AUTO INSURER Archives — Auto Trends Magazine

Auto insurance will cost you, but savings can be had.

The cost of auto insurance puts a huge dent in some wallets. Drivers in Michigan, Louisiana, and Oklahoma pay far above the national average while drivers in Maine pay the least.[1] Among auto insurers, rates can vary widely, and consumers don’t always know why they’re being charged so much.

You can’t do much about the state where you live—besides moving—but you can get the most coverage for your money by keeping some things in mind as you shop for auto insurance.

Credit Matters

Your credit history reflects on what you pay for auto insurance. Insurers develop an “insurance-risk score” or “insurance credit scoring” based in part on your credit score, theorizing that you’re less likely to file a claim if you have good credit.[2] Your credit score is easily available to you, but your insurance score is not (typically, you’ll have to visit a credit monitoring service such as TransUnion to find it, not your insurance company). In any case, if your credit score is high, then your insurance rates should reflect your insurability.

Personal Demographics

Your marital status, gender, age and the city where you live are factors in determining insurance premiums. The last category can make a big difference in what you pay—if your zip code or street address is coded wrong, you might be charged a rate far above what you should be paying.[3] Therefore, it is important to review your declarations page for accuracy.

What You Drive

Before purchasing that turbocharged sports coupe, contact your auto insurer to get a quote for car insurance. Indeed, your agent can tell you which cars cost the most to insure in any given vehicle segment. Engine size isn’t the only consideration: insurers charge more for cars that don’t hold up as well in an accident. They may also raise rates for cars without recent safety features including side curtain airbags, rearview cameras, and lane departure warning.[4]

Your Driving Record

If you have tickets, then you may have points on your driving record. Points send a signal to auto insurers to raise your rates based on an algorithm set by each insurer. Your insurer won’t tell you how that works, but you can contact your Department of Motor Vehicles to obtain your driving record. If old points have not been removed from your record or points have been wrongly assigned to your record, you can have the DMV make the correction and forward a copy of your updated record to your insurer.[5]

Seek Discounts

Insurance companies offer discounts for drivers who drive just a few thousand miles in one year. Further, discounts are offered if you insure your auto and home with the same company, have been with that company for several years, are a safe driver or have recently completed a driver’s training course. Ask your insurance agent about available discounts—information that’s not always readily volunteered.[6]

Shop Around

Get at least three price quotes from different insurers with similar coverage to make comparisons easier. You may be able to save money by dealing directly with a company over the phone or via the Internet instead of through an insurance agent.

If you belong to an alumni association, a business group or some other association, a group plan can offer additional discounts. Moreover, ask your employer if the company offers a group plan for its employees and their families.

Save Money

It pays to review your auto insurance policy annually as it may reveal overlooked discounts or even mistakes that are costing you money. Never assume your policy reflects your current information as your address may have changed, drivers may have been added or dropped, or other factors may influence what you pay.

Sources

[1] Insure.com: Car insurance rates by state, 2019 edition — https://www.insure.com/car-insurance/car-insurance-rates.html

[2] The Balance: What is Insurance Credit Scoring? https://www.thebalance.com/what-is-insurance-credit-scoring-4156729

[3] The New York Times: Your Neighbor in an Adjacent ZIP Code May Pay Less for Car Insurance — https://www.nytimes.com/2018/10/19/your-money/car-insurance-neighbor-zip-code.html

[4] Insurance Information Institute: What determines the price of an auto insurance policy? — https://www.iii.org/article/what-determines-price-my-auto-insurance-policy

[5] North Carolina Department of Motor Vehicles: Driving Records — https://www.ncdot.gov/dmv/offices-services/records-reports/Pages/driving-records.aspx

[6] Allstate: 6 Car Insurance Discounts That May Save You Money — https://www.allstate.com/tr/car-insurance/tips-for-car-insurance-discounts.aspx

Image by 3D Animation Production Company from Pixabay

Gap Insurance

Yet, there are other forms of auto insurance coverage including gap insurance. As the name suggests, this type of insurance closes the gap between what you owe on a car and what it is worth following total loss or a theft. You may think that you don’t need gap insurance, but without such coverage you could be left holding a hefty bill.

Gap insurance is particularly useful for consumers who own a new car. For instance, that BMW 328i Coupe has cost you $41,100 and you’re financing it with a $39,000 auto loan. You’ve made six payments of $380.44 per month (taking out a 5-year loan at 4 percent) and have reduced your outstanding balance to $36,717.

Insurance Example

One day, you find yourself driving down the road and you hit a patch of ice. Your car suddenly veers out of control, heads down an embankment and t-bones a tree on the passenger side. You’ve got some scrapes and bruises, but fortunately, you were able to leave your car relatively unscathed. Unfortunately, your car has sustained heavy damage and it won’t be drivable again.

Your insurance company has evaluated your car and has determined that repair costs will exceed what the car is worth. That worth is its actual cash value or what your car would fetch if you were to sell it. Your insurance company has pegged its value at $34,100 based on 20,500 miles driven. With its $1,000 deductible, you’ll be given a check for $33,100 and soon find yourself owing your financing company $3,617, representing the difference between the cars ACV and your remaining loan payments.

Financial Obligation

That difference is a gap and that is where gap insurance comes in. If you opted for gap insurance, the $3,617 difference would be covered by an insurance company and payment would be made by your insurer to your lender, freeing you of any further financial obligation.

Not every auto insurer offers gap insurance. Some companies, such as Progressive Insurance, do not offer gap insurance. Instead, you may be covered by a loan/lease payoff arrangement that limits the insurer’s payout maximum to 25 percent of your vehicles ACV. You may be covered, but your deductible would still be your responsibility. Check with your insurance carrier to see how you would fare if your car was totaled or stolen.

Upside Down Consumers

Gap coverage is especially desirable for upside down car buyers or people who owe more on their cars than what they are worth. And if your auto insurer doesn’t offer gap insurance, your lender may advises Monica Steinish writing for the Credit Union National Association.

Of course, one way to avoid a gap is to put down more money on your new car. When you put down at least 20 percent on your new vehicle, you are essentially assured that gap isn’t an issue with no worries that you’ll be socked with an outstanding payment from your lender.

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AUTO INSURER

How to Get the Most Auto Insurance Coverage for the Money