Problems About Car Insurance

Does car insurance boggle your mind? We’re not surprised. The various options and decisions regarding your car insurance could leave you confused and conflicted. With this article we shall attempt to clear up some of those dilemmas.

1. Getting insurance Vs. Driving uninsured

You’ve just bought your first car, don’t have a job and are already burdened by the weight of your college debt. Insurance doesn’t seem high on the priority list and you’re wondering if you should bother with it at all. After all what’s the worst that can happen? A lot actually. If you get caught driving uninsured, you could get fined heavily, have your license suspended and have your car impounded. And if you happen to get into an accident while you’re driving uninsured you’re in for a world of trouble. Chances are you’ll be responsible for damages to your own self and vehicle and will also have to bear the costs of any damages to the other party’s self and property if you are found at fault. So this one is actually easy. Get car insurance no matter what.

2. Full Coverage Vs. Minimum Liability

Now that we’ve convinced you to get car insurance, let’s deal with the next dilemma. How much? While it may be tempting to get just the minimum coverage stipulated by the state, we suggest you get more. If your state only requires you to get a certain amount of liability coverage, and that’s all you purchase, you will receive no support from your insurance provider in the event of theft, natural disasters, acts of God, accidents with uninsured motorists, etc. We suggest you get collision, comprehensive and Personal Injury Protection (PIP). Collision will take care of damages to your vehicle in the event of an accident with another party. Comprehensive covers theft, fire, flood, vandalism, random objects falling on / crashing into your car, etc. PIP (Personal Injury Protection) will take care of medical bills and in some cases loss of wages that occur as a result of the accident.

3. High Deductible and Low premiums Vs. Low Deductible and High premiums

The answer is simple. Settle on the highest deductible you can afford. Keeping a low deductible means that your insurance rates will be higher and vice-a versa, so raising your deductible could potentially mean huge accumulated savings. However keep the amount that is your deductible aside, put it under lock and key and forget about it because if you get into an accident and make a claim, you will need to fork it out.

4. 6 month policy Vs. 1 year policy

Generally people purchase 6 month policies, but you can also get 3 month and 12 month policies. If you plan to retain insurance coverage for the entire year, its best to go with a 12 month policy. By purchasing a 12 month policy, you have the security of knowing that your rates won’t rise and that you will be insured for that period of time. If you were to get a 6 month policy, you might see a hike in premiums at the end of that term, and if you made serious claims, your insurer may choose to non-renew you. Not only do you benefit from the lack of stress, but your insurance company may also give you a discount for purchasing their policy for a whole year.

5. Addition to parents’ policy Vs. Separate Policy

Young drivers tend to pay very high insurance rates, so many of them choose to get added to their parents’ policies. However, this presents its problems. A claim made by you or a driving violation will affect not just your own insurance records, but your parents’ as well. There is no single answer to this dilemma; the best thing to do is get an estimate from your parents’ company and compare this with free auto insurance quotes and discounts offered by other reputable providers.

6. Used Car Vs. New Car

When picking out your first car, in order to get the best car insurance rates, you need to strike a balance. An old broken down car is likely to require more repairs maintenance and hence is more expensive to insure. However, a shiny new sports car is more likely to get stolen, and people who drive them tend to speed, so your rates will probably be high if you buy one of those. The best option is to buy a second hand car that has only been driven for a year or two, is in mint condition and has safety features.

7. Paying in full VS. Paying in installments

While auto insurance companies generally give you the option of paying in installments, you should pay your premiums in full if you can afford it. You may get discounts for doing this and even if you don’t, you’ll save on the additional money that your provider would charge you for allowing you the luxury of paying in installments.

8. Switching Providers Vs. Staying with the same one

Now this varies from person to person and provider to provider. Some auto insurance companies offer loyalty discounts as incentive to stay, but yet others will give you a discount for switching to them. Often sticking with a company makes you eligible for a good driver’s discount, a disappearing deductible, first accident forgiveness, etc. However, other companies will offer you a lower quote outright. The only way to find out whether you should stay or switch is to get in there and get as many auto insurance quotes online as possible. No matter which decision you take, make sure the company you end up with is reputable.

