15 things you didn't know your car and home insurance covers

Your insurance policies probably include coverage you've never thought about. In order for you to get the most value from your policy, check out these things that may already be included for your premium payments:

1. A lawyer for your problem

Americans have a 10 percent chance of being sued in any given year and a 33 percent chance of being sued in their lifetimes, according to IFG Trust Services Inc., an international investment firm. Both your home and car insurance will provide you with legal defense if you're sued for an incident that's covered by your policy. For example, your home insurance company will provide a lawyer if you are sued because someone is injured on your property -- whether it's inside your home or outside on the sidewalk.

If a court finds you negligent and awards damages to the other party, your insurance will pay up to the liability limits defined by your policy. If you have assets to protect, such as a house, savings or investments, consider buying an umbrella policy. Umbrella coverage, which provides liability coverage above and beyond your home and car insurance, typically starts at $1 million. Read how umbrella policies extend your coverage.

2. Your naughty dog

Say your normally mild-mannered tail-wagger has a bad day. One of your neighbor's children wants to play but your pooch isn't in the mood and responds negatively. The bite causes the child an injury that requires hospitalization. Your neighbor sues you, seeking reimbursement for the child's medical bills. Depending on what breed of dog you own, where you live and your insurance company, home insurance may have you covered. Some home insurers have lists of breeds and crossbreeds they will not insure; other insurers consider such breeds on a case-by-case basis, or charge more for certain “biting” breeds such as pit bulls. Check your policy or call to see if you have coverage. For more, read home insurance for dog lovers.

3. An injured pet

Car accidents are dangerous not only for people but also the pets riding with them. And because pets don't have the benefit of seat belts, even a minor collision can result in pet injuries and major veterinary bills.

Depending on your insurance company and where you live, your car insurance could pick up the bill. For example, Farmer's Insurance will pay for pet medical costs up to $600 if you have comprehensive and collision coverage — in some states. You don't pay extra for this coverage. Coverage applies in the event of your pet's death or injury in a car accident, hijacking or theft (exotic animals not included). Here's more about insurance coverage for pets in car accidents.

4. Terrorism

If a group like Al-Qaeda bombs your neighborhood, your property is covered under both your home and car insurance policies. Standard homeowners insurance policies include coverage for damage to property and personal possessions resulting from an act of terrorism. If your car is damaged or destroyed in a terrorist attack, your car insurance policy will cover the damage if you have purchased comprehensive coverage. But if you carry only liability coverage, your car would not be covered.

While terrorism is covered, acts of war are excluded. After an attack, the government would declare whether it is terrorism or war and your insurance will respond accordingly. Note that biological and nuclear attacks are not covered. Here's how insurance takes cover from war and biological attacks.

5. Your stolen gun

Say your teen invites a few friends to your home and later you discover that your .40 caliber semiautomatic handgun is missing. You would report the theft and your home insurance will likely cover it. Most standard policies cover theft of firearms for up to $1,500. If you own an extensive collection of guns, consider purchasing extra coverage.

6. Your drunk friends

If you've just hosted a rollicking party but one of your guests left drunk and caused an accident, the finger of blame could point at you. In most states, you can be held responsible for his actions and find yourself in court. If a civil claim is filed against you, your home insurance pays for your legal representation and any damages the court awards — up to the limits of your policy. See where you could be held liable under "social host liability" laws. It's important to have adequate liability coverage. Most insurance agents recommend buying liability coverage between $300,000 and $500,000.

7. Those reckless friends

If you loan your car to a friend for a few hours and he crashes it, your own insurance policy will come to your rescue. (It doesn't matter whether or not your friend is insured, because your policy kicks in on your car.) Your policy insures your vehicle plus “you, any relative and anyone else using your car if the use is with your permission.” Even if your friend has his own car insurance, your insurance will pay for damage caused to others and, if you carry collision insurance, for damage to your car. However, you'll have to pay your deductible for any collision claim. For more, read about what happens when your friend crashes your car.

8. Stolen gifts

We've all stashed purchases in our car in a mall parking lot and gone back in for more shopping. But car insurance does not cover personal possessions that are stolen from your vehicle. Fortunately, theft of personal property is covered under your home insurance. You'll need to file a police report and pay a deductible to make a theft-related insurance claim. If your receipts are stolen along with your gifts, you will need to document your purchases, perhaps by obtaining duplicate receipts from the stores.

9. Your lost luggage

Any trip can turn sour if your luggage does not return with you. Fortunately, many home insurance policies will reimburse you for lost or stolen luggage. Loretta Worters of the Insurance Information Institute says that this falls under "off-premises coverage" in some home insurance policies. Sometimes coverage is automatic, but some insurance companies may charge extra, she says.

If you made expensive purchases while on vacation that are gone with your luggage, you won't recoup your expenses. Generally, you will be reimbursed only up to $500 for loss of personal property in luggage. If you know you will be making expensive purchases, you should probably have certain items insured separately.

