Is Your Car Insurance Tied to You or Your Vehicle?
Technically, your car insurance is connected to your vehicle. This means that if someone else drives your car and there’s an accident, your insurance may come into play. However, not all insurance policies cover all uses of your vehicle, so it’s essential to read the fine print before letting someone else drive it. If you want to exclude drivers who live with you from your policy and prevent them from affecting your policy’s cost, you may have that option.
Does the Type of Car You Drive Matter?
The value, type, and safety rating of your car are all factors that impact your insurance policy’s cost. Other factors can include your annual mileage, where you park your car, and the expensive features it has.
Can Your Driving Record Impact Your Insurance?
Every claim you make, and even if you inquire about making a claim, is recorded and accessible to current and future insurance companies. If you have recent accidents or traffic violations, insuring you may be more expensive compared to someone with a clean driving record. Your insurance premiums are likely to increase if you have made any recent claims. When switching to a new insurance company, they will have access to your records and consider your driving history.
Can You Check Your Insurance Reports?
Insurance companies share information with two databases: the Comprehensive Loss Underwriting Exchange (CLUE) and the Automated Property Loss Underwriting System (A-PLUS). Third-party agencies manage these databases (LexisNexis runs CLUE, and Verisk Analytics runs A-PLUS). Claims you make will stay on your report for five to seven years, depending on the database.
Under the Fair Credit Reporting Act, you are entitled to one free copy of your report annually. You can dispute any incorrect or incomplete information in your report. You also have the right to be notified of any negative decision based on the information in your report. Requesting your reports will not affect your credit score.
If you want to retrieve your CLUE report from LexisNexis, you can do so online or by calling 866-312-8076. For your A-PLUS report from Verisk, call 800-627-3487.
Does Your Credit Score Affect Your Insurance Costs?
In most states, your credit score can impact the cost of your auto insurance. The only exceptions are California, Massachusetts, and Hawaii, where auto insurance companies are not allowed to use credit scores as a pricing factor. Research conducted by the Federal Trade Commission and other organizations reveals a correlation between credit scores and the potential costs for auto insurance companies. A low credit score indicates a higher risk, which leads insurance companies to charge more to offset potential future claims.
Does Your Location Affect Your Premiums?
Where you live can affect the cost of your car insurance. For instance, in 2018, the average auto insurance premium in Michigan was 64% higher than the national average. Other states with higher average auto insurance premiums include Louisiana, Florida, Rhode Island, and Connecticut. States with the lowest average auto insurance premiums are Vermont, Ohio, Virginia, Idaho, and Iowa.
Does Age Impact Your Premium?
Age is no secret when it comes to what car insurance companies don’t want you to know. Younger and older drivers tend to pay more on average for their premiums.
Younger drivers pay the highest premiums, which then decline steadily until they turn 25. From that point, premiums remain fairly stable throughout their adult years, up to age 55. Between ages 55 and 65, premiums rise gradually before taking a significant jump around age 75.
Apart from age, your gender, marital status, education level, and even occupation can also affect your insurance rates.
Does Buying a Car with a Loan Increase Your Premium?
If you have a car loan, insuring your vehicle may cost you more. When you fully own your vehicle, you are only responsible for liability coverage, which covers damage to other people’s cars or property if you’re at fault in an accident.
However, if you have a loan, the bank wants to protect its investment. They may require you to carry comprehensive and collision coverage, which covers damage to your car in an accident where you’re at fault. Policies that include this additional coverage are more expensive than those without it.
How Can You Lower Your Auto Insurance Rates?
Regardless of your age, gender, or location, you have several potential options to reduce your auto insurance costs. Here are some tips that your auto insurance company may not want you to know about:
- Drive carefully: Safe driving not only helps you avoid accidents, which can raise your rates, but many insurance companies offer good driver bonuses if you haven’t had an accident or filed any claims for a certain period.
- Pay your bills on time: Timely bill payments can improve your credit score, potentially leading to lower rates depending on where you live. Paying bills on time also demonstrates your trustworthiness to insurance companies, making it easier to negotiate a lower rate.
- Inquire about discounts: Don’t be shy when it comes to asking your insurance company about available discounts. These could include multi-driver or multi-vehicle discounts, good student discounts, or safe driver discounts. Being a good student or obeying traffic laws can significantly reduce your premium.
- Check your credit report: Review your credit report to identify any areas for improvement. Once your credit score improves, you can request a new auto insurance quote.
- Consider a higher deductible: Evaluate your coverage and determine if you can make adjustments to your policy. If you can afford a larger payment (such as $2,000) in case of an accident, consider raising your deductible from $500 to $2,000. This change can result in lower monthly premiums.
- Shop around: The insurance market is highly competitive, so it’s worth exploring offers from other insurance companies. You can search online or consult brokers who work with multiple providers. If you find a better rate, approach your current company and ask if they can match or beat the offer.
- Choose your next vehicle wisely: Research thoroughly before purchasing your next car. The type of vehicle you drive affects your insurance rates. Look for a car that has ample safety features without unnecessary additional features, as this can help secure a lower rate.
What Happens When Your Claim Gets Denied?
Car insurance is not just a financial burden; it’s meant to provide assistance in case of an accident. If your insurance company denies your claim, you have a few options to address this situation:
- Contact the insurer: Reach out to your insurance company directly after reviewing the claim denial. They may be able to provide a more detailed explanation or gather additional information to help you understand the reasons for the denial.
- File an official appeal: Most insurance companies have a clearly defined appeal process available online. Craft a clear and concise letter explaining how the evidence you submitted contradicts the decision to deny the claim.
- Consult legal professionals: If you suspect that your insurance company is acting in bad faith by denying your claim, seek advice from legal professionals who specialize in insurance matters.
Reducing the Overall Cost of Car Ownership
Owning a car can be expensive. To get the best deal overall, be vigilant about all potential expenses and shop around for the best rates before committing to anything.
Originally published on credit.com.