Myths about Virginia Auto Insurance

While talking to a client today about their auto insurance, I was reminded of a number of misconceptions and misunderstandings many people have about motor vehicle insurance. Here are four of the most common ones I hear.

Myth #1. “The better known insurance companies offer better coverage, so it’s safer to be with one of those.”

The Virginia State Corporation Commission (SCC) Bureau of Insurance issues a form “family automobile insurance policy”. (1) All consumer family auto insurance policies sold in Virginia must provide the coverage specified in the form policy. If a policy offers less, Virginia law provides that the policy is “deemed” to conform to the requirements. In 25 years of practicing only personal injury law in Virginia, I’ve only seen one insurance policy that offered more than the required minimum, and that difference would only apply in an obscure situation unlikely to ever occur. So, in terms of what the policy offers in the small print, buying an auto policy in Virginia is kind of like buying a bag of sugar in the grocery store. One bag might be Domino and another might be Imperial, but let’s face it, a bag of sugar is a bag of sugar. Insurance policies are the same. The real differences between companies are price and service, not what they are selling.

Myth #2. “Insurance companies are regulated, so one company is about the same price as another.”

Auto insurance companies are regulated in Virginia as to what the policy offers, and they have to have a “charter” to be able to sell insurance in Virginia, but family auto insurance policy rates are not regulated. The insurance companies can charge whatever they want. Some years ago I heard the state Commissioner of Insurance say he was frustrated because consumers in Virginia pay too much for their auto insurance, but the reason they do is because they don’t shop around. “The same person who will go to one grocery store over another because they can save 50¢ on a loaf of bread won’t pick up the phone and shop around to save themselves hundreds of dollars on their insurance policy.” (He also said that auto insurance is kind of like religion for some people; they have what their parents have, and don’t really think about it). In fact, to encourage people to shop around, the Virginia Bureau of Insurance offers a free booklet that has an “Automobile Insurance Quotation Worksheet” in the back to help people shop for insurance. (2) They also offer “Sample Premium Tables” that show rate quotes they received for a person of a certain age with the same driving record. In the 2006 pamphlet, it shows that quotes for the same 45 year old married adult living in Richmond varied from $778 to over $3,440! (One warning about the quotes; whatever company was low when that booklet was prepared may not be among the lowest now, because companies adjust their rates year to year based on their claims experience, sales goals, and many other factors. The best way to check is to shop around).

Myth #3. “All the companies are regulated as to how they do business, so the service they provide is about the same.”

Although insurance companies in Virginia are regulated as to some aspects of how they do business, they are not really regulated as to the level of service they provide. My experience is that when it comes to handling claims, they are all at best rather poor. There are a handful of companies that are really bad, but if you do as the Bureau of Insurance recommends and shop around, you are not likely to end up with one of the really bad ones. Why? Because the bad ones tend to be among the ones that advertise a lot, and since all that advertising costs money, they tend to be more expensive! As with most things you buy these days, you need to be a sophisticated consumer. If you are not happy with the price you are paying or the service you are getting, shop around. (On the other hand, how often are you likely to use your auto insurance or make a claim? The average person is not likely to use their insurance more than once every 5 or 10 years, so if you can save $100 a year with one company over another one, how much worse does the service have to be every 5 or 10 years when you actually use it? And remember, all of them are pretty bad. So the service is about the same, which means it’s all the more important not to pay too much.) The American Association for Justice named their “Ten Worst Insurance Companies in America” in a recent report. Click here to read more.

Myth #4. “I don’t have a lot of assets, so I don’t really need more than the minimum limit.”

The limits you buy of liability coverage on your auto insurance policy serves two basic purposes. First, if you cause an accident, then the limits of insurance protects your personal assets. If the amount of the damage or injury you cause is greater than the limit on your policy, then after your insurance company pays the limits then you are personally responsible for the amount greater than that limit. An injured person could sue you and get a large judgment. So you can protect your assets by purchasing a sufficiently high limit.

The second purpose for having a sufficiently high insurance policy limit is because, under Virginia law, you automatically have an equal limit of “uninsured motorist” and “underinsured motorist” coverage. (3) If you, a family member who lives in your household, or a passenger in your car is injured, and the person who causes the injury has no insurance or a limit less than yours, then your own company will pay up to the difference. For instance, if you have a policy with limits of $100,000 and are seriously injured, and the person causing your injuries only has a policy with the minimum limits of $25,000, the at-fault driver’s company would pay their $25,000 and then your company would pay up to the difference (that is, up to $75,000 more) to equal the limit you have of $100,000. So higher insurance policy limits not only protect you and your assets, they also protect you and your family against a driver how has no insurance or not enough.

About the Author: Clayton Allen is a Richmond car accident attorney with the law firm of Allen & Allen. He has over 25 years of experience handling personal injury cases protecting plaintiffs’ rights against the auto insurance industry.

(1) An example of the form policy is listed online at the Virginia SCC Bureau of Insurance website:

(2) “Auto Insurance: Consumer’s Guide”, Prepared by the Commonwealth of Virginia State Corporation Commission (SCC) Bureau of Insurance, available free by calling 804-371-9185 or tollfree 877-310-6560. If you call, be sure and ask for the companion “Auto Insurance: Sample Premium Tables” pamphlet for the most recent year.

(3) You can choose to make your UM and UIM limits less than your liability limit, if you request that in writing, but that’s rarely done and is a very bad idea.