


Appealing an At-Fault Accident Surcharge


If you have been surcharged for a traffic accident and you believe that you were not more than 50 percent responsible for causing the accident, you may appeal the surcharge to the Division of Insurance Board of Appeals. There is a $50 fee to file an appeal. You must file your appeal within 30 days from receiving your Surcharge Notice; otherwise you may lose your right to appeal.

If a surcharge is applied to your auto insurance premium while your appeal is pending, you must pay the additional premium or your policy will be cancelled. If you win your appeal, you will receive a refund or credit from your insurance company for any increased premium you paid as a result of the surcharge.


Your appeal does not guarantee success. If you do not agree with the decision of the Board of Appeal, you may pursue the matter further in Superior Court. For specific details about the at-fault accident appeal process, contact the Division of Insurance Board of Appeals at 617-521-7478.


Appealing Traffic Violations


If you receive a traffic ticket - known as a civil traffic citation - that results in a surcharge, you cannot appeal the surcharge to the Board of Appeals. You must challenge the ticket in court. The rules for contesting the ticket will be found on the back of the ticket. Typically, you will have a hearing before a clerk-magistrate or judge. If the court finds in your favor, you will not be surcharged for the violation.


Copies of Your Driving Record


You may obtain an official copy of your driving history record from the Merit Rating Board (MRB). The MRB is the state agency that maintains driving history records. You can receive a copy of your record by submitting a completed "Request for Detailed Driving History Record" form to the MRB. There is a $15 fee to process your request. You can download the form from the MRB's website at or you can call 617-351-4400 to obtain the form.


Operators New to Massachusetts


If you are new to Massachusetts you may be assigned to an insurer through the MAIP. MAIP policies use the SDIP system for a Merit Rating Plan. This allows drivers new to Massachusetts to get credit for their safe driving in other jurisdictions. If a driver new to Massachusetts was licensed in another state or country within the last 6 years, the driver will initially have zero (0) SDIP surcharge points. However, the new driver will not be eligible for any safe driving discounts.

If a new driver's Motor Vehicle Report (MVR) is electronically available, the insurer will be responsible for obtaining it from the state or country where the driver was previously licensed. If an MVR is not electronically available, the driver can obtain an official driving record, or a record from a previous insurer, and submit it to the current insurer. If that driving record is not in English, the driver must obtain a translation certified true and correct by a translator, attach it to the driving record, and submit it to the current insurer.


Merit Rating Board


The Merit Rating Board is the state agency that maintains operator driving history records and is responsible for the administration of the Safe Driver Insurance Plan. The MRB receives and maintains information from insurance companies, police departments, and Massachusetts courts regarding at-fault accidents and motor vehicle traffic violations.

If you are a listed driver on a Massachusetts private passenger automobile insurance policy assigned through the MAIP, the MRB will determine your SDIP rating and report it to your insurance company. If you obtain your policy through the voluntary market and your insurance company uses its own merit rating plan, the insurance company will use the information from the MRB's driving history record to determine your premium.


Accidents, Claims and Fraud

Everyone Pays for Insurance Fraud


Auto insurance fraud is not a victimless crime. We can all do our part to hold down costs by reporting suspected fraud and being part of the solution. Insurance fraud is a crime punishable by up to five years in state prison and a $10,000 fine.

When you are involved in an automobile accident, you rely on your auto insurer to handle your claim properly, fairly, and with as little inconvenience to you as possible. As a policyholder, you can ensure the efficiency of claims processing by doing your part to assist insurers in providing accurate information when the policy is issued, and in the fact-gathering process that follows an automobile accident. If you give false information to your insurer concerning where your car is garaged or who customarily drives your car, your claim may be denied.


Buying a Policy – what to look out for


The single most important thing you can do to protect yourself from a claim denial is to check that all of the information you provide your insurance company is complete and accurate.

You must indicate where your car is garaged most of the time, regardless of your listed address. Furthermore, you must also list all the licensed drivers who are likely to operate your vehicle. This includes people who live with you (family and roommates) who do not have their own auto insurance, and also people who use your car on any kind of regular basis.



After an Accident


Three simple steps can make a real difference in collecting all of the relevant information in the event of an accident:


1.     Keep the following items in your glove compartment - a disposable camera, a first aid kit, a tape measure, and blank police reports or accident diagrams.

2.     Note all participants and witnesses at the scene including their name, address, contact information, and insurers regardless of whether or not anyone was injured.

