Looking for Auto Insurance? Here Are 6 Things You Need to Know

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Let’s get one thing out there: no one is especially psyched to get car insurance. You get it because it’s a financial safeguard against damage to your car or injury to you or others (and maybe because it also happens to be legally required in some form nearly everywhere in the US). Car insurance is complicated, and drivers often don’t know what to expect from the process.

Let us break down the basics so you’re better able to find the right coverage for you. Here are six things you need to know.

1. What Car Insurance Is 

As a licensed insurance agent, I find that many people I talk to don’t quite understand what insurance is or why they need it. I get it. After all, insurance is rather abstract—it’s not a physical object you buy at a store. Further, if all goes well for you, you won’t ever have to use the coverage you paid for. So it’s often hard for people to see the value.

In the simplest terms, insurance is a promise from an insurance company to support you financially in the event that something unfortunate occurs and causes you financial loss or other damage. You pay an insurance company money (your premium) for a policy that details your coverage (who/what is protected and to what dollar amount), and the insurance company is responsible for paying if something happens and you incur a loss (damage to your car, a broken leg, etc.). Insurance companies do this by pooling risk among all the people they insure, collecting premiums from everyone and using those funds to pay claims for those who need it.

Of course, there are many other details that go into the whole system, but we’re keeping it simple.

2. What Different Insurance Types Cover

The type and amount of coverage each person needs varies, but these are the coverage basics you should know.

Liability coverage is legally required for drivers in almost every state. It covers the other driver in a crash you cause, and it includes injury and property damage. If you see numbers like 25/50/10 or 30/60/25, that shows the liability coverage limits for (1) bodily injury per person, (2) bodily injury per accident, and (3) property damage—each in thousands of dollars. For example, 25/50/10 means your coverage will extend up to $25,000 per individual injured in an accident, $50,000 for all persons injured in an accident, and $10,000 for property damage.

In no-fault states, you are required to carry coverage (normally personal injury protection or PIP) for your injuries regardless of who caused the accident.

Collision coverage, which covers damage caused in a crash, and comprehensive coverage, which covers damage from other events including weather (fire, flooding, etc.) as well as theft, are often collectively called full coverage.

Other coverages include uninsured motorist coverage, which protects you and your vehicle from damage caused by people who don’t have insurance, and medical payments coverage, which covers select costs for injuries you and your passengers sustain in a collision.

3. How to Get Car Insurance

You can easily go online, call a company or two, or even walk into a local insurance agent’s office to talk to them about getting coverage. But how do you know which company to contact?

Insurance companies spend billions of dollars every year on advertising, so you could probably rattle off a few big car insurance brands you’re familiar with. But it’s important for consumers to know that not all insurance companies are the same—in fact, they all have different ways of pricing policies, and many look for certain types of customers with certain risk profiles to do business with.

This is why it’s more important than ever to compare car insurance quotes from as many companies as possible. Getting multiple opinions and understanding the market will help you find the best rate around.

4. Why You Pay What You Do

Insurance companies determine what you pay for insurance based on dozens of “rating factors”—all having to do with who you are, where you live, what you drive, and other details of your history, both on and off the road. Everything is about statistics, and insurance companies assign certain levels of risk to each of these factors to gauge the likelihood that you will file a claim.

For example, teens are considered high-risk drivers because they have so little experience behind the wheel and are statistically likelier to be in an accident—and thus file more claims—than older drivers, so they often pay much more for their premiums.

Other risk indicators include some obvious ones (like your driving record) and some less-obvious ones (like your ZIP code). There are also certain factors, like your credit score, which only some states allow to be used in determining your rate (it’s prohibited in California, Hawaii, and Massachusetts).

5. How to Lower Your Risk and Your Rates in the Future

You can’t change certain insurance rating factors, like your age, but you can make a few changes to reduce your risk in other areas. Here are a few tips:

  • Drive safely and maintain a clean driving record.
  • Consider sharing a policy with someone you live with.
  • Bundle your renters or homeowners policy if you can.
  • Pay your premium in full at the start of your policy or sign up for auto-pay.
  • Maintain insurance coverage with no lapse between policies (even for a day).

6. When to Get Insurance 

The obvious time to get car insurance is when you’re getting a car, but it’s critical that you don’t have a lapse in coverage between insurance policy terms. I highly recommend shopping around for car insurance before you begin the car-buying process. Shopping early also allows you to account for your premium in your car-related expense budget.