10. Your child's college dorm

If a thief robs your child's college dorm, your home insurance policy should have you covered. Most home insurance policies will extend coverage to theft of personal belongings in your child's dorm. However, coverage does not extend to an off-campus apartment rented by your child; for that you'll need renter's insurance. Also, your child must be a full-time student and be considered your dependent for coverage to apply.

The 5 biggest lies told to car insurance companies

Fudging on your car insurance application to save on the premium may seem like a harmless white lie, but it can spell trouble for you down the road.

A new report by Quality Planning Corp. in San Francisco says car insurance companies lost $15.9 billion in 2008 from what it calls "premium leakage" — meaning loss of revenue due to the inability of insurers to keep track of changes in customers' situations that affect prices. The number represents almost 10 percent of the total $167 billion in personal auto premium written.

"It's a major problem, and some companies are taking it very seriously," says Quality Planning senior vice president Bob U'Ren. His company designs solutions for insurers to validate policyholder information and cut premium losses. In other words, they're in the business of making sure you're telling the truth.

Here are the most common misrepresentations customers make to their car insurance companies.

1. Under-estimating the number of miles driven

Whether out of ignorance or as a strategy to cut their premiums, many people lowball the number of miles they drive. Some simply forget to call their car insurance agents when they get new jobs that lengthen their commutes. This lie was the most misrepresented rating factor in 2008 and accounted for an industry loss of more than $3 billion.

2. "Forgetting" to report all the drivers in the household

Up to 2 percent of policies written are for households with a driver who's not listed on the policy — and that "missing" driver is usually a high-premium teenage driver or an adult driver with a lot of premium-boosting baggage. In conducting premium audits, Quality Planning asked one mom why her 17-year-old daughter, a licensed driver, wasn't listed on the policy. Her reply: "I totally forgot she was in the household." Unrated drivers accounted for $2.6 billion in lost premium in 2008.

3. Fudging the garage location

Quality Planning noted a slight upward trend in the number of people misreporting where they park their cars, particularly in big cities, where garage locations can affect premiums dramatically. Location discrepancies led to $1.3 billion in lost premium in 2008.

4. Claiming discounts that no longer apply

In some cases, drivers conveniently forget to tell their car insurance agents that the conditions that gave them a discount have changed. For example, perhaps they ended membership in an organization that made them eligible for a special premium rate. These wrongly applied discounts, based on misinformation about the driver or the car, added up to $2.9 billion in 2008.

5. Misstating how the car is used

Some customers fail to tell their car insurance companies that they're using the car for business. An at-home daycare provider, for instance, may neglect to mention that the household van is used to transport the kids to the park every day. Insurers lost $1.5 billion in premium as a result of this type of misrepresentation.

How car insurance companies find out

There are a variety of ways car insurance companies can find out that you lied. If the teenage son you fail to list on your policy gets in a car accident, it'll be pretty obvious.

Insurance companies also turn to outfits like Quality Planning, which use sophisticated analytical testing to uncover rating errors. The company puts an insurer's policies through a battery of more than 150 tests, cross-referencing data and employing pattern-matching algorithms to identify errors and discrepancies that suggest fraud or misrepresentation.

If you think the insurance company can't find out how far you drive every year, think again. Odometer readings taken at smog testing stations, for instance, can be compared to what you report to your insurance agent, U'Ren says. It's just one example of how your information can be checked.

Given the turbulent economy, insurers have good reason to pay attention. According to Quality Planning, every 1 percent reduction in rating error can result in a 20 percent profit gain. So don't be surprised if the information you report to your car insurance company comes under increasing scrutiny.

6 Top Car Insurance Myths

Insurance policies can be complicated enough. Don’t let a flood of misinformation drown out the facts. Since confusion can be costly, here are the most common car insurance myths debunked.

Myth: Red cars are the most expensive to insure

Fact: Red will not cost you more green. Roughly 25 percent of drivers surveyed by Progressive Insurance believe that the color of their car is a factor in determining their insurance rate — especially if the car is red. But the belief that drivers of red cars pay higher car insurance premiums is a myth. Insurance companies will likely not even ask the color of your car when they’re calculating your car insurance quote.

"The idea that the color of a car enters into what you’re going to pay for insurance is a myth that’s been around for a long time," says Jeff McCollum, spokesperson for State Farm Insurance. "I wouldn’t be surprised if it came from the fact that people with red sports cars have the image of being wild and reckless, but it certainly isn’t based on any type of reality."

Car insurance companies are interested in the year, make, model, body type, engine size and age of your vehicle. The color may be important to you, but it really doesn’t matter to your insurance company.

Myth: Thieves prefer to steal new cars

Fact: It’s the other way around. Statistics show that thieves actually prefer to steal older cars. According to a 2008 National Insurance Crime Bureau (NICB) report, the top 10 most-stolen vehicles reported in 2007 were the ‘95 Honda Civic, ‘91 Honda Accord, ‘89 Toyota Camry, ‘97 Ford F-150 pickup, ‘94 Chevrolet C/K 1500 pickup, ‘94 Acura Integra, ‘04 Dodge Ram pickup, ‘94 Nissan Sentra, ‘88 Toyota pickup and ‘07 Toyota Corolla.