9. Filing a claim Vs. paying for damages

The reason you pay premiums is so that you will be covered for any damages your car/person sustains during an accident. However, the unfortunate fact of the matter is that filing a claim can raise your premiums. When you get into an accident, you need to do the math and see what will be beneficial in the long run. Look at the amount of money that repairs/replacement will cost after your deductible is taken. If your car has sustained $1000 of damages and your deductible is $500, filing a claim and having to deal with the subsequent hikes in your premium may not be worth the compensation paid by your provider. However, if your $30,000 car is totaled, by all means, file that claim.

10. Being upfront with insurance company Vs. Conveniently omitting details/Fabrication

There are many cases in which people are tempted to conceal/fabricate facts when it comes to insurance. Say you want that hot performance modification. You know that informing your insurance company could mean them dropping you/raising your rates. Or that you’re really short on cash, need to pay rent and an easy way to make some bucks is to stage an accident/theft and claim compensation from your provider. Well we have one thing to say to you. Don’t do it! If you’re caught, the company will drop you, your friendly neighborhood police will pay you a visit, you will receive fines/prison time, and no auto insurance company will touch you with a barge-pole after that. And if a provider does agree to take you on as a client, trust us when we say your insurance premiums will bring you to tears (and these aren’t tears of joy we’re talking about). Besides, any company that does take you on is probably not reliable; the fact that they associate with those charged with insurance frauds only confirms that honesty and standards aren’t exactly a priority for them.

Auto insurance is a convoluted, complex subject, which is unfortunate considering the fact that anyone who drives a car has to deal with it. However, knowledge is power, and if you’re armed with the right information, you can make decisions that will benefit your sense of security and your wallet.

The Impact Behind Car Insurance

Have you ever wondered how the cost of car insurance is determined? Do you feel like the bulls-eye on the dartboard where you are the target of the highest rate imaginable? These feelings can be relieved somewhat by understanding what factors have an impact on automobile insurance premiums.

Risk Affects All Quotes on Car Insurance
First however, this is a good time to mention the term risk. Risk is a basic premise found behind every insurance policy issued and the concept of risk and the idea behind it is relatively easy to understand. In simple terms it is all about statistics and probabilities and can be explained as the chance of something going wrong.

Effective risk management is critical to business success and the insurance industry employs highly skilled individuals known as actuaries to aid in risk management. These individuals use a combination of strong analytical skills, business knowledge and understanding of human behavior to design and manage programs that control risk.

So you say, “That is interesting but how does it apply to what I pay for my automobile insurance?” To answer simply, you are a risk to the insurer.

In order to calculate what level of risk that you will present to the insurer, your characteristics will be analyzed based on two specific factors known as Underwriting and Rating.

Underwriting: How Car Insurance Cost is Evaluated
Although much could be said here, for the sake of time understand that underwriting has to do with the assumption of financial responsibility. If an insurer provides you with a policy, they are underwriting, meaning that the company will have financial responsibility to pay a claim should the need arise. Here the topic of risk comes into focus. How does the insurance company determine how much should be charged for a car insurance premium?

First, with any policy issued, limits are set for specific incidents that could potentially be paid via a claim. Remember that actuaries have worked through the statistics and probabilities of the various aspects of insuring against a specific risk. Their work is a foundation to the underwriting process. Building on this foundation, limits are set for various events that could be covered. By setting limits, an element of control is provided.

It is appropriate to keep in mind that insurance companies are not charitable organizations. They are in business for the purpose of making a profit. Search for the most affordable car insurance you can find, but understand that car insurance prices vary between insurance companies and may change as a result of a company’s financial situation.

Second, the premium is established. The premium is your cost of car insurance. By taking into consideration numerous factors discussed below, the premium calculation is put on an individual and personal level specific to an individual.

Keep in mind, that the underwriting process could determine that you are not a good risk and your application for insurance for your car might not be accepted.