Other times to switch insurance could be if you get married, move, or have another big event in your life; if your rates increase for no apparent reason; or if you need to add a new teen driver to your policy.

Additionally, it’s important to compare rates every six months to make sure you’re staying up to date on any changes that might occur if you move, get a speeding ticket, or even have a birthday.

Once you’re ready to start your insurance search, you can use Credit.com’s comparison tool to get a car insurance quote and compare rates.

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13 Ways to Drive Down Your Car Insurance Premium

If you have a car, paying for insurance is a necessary evil. But you don't need to pay as much as you are now.

Paying for car insurance is a necessary evil. It helps protect you and your property from the cost of accidents. Unfortunately, it can cost a bunch to insure yourself against the unpredictable conditions of the open road.

There are several ways to reduce the cost of your car insurance premium, letting you cruise past high payments. Here are 13 ways to reduce your car insurance premium:

1. Choose the Right Car

In part, your car insurance premiums are calculated using the risk and cost associated with your vehicle. That means the price, the potential cost of repairs, the odds of theft and the safety features of your specific car impact your cost of insurance. Insuring a sports car won’t cost the same as insuring a family sedan. When you’re car shopping, consider the cost of insurance for specific vehicles. (Taking out an auto loan? Brush up on the lingo here.)

2. Maintain Good Credit

In most states, your credit score helps determine your premium. Those with excellent credit can access the best rates, while those with poor credit see higher costs. You get a snapshot of your credit report free on Credit.com.

“The insurance company may not necessarily pull a credit score or credit report, but they will use some type of insurance score that is based on one’s credit score. This varies from one state to another, but generally speaking, the better your credit score, the better your car insurance rate,” said Joel Ohman, certified financial planner and founder of CarInsuranceComparison.com.

3. Install Anti-Theft Devices

Most insurers offer discounts for a having an anti-theft device, which can prevent theft or identify and locate stolen vehicles. You’ll have to purchase the device, but it may save you money in the long run.

“Almost any insurance company approved anti-theft device will result in a discount of anywhere from 5% to 25%,” said Ohman. “For details about whether or not a particular device will result in a discount, it’s always best to verify directly with the insurance company.”

4. Get a Good Driver Discount

Good driver discounts are available at many insurance companies. Each insurer may define good drivers differently, but if you successfully avoid causing accidents and moving violations, you may qualify. Check with your insurer to find eligibility requirements for good driver programs.

5. Choose Higher Deductibles

You can lower your premium by signing up for higher deductibles, which means you’ll pay more out of pocket for repairs before your insurer steps in to cover the rest. Of course, you’ll want to make sure you can afford to cover the deductible before you take this route.

“The fastest way to lower your monthly auto insurance premium … is to increase deductibles. Changing deductibles from $500 to $1,000 saves about $150 annually,” said Neil Richardson, licensed insurance agent at The Zebra.

6. Bundle Insurance Plans

Bundling your car insurance with other types of coverage can save money. For instance, you could bundle your car insurance with homeowners insurance from the same provider.

“Drivers who bundle homeowners insurance save about $110 annually on their auto policies, and even bundling renters coverage saves drivers about $72 each year,” said Richardson.

7. Sign Up for Group Insurance

Many employers, universities and organizations offer group insurance plans from certain providers, which may offer cheaper rates. Check with your employer, current or former educators and any other official groups you’re a part of to see if they offer group insurance.

8. Find High-Risk Auto Insurers

If you have a poor driving or financial history, you may be considered a high-risk customer. Some insurers offer better rates for high-risk drivers than others.

“Certain auto insurance companies specialize in higher-risk drivers. This means that if one has a DUI in their history, many accidents or even poor credit … it becomes all the more important to shop around and compare rates from many different car insurance companies,” said Ohman.

9. Sign Up for Automatic Payments

Like many service providers, some insurers offer discounts when payments are automatically withdrawn from your account every month. As a bonus, you’ll avoid missing payments.

10. Make Bulk Payments

Insurers may offer discounted rates for paying your premium in bulk instead of month-to-month. In this scenario, you’d have to pay your premium for a longer time frame — for instance, six months or a year — to receive a discount. This could save you anywhere from 5% to 11%, according to DMV.org.