"The reason we see so many older vehicles on the list is because they are easier to steal," says Frank Scafidi, spokesperson for the National NICB. "Also, people are keeping their cars longer (in the faltering economy). That creates a good market for used parts. A lot of times, when they are stolen, they don’t make it back on the street intact."

If you have an older vehicle and have dropped comprehensive coverage to save money, you are not covered for theft and do not qualify for rental car coverage. NICB’s report reveals that thieves have different preferences from state to state. Crooks in California and Florida prefer imports like Hondas and Toyotas. Texas crooks select pickup trucks. Criminals in Illinois, Indiana and Michigan have a thing for domestics (Dodges and Fords).

Myth: My insurance will cover me if my car is stolen, vandalized or damaged from hail or fire.

Fact: Unless you have comprehensive coverage, you are not covered for any of these things. A bare-bones policy in most states only requires you to buy liability coverage. This pays only for damage you cause to others. You need to purchase both collision and comprehensive coverage in order to fully protect your vehicle from all types of damage situations.

Comprehensive coverage covers pays for damages to your car that are not the result of a car accident. That includes theft, vandalism, hail, fires and accidents involving animals. Collision coverage pays for damage to your vehicle from a car accident.

Myth: If my car is totaled, my insurance will pay off what I owe on my loan or lease.

Fact: When your car is totaled, your policy does not promise to pay off what you owe. It will pay you the actual cash value of your car, minus your deductible. Actual cash value is the amount your car was worth before the accident, factoring in depreciation. You are still responsible for any amount outstanding on the loan or car lease.

The only way to cover the difference between the car's cash value and the amount you owe on a loan is to purchase gap insurance. Available to cover both auto leases and loans, gap insurance covers you if your car is totaled before you’ve paid off the loan, or before the lease term expires. Here’s how tosave yourself some grief: buy gap coverage.

Your insurer will decide if your car is "totaled." Generally a total loss is declared when the repair costs exceed a certain threshold of the car’s value, generally 70 percent. At that point, the insurance company will tow the car to the salvage yard and offer you the actual cash value of your car.

Myth: My insurance company will pay for a rental car if my car is stolen or damaged in an accident.

Fact: Even if you have comprehensive and collision coverage, it may not include a rental car. Rental car reimbursement is not automatically included in most car insurance policies, but you can add it at an affordable cost. According to the Insurance Information Institute, rental reimbursement coverage is available for $1 to $2 a month with most insurers.

Even if you have this coverage, it won’t necessarily last until your stolen car is recovered or your damaged car is fixed. There’s a limit on how much your insurance company will reimburse you per day, plus a cap for a maximum amount per accident. For example, GEICO charges $20 per year for a maximum $750 in rental reimbursement, with no deductible to pay. In this case, GEICO would reimburse you up to $25 per day but no more than $750 per accident.

Myth: Drivers of sports cars get more tickets and thus pay higher insurance premiums.

Fact: That’s not necessarily the case. According to a study released in 2009 by Quality Planning Corp., leading the pack with the most violations are drivers of the Hummer H2/H3. Hummer drivers have almost five times the number of violations compared to the average. Drivers of three different Scion models (tC, XB Station, XA) also made the Top 10 list. Others on the list include drivers of two models of the Mercedes-Benz (CLK63 AMG, CLS63 AMG), two Toyotas (Solara, Matrix) and the Subaru Outback Station Wagon and Audi A4.

At the other end of the spectrum, the study also includes a "well-behaved vehicle list." Topping that list are drivers of the Jaguar XJ, followed by the Chevrolet Suburban, Chevrolet Tahoe, Chevrolet C/K-3500/2500, Buick Park Avenue, Mazda6, Buick Rainier, Oldsmobile Silhouette, Buick Lucerne and GMC Sierra C1500 pickup truck.

While insurers don’t base their rates on this particular study, the type of car you drive and your driving history factor into how much you will pay for car insurance.

Cheap Car Insurances

Not all car insurances are created equal. Some plans provide full coverage, other just cover liabilities in the event of an accident. Some have high deductibles and other do not. These features can determine what kind of premium you'll end up paying on your car. If you want to get the lower car insurance rate possible there are some things you can do.

Some things car insurance companies base their rates on are out of your control like age, location, and education. There are other factors that you can change in order to get a cheap rate on your insurance. For example the type of car you choose to buy can determine how high the insurance companies decide to charge you.

Insurance companies have tons of statistics about how often various cars are stolen and how much damage certain cars take when they get into an accident. The crash test statistics are available to the public and you can lookup how different cars fair in these tests. If you choose a car that has done well on crash tests you're more likely to pay less on your premiums than if you buy a car that did poorly in crash tests. More importantly though you'll be buying a safer car for you and your family.

The age of your model is also a factor that determines insurance costs. A brand new car is going to have a higher premium than a used car so if you want to keep your rates down you should consider buying a used vehicle instead of a new one.