Rating: The Impact of Individual Characteristics on Car Insurance Premium
The second factor is rating. Put simply, rating has to do with determining what the premium will be based on the characteristics of the driver as well as characteristics of the automobile. When you apply for insurance, before you receive a quote on car insurance, you will be asked a series of questions to help determine the cost to insure you. These answers are fundamental to premium calculation. Information collected through these questions include:

Driving Record
Insurers want to know your past driving record and certain personal characteristics and then they group you with other similar drivers. Insurers review the claim history of your group to make projections about future claims.

Age, Gender & Where You Live
There are some rating factors whose characteristics you cannot control. Examples include your age and gender. Then there are some rating characteristics which could technically be controlled but such control may not be practical or realistic. To explain, think about where you live. Geographic location can have a definite impact on rating. For example, if you live if a highly populated area with a higher probability of accidents then this will carry a higher risk of claims versus a less populated area; however, to pack up and move just because of your vehicle insurance rates sounds rather silly.

What You Drive
There are other characteristics that can be controlled, such as the make and model of the vehicle that you choose to drive. A vehicle with few safety devices and a powerful engine carries a greater risk of high claims than a less sporty model. The choice of vehicle however is controlled as it is totally your decision.

Lifestyle Characteristics
Insurers also consider lifestyle characteristics in the underwriting process. These characteristics include marital status and employment history. From prior claims data, insurers know that married persons tend to have lower claim levels than unmarried persons. Other statistics show that persons who work in the same place for a long time tend to have lower claims.

Credit History
Also, underwriting criteria can include credit history. Those with a good credit will be deemed to be more responsible as they handle their finances well. That responsible behavior in turn will be viewed positively as a lower risk and grouped accordingly.

Do you see the pattern? Insurance rates are based on statistics that each company has collected. For example, if statistics indicate that teenage drivers are found at fault in more accidents, then that company will charge a higher rate for that category because, as a group, they will increase the need for funds to cover the expense of claims. In other words, the higher the losses from a group, the higher the rate for that group.

Claims Frequency
Keeping this same thought in mind, it is important to understand that the most influential aspect on the rating process is claim frequency. This does not mean how many times that you personally have made an insurance claim, although that will have an additional effect; however, claim frequency measures how often an insured event occurs within a group relative to the number of policies contained in that group. Persons sharing characteristics with a high claims group will be charged more for insurance coverage.

At the same time, persons who share characteristics with low claims classes will be charged lower rates. In addition, insurance companies offer discounts to individuals that exhibit certain characteristics.

So what can you do? Other than your choice of automobile, the most influential factor over which you have control is your driving record. A person with a clean driving record will pay less than other drivers.

Considering this information, what can you do to find a affordable car insurance plan? Compare car insurance plans! Prices for the same coverage can vary widely from one company to another since not every insurer will rate you exactly the same. One company may consider you higher risk because of where you live whereas the next company may rate that item differently.

Be Proactive – Get New Quotes for Car Insurance Annually
Being a proactive, responsible driver can help you avoid many situations that might otherwise result in a claim against your affordable car insurance coverage. Being a complacent driver can cost money. Make it your aim to review your coverage’s on at least an annual basis and get new quotes to make sure you have the most affordable coverage for your vehicles.

Signs That You Need Car Insurance

Insurance policies mean you have to make regular payments, and these payments cut a slice on your finances. Many people don’t like paying too much for insurance products. This is why they tend to get cheap car insurance. Low-cost automobile insurance is not necessarily inferior to the rest of the insurance products. There are important questions to ask.

What type of vehicle do you have?

The value of your car affects the amount of insurance you pay for it. Generally, small cars mean lower premiums. Car insurance advisers say that choosing a car you can afford is a good thing.

Details about the car are important. Insurance companies want to see correct details. For instance, ownership should be clearly established. Where the car was bought is another thing that affects the premium. Imported cars may have higher insurance cost because its parts are difficult to find or pricey.

Does your car have enhanced security features?