11. Eliminate Unnecessary Features

When you first signed up for car insurance, you may have opted for features that are no longer necessary. For instance, many insurance providers offer roadside assistance, but if you’ve since become a member of AAA, which provides roadside assistance, you no longer need the service from your insurer. You can regularly review your plan to make sure you’re only paying for what you need.

12. Find Other Discounts

Car insurance providers offer various discounts, which may include usage-based driving discounts, defensive driver courses for the elderly, mileage-based discounts and student discounts. The odds are good there is a discount available if you hunt around. You can call your insurance provider to find available discounts or look for competing offers. Which brings us to our next point:

13. Shop Around

Many people may sign up for an insurance plan and never revisit their options. But shopping around with providers is the best way to ensure you’re getting a good rate, and there are many online resources available to help with your search.

“Every six months or year, consider shopping around with as many companies as possible,” said Richardson. “Since each insurance company weights rating factors differently (and these change as your coverage needs or lifestyle changes), you won’t truly know if you’re getting the best rate until you check with multiple providers.”

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6 Reasons to Leave Your Car Insurance Company

Here are six signs it's time to break up with your auto insurance company.

You might be familiar with a few scenarios that could make your auto insurance rates change: You bought a new car, moved, got in a car accident, or even got married or graduated from school. In all these cases, it’s important to shop around for car insurance to ensure you’re getting adequate coverage — at the right rate — to meet your needs.

Even if you’re happy with your car insurance company, simply checking out the competition on a regular basis (we recommend every six months) can help keep your current rate low because it indicates to your insurance company that you’re on the lookout for better deals, and your insurer will, therefore, be motivated to keep you.

Insurance rates and policy details vary widely by insurer and by person. If you get a quote from a dozen insurance companies, many of the quotes might look quite similar, while others might show your premium varying by hundreds of dollars.

Even if your rates and coverage were equal among a handful of insurance companies, we remind you: It’s not all about price.

Insurance is intended to protect you when you need it — legally, medically, financially. You want to make sure you choose the company and service that meets your needs and has your back. If you’re not getting that support, you might consider changing insurance companies.

The Zebra’s licensed insurance agent and adviser Neil Richardson offers his expert advice on when it’s time to leave your insurance company:

1. Your Rates Increase (And It’s Not Your Fault)

As we’ve discussed, countless factors impact your auto insurance rates, including where you live, what kind of car you drive, your driving record and insurance history, and your personal information such as age, gender, marital status, credit score and more in many states. (You can view two of your credit scores for free on Credit.com.)

When any of these factors change, your rates may change, too. Sometimes it’s for the better (the older you get, the lower your rates drop — until about age 60, that is), and sometimes for the worse (if you cause a collision, your rates could rise nearly 50%!). Long story short: It shouldn’t be a huge surprise.

Because auto insurance companies are businesses that must make money to stay afloat, they may raise premiums for their customers, likely following a high claims payout period in which they incurred hefty losses. You may or may not be able to find lower rates elsewhere (for example, if a violent storm caused damage in a certain geographical area, other insurance companies could be suffering the same losses from big claims payouts), but it’s worth shopping around.

2. Your Insurance Agent Is Inflexible About Your Policy

A big part of the insurance company choice comes down to customer service, and if you aren’t getting the results you expect, within reason, you might consider other options. You should expect a certain degree of flexibility from your insurance company, and if you speak with someone who isn’t flexible with your insurance requests, keep in mind that there are plenty of companies that would like to try to keep your business.

“Changes like updating coverage or adding or removing a vehicle are simple requests, so if you hit a roadblock with an agent, it can be a sign that you need a new insurer,” said Richardson.

You should have full access to your policy and the ability to make adjustments, even mid-cycle, so if you’re told it’s not an option, begin shopping around.

It’s also important to note that you should be realistic about rates. Every time you make an adjustment to your policy, whether you’re adding or removing drivers or vehicles, your rate will change. So, if your rate goes up a little in one of these instances, it likely doesn’t mean you’re being treated unfairly. Here are some things that may impact your car insurance.

And/Or a Member of the Company Is Rude to You

It goes without saying that if any member of the customer service team or an agent is rude to you, you should consider taking your business elsewhere.