3.     File reports with the local police and your insurer promptly after the accident.


These easy steps will allow you to make a contribution to limiting the cost of fraud to all insurers, and thereby hold down rates for all consumers. In addition, you will be far more likely to be satisfied with the handling of your claim.


If you suspect fraudulent conduct on the part of anyone involved in your motor vehicle accident or your insurance claim - including other operators, any passengers, the repair shop, the appraiser, or any employee of the insurer - please call the Insurance Fraud Bureau hotline at 1-800-32-FRAUD. Another number to remember is the Governor's Auto Theft Strike Force Hotline at 1-800-HOT-AUTO when you have information about an auto theft. You will be able to speak confidentially with an investigator about your suspicions.


Finally, be sure that your auto body repair shop is registered with the Division of Standards 1-617-727-3480.


The Use of Original Equipment Manufacturer (OEM) Parts in the Repair of Your Vehicle
OEM Parts - No Additional Charge to Owner


You are entitled to the use of Original Equipment Manufacturer (OEM) parts in the repair of your vehicle under any of the following circumstances:


·        Your vehicle has been driven for no more than 20,000 miles,

·        The operational safety of the vehicle would otherwise be impaired, or

·        After reasonable and diligent effort, an appropriate rebuilt, aftermarket or used part cannot be located.


If you do not meet any of the criteria listed above, you can always require your auto repairer to use OEM parts, but you must pay the increased cost that may result.

Whenever repairs are to be made to a vehicle using non-OEM parts, state law requires that notice must be given by the appraiser and repairer to the owner prior to repairs being made.


Optional Endorsement for OEM Parts


Some insurers may offer an endorsement covering the amount necessary to replace any damaged "crash part" which cannot be repaired, with an OEM part. You must pay additional premium for this optional endorsement. Contact your agent or insurance company to see if they offer this endorsement.


Pre-Insurance Inspection

A Pre-Insurance inspection of used private passenger motor vehicles prior to providing coverage for Collision, Limited Collision or Comprehensive is required unless waived by your insurer. The inspection may be deferred for ten calendar days - not including legal holidays and Sundays. If your auto is not inspected within the required time, these coverages will be automatically suspended.

Cancelling Your Policy

If you cancel your insurance policy, no refund will be issued until your insurance company receives a receipt showing the license plates have been returned to the Registry of Motor Vehicles.

Safety Inspection and Premium Payment

It is your responsibility to make sure that your safety inspection sticker is current. If you fail to keep your sticker current, you may be fined and surcharged. You must pay your premium to avoid cancellation of your insurance. On the effective date, cancellations are electronically reported to the Registry of Motor Vehicles.

Newly Licensed Drivers

If any of your children who are household members obtain a driver's license, you must notify your company within 60 days of that date. You must list all licensed household members and any other licensed person who will customarily operate your auto.

Cooperate with Your Insurance Company

If you or someone on your behalf gives your insurance company false, deceptive, misleading, or incomplete information concerning the description and place of garaging of your car, or the names of those people who drive your car, your insurer may refuse to pay your claims under any or all of the Optional Insurance Parts of your policy.

Travel Outside Massachusetts

If you travel outside of Massachusetts to another state or to Canada, it is a good idea to have your insurance policy or proof of insurance with you. Your agent or insurance company can provide these forms.

For More Information

If you visit Sullivan Insurance & Financials website at, you will find an array of materials that can help you understand automobile insurance in Massachusetts. Go there to learn more about:

·                        Shopping Around for Automobile Insurance

·                        Consumer Rights in Automobile Insurance

·                        Learn More About the Massachusetts

·                        Automobile Insurance Plan (MAIP)

·                        Insurance and Your Rental Car


This guide is not meant to be a substitute for READING your Automobile Insurance Policy.  Everyone should read through their policy each year!  Information as of 04/2008.


If you have any questions or concerns, please visit our website at or call the agency at 978-372-2790 with any questions.  We can discuss the pros and cons of the coverage of ANY type policy so you can make an informed decision about your insurance coverage!

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Couldn't believe the difference - my past agent never discussed my coverage the way this agent did! I can't believe how bad my coverage was. They took care of everything & even cancelled my old policies. The new cost was even less than I was paying for for less coverage! I would highly recommend everyone have a review with this agency - they covered ALL the discounts and coverage options, and even asked me what I wanted my insurance to do - no other agent has ever asked me that! They didn't push me towards one company or another - they just competitively quoted with all their insurers. I would recommend everyone have a review with this agency and find out just want you are missing out on.