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Shopping for Car Insurance?
Copyright AA1Car.com
Copyright AA1Car.com
One of the first things you should know about car insurance is that it is REQUIRED by law in most states. You must carry proof of insurance with you when driving. Your auto insurance company will provide you with a card or some type of digital verification that shows you have the required coverage. Full Coverage is usually a combination of liability, comprehensive and collision insurance. Most states only require minimum liability insurance that covers damage to the other person's vehicle if you are involved in an accident. Even so, you should compare all the various coverage options when shopping for car insurance. Price quotes will vary depending on which kind of coverages you select, the deductibles for each type of coverage, and the maximum dollar limits of those coverages. You can save money by choosing higher deductibles and lower maximum coverage amounts.
Insurance companies also consider your age, gender, how many miles you typically drive in a year, where you live, your driving record and what type of vehicle you drive when quoting you a price for a policy.
Younger, less experienced drivers will pay a much higher premium than older more experiences drivers.
Men, particularly teenagers and men into their mid-20s, will pay the highest rates compared to women.
The number of miles you drive increases your risk of having an accident. So the more miles you drive, the higher rate you pay.
People who live in large congested cities will be charged a higher rate than people who live in rural or less congested surburban areas. It's all about risk. The more traffic you encounter, the higher your risk of an accident.
Your driving record is also a huge factor in determing your insurance rates. Parking tickets generally do not count against you, but moving volations do. Speeding tickets, red light and stop sign violations, passing in a no passing zone, reckless driving or a conviction for Driving Under the Influence (DUI) or Driving While Intoxicated (DWI) will really drive up your insurance rates.
If you have received multiple speeding tickets in the past 3 years, had your drivers license suspended, had multiple accidents, or one or more DUI or DWI convictions on your driving record, you will be considered a HIGH RISK driver and will likely have to get super expensive SR-22 high risk insurance. There are companies that specialize in these types of policies, and they are not cheap. What's more, you will have to maintain a clean driving record (no tickets or DUIs or DWIs) for the next several years before you can get off SR-22 insurance.
The type of vehicle you are insuring will also affect the rate you pay. The more expensive the vehicle, and the newer the vehicle, generally the higher the cost for collision insurance.
High performance vehicles and those with a history of being stolen (KIA's and Hyundais, Dodge Hellcats , for example),or vehicles that have a history of being involved in accidents more frequently than other vehicles will cost you more to insure.
Rates for virtually identical coverage can vary quite a bit from one insurance company to another. Insurance companes will charge what ever rate they feel is justified to cover their risk and to maintain their corporate profits. Rates will depend on the commissions they pay their representatives, how they market their products (locally or online), their overhead, their loss ratios, their responsibility to their shareholders, and how fat a year end bonus their CEO is counting on. Consequently, one company may charge 2X or 3X for the same coverage as another company. So it pays to shop around and to take the time to get multiple quotes.
Many insurance companies also give you a lowball initial quote to get you as a new customer (that lowball rate will go up the following year guaranteed!). They may also offer special discounts to military members, AARP senior citizens, people who have completed special driving safety classes, or discounts for bundling your car insurance with a home owners policy.
Just remember that CHEAPER isn't always BETTER when it comes to insurance rates. Some insurance companies that offer very competitive rates may not provide good customer service if and when the time comes file a claim.
An insurance company that has local representatives and/or claims adjuster will often provide better customer service than an online company that is out of state or does not have local reps. There may be long delays in getting a claim processed or settling a claim if you are dealing with a call center in some Third World country where English is a second language and communication can be challenging.
There are websites that rank customer satisfaction scores and complaints against various insurance companies, so be sure to research BEFORE you buy so there are no unpleasant surprises later should you have a claim.
Car insurance protects you and your vehicle against losses. Policies offer various types of coverage:
Liability pays for any damages caused by you or your vehicle if you are involved in an accident with another vehicle or object. Liability covers property damage and bodily injury. A $50,000 liability coverage is generally considered the absolute minimum, while most car insurance companies recommend taking a policy that provides $150,000 or higher coverage.
Medical Payments covers you and your passengers, and is usually limited to less than $5,000.
Collision coverage is optional, but pays for damage that may occur to your vehicle in an accident regardless of who is at fault. Collision insurance is recommended for newer vehicles, especially if you owe money on the vehicle. On an older vehicle that is not worth much, collision coverage may not be worth the expense. The deductible (the portion of any repair expenses you pay out-of-pocket yourself) typically varies from $100 up to $2,000. The higher the deductible, the lower the premium.
Comprehensive coverage is also optional, and pays for theft losses, vandalism or storm damage, and glass breakage. Though not required by law, it is usually well worth the money and often pays for itself if you ever have to replace a windshield or your vehicle suffers storm damage.
Emergency road service covers a roadside service call, jump start or towing fee. The amount paid may be limited to $50 to $100 per incident. You don't need emergency road service if you are a member of AAA or another motor club. But emergency road service is usually less expensive when purchased as part of your car insurance package than joining AAA or another motor club. This type of coverage will more than pay for itself if your have a break down or flat tire and have to call a tow truck (most of whom charge a minimum of $75 plus mileage).
Uninsured Motorist or underinsured motorist coverage pays for damages to your vehicle should you be involved in an accident with someone who is uninsured or underinsured. This may be required depending on the state where you live. This type of coverage is highly recommended whether you live in an urban area or a rural area (there are a lot of uninsured drivers on the road). It will pay for damaged to your vehicle if the person who hit you is uninsured.
Always get multiple rate quotes when shopping for car insurance, as rates from one company may be 2X or 3X higher than another company. Finding the best deal can save you hundreds of dollars a year!
When shopping rates, be sure you are comparing similar coverages (same liability limits, deductibles, etc.). You obviously want the best insurance value for your money, but equally important is how well the insurance company will treat you should you have to file a claim. A cheap rate is not worth much if you get lousy service from your insurance company.
If you have a claims problem with an insurance company, contact your local Better Business Bureau, or your state insurance office to file a complaint.
A suyrvey by the Consumer Federation of America found that many insurance companies typically charge higher auto insurance rates if you finance your car rather than own it outright. They also discriminate against lower income drivers as well as drivers who live in large cities.
The survey found wildly different premiums for the exact same coverage - which is another reason why you should always get multiple quotes when you are shopping for car insurance. The premiums quoted in the survey for the same coverage ranged from $564 to $3374 per year! This means some drivers have to pay SIX TIMES as much money for the exact same auto insurance coverage as other drivers who have the same driving record (no recent tickets or accidents). The differences in premiums varied by location and whether the driver lived in the city (higher rates) or suburbs (lower rates).
To read a copy of the CFA Auto Insurance Survey, Click Here.
If you think your insurance company is over-charging you for your car insurance, you can attempt to negotiate a lower rate when your policy is up for renewal (fat chance of that ever happening!). Or, you can tell them goodbye and shop around for a better rate. Chances are you'll find another company that can save you money over what you are paying now.
Another game the insurance companies play is to give you a lowball quote for your car insurance IF you also buy your home owners or renters insurance from them (which may be higher than what your are paying now). Or, they give you a low premium for the first year, then jack up the rate when your policy comes up for renewal based on what the other insurance companies in your area are charging for a similar policy.
The bottom line is the insurance companies play a lot of unfair pricing games to take unfair advantage of consumers. Auto insurance is supposed to be a "regulated" industry, but it really isn't.
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