The security features of your automobile are an advantage. Aside from providing safety, the security features also reduce the amount of insurance. People whose cars have alarm system, immobilizer, and tracker may have the cheapest car insurance premiums. The rationale is that cars with safety features have low chances of being stolen. The alarm system alerts the owner in case an intruder tries to break into the automobile. The immobilizers keep your car from being started by an intruder. The trackers, on the other hand, allow your car to be recovered after being stolen. It would be an advantage to make sure the car you buy has enhanced security mechanisms. New cars generally have enhanced security elements.

Who owns the car?

There is a difference between car owners and car keepers. Insurance companies usually ask whether the person who owns the automobile is also the one driving it. If you own and drive your car, you can get cheap car insurance quotes. If someone else drives your car, quotes can be higher.

How is the car used?

The insurance provider will ask how you use your car. If you insure a vehicle for personal use, it must be used for personal transportation purposes only. If you drove the car for business purposes and you get into an accident, your insurance provider may not reimburse costs incurred during the accident.
Cars used for business purposes sustain bigger premiums. Usually, only vehicles used for personal and family purposes can qualify for cheap auto insurance. If your car is only used for daily driving to family or friends, you may pay low premiums. Insurance providers assume that the more frequently you use your cars, the higher your chances of having car accidents.

What kind of insurance do you need?

Car insurance has varied levels. Depending on your need, you may go for third-party or comprehensive auto insurance. Third-party insurance is very limited and covers only claims of third parties. If you slam into the car of someone else, your insurer will cover their repair expenses, but you shall pay for your own repairs. There are insurance products that provide a wider range of protection that includes fire damage and theft. Comprehensive car insurance has a wide coverage including fire, theft, damage due to accidents, and third-party claims. The rule of the thumb is that the wider the coverage, the higher the premium.

Car Insurance For Students

Many college students now drive their cars, and one common complaint is the high cost of car insurance for college students. The first thing to put in mind is that car insurance is seen by almost everyone to be expensive. It is viewed as an added expense, and because it is enforced, it does not have consumer-friendly connotations. Some people think having an insurance for your car is absolutely necessary. For students, it probably is.

Why is it expensive?

However, it cannot be denied that the students are hit the hardest by high insurance cost. The rationale behind the high cost of car insurance for college students is due to mainly one factor-their age.

The Age Factor

Car insurance is perhaps an area wherein age is an advantage. Insurance rates get better as you grow older. Nascent drivers are still learning how to drive and train their reflexes. The chances that they may bump their car into a signage or lamp post are high. Also, they are less equipped with skills and reflexes to avoid accidents.

The Gender

The gender of the student partly determines the cost of their auto insurance. Usually, college boys will have to pay more than college girls. Statistics indicates that teenage boys are susceptible to driving accidents and violations, most probably because they are new to the activity and they want to be adventurous. But the practice of insurers to offer more expensive insurance for males has been viewed by some critics as a form of discrimination.

Looking for Favorable Deals

It may be a challenge for students to save on car insurance. One way is to look for quotes online. There should be a few insurers who are willing to offer cheap car insurance for students. Shopping for insurances can be daunting for young drivers. You may want to get advice from mom or dad.

Opting for Temporary Insurance

Students who use their cars occasionally may opt for temporary student car insurance, which is the cheaper alternative. This allows you to avail of the coverage only when you use your car. A similar insurance product is the pay-as-you-go policy. However, check with your state authorities if insuring a car on temporary basis is legal.

Choosing the Right Car

Insurance companies classify cars in several groups, depending on price, newness, features, engine size, and so on. Usually, inexpensive cars would qualify for low premiums. The problem with many college students is that they want new stuff-new gadgets and new cars. If the car is not sleek, it will most likely be left in the garage. But new and classy cars are likely to get high insurance costs.

Adding Your Parent to the Policy

When you add a more experienced driver, like your father, on your insurance, the insurer will assume that the driving is shared. Doing this will reduce insurance premiums. Parents should not insure a car under their name if the main driver or user is their son or daughter. This is illegal.

Taking Care of Your Car

Reckless driving has several negative repercussions. One is your car can get damaged. Another is you can damage someone’s car. You may crash into a property or hit a pedestrian. All the recklessness can incur liability and rise in the cost of your insurance.