“There are just too many insurance options out there for you to stick with a company that doesn’t value your business,” Richardson said.

There are certain issues outside a representative’s control, but you can always ask to speak with a supervisor to voice your concerns. And if you end up switching companies because of a customer-service issue that isn’t resolved to your satisfaction, mention the incident to your new insurer to avoid going through the same headache.

3. You Notice Changes to Your Monthly Bill That You Weren’t Informed About

If you’re billed monthly for your policy, the price should be consistent each billing cycle.

If you notice a change in your bill for which you were not contacted, it can be a sign that something’s amiss with your insurer.

“Sometimes policy updates get sent to your email spam, and sometimes phone calls or mailings are missed, but if you notice a change in your rate, you should look into it immediately,” said Richardson.

If you don’t feel you were adequately informed, shop around for a new company that meets your customer-service needs.

4. You Want 24/7 Agent Access

Many local insurance agencies aren’t available to customers at night or on the weekends, and while often this works just fine, if you’re the type of person who needs more access, you might consider a switch.

For instance: If you buy or lease a new car on a weekend and your insurer doesn’t have weekend availability, you might not be able to take your car home right away. Many dealers require proof of insurance (especially if you’re leasing or financing) before they allow customers to drive off the lot.

Plenty of big national insurance companies have 24/7 agent access, which can be a plus if you’re the type of person (or family) who regularly changes vehicles. Keep in mind, your local agent might be willing to make an off-hours exception for your insurance needs if you give them advance notice.

5. You Want to Conduct Insurance Business Online

Some of us are more comfortable conducting business online, and that’s OK. If you want to add or remove drivers or vehicles without speaking to someone on the phone, you’ll need an insurer who can meet your needs.

Insurers offering online access tend to be larger national brands, but every company is different, so check out all the options in your area. Most insurers spend a lot of money to allow customers online access, so if you want to know about an insurer’s online policies, just ask, and they’ll usually be happy to help you navigate.

If online access is important to you, remember that it’s just one piece of the insurance puzzle. You should always consider the importance of adequate coverage, as well as service and rates.

6. You Want to Add Drivers to Your Policy

When you have a new spouse, a newly licensed teen driver or a new roommate, you might consider adding them to your own auto insurance policy. Adding extra coverage or drivers to your policy often shifts both your needs and the discounts you qualify for enough that you might find you fit better — and save money — with another company.

Life changes — big or small — could put you in a new risk category, which might mean you’re a better fit with a different insurance company,” Richardson said. “There’s not an advertised rate for life-event changes, so you’ll need to shop around to see if you can get better coverage prices and discounts from other companies.”

If you’ve been with a company for a while, particularly a local one you know, the idea of changing companies might feel uncomfortable and make you feel a little guilty. But when it comes to insurance, you need to do what’s best for you.

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The 20 Worst States for Filing an Auto Insurance Claim

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Here’s How Much the Most Expensive Traffic Violation in Your State Will Raise Your Auto Insurance

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If a cop hands you a ticket for speeding, swerving in and out of lanes, or causing a crash, you’re already paying up. However, drivers need to keep in mind that those tickets can also mean big increases to their car insurance premiums.

For example, if you’re caught racing in North Carolina or driving drunk or recklessly in California, that single incident will cost you nearly $3,000 on your annual auto insurance premium. (For North Carolina, that’s a 350% rate increase.) And that’s not including the ticket itself or any court fees or other expenses.

Although each state regulates insurance differently, every state’s most costly violation will earn the driver a car insurance rate increase of at least 40%, according to The Zebra’s new State of Auto Insurance Report.

To determine what violation was most costly in each state, The Zebra analyzed auto insurance pricing data from its quote engine. The analysis includes annual auto insurance premium data across all U.S. zip codes for a base driver profile of a 30-year-old single male driving a 2012 Honda Accord EX.

Below are the most expensive traffic violations by state and how much each could wind up raising your insurance.

1. Alabama

Most Costly Violation: Driving Under the Influence (DUI)
Dollar Increase on Premium: $716

2. Alaska

Mostly Costly Violation: DUI
Dollar Increase on Premium: $568

3. Arizona

Mostly Costly Violation: Racing
Dollar Increase on Premium: $1,574

4. Arkansas

Mostly Costly Violation: DUI
Dollar Increase on Premium: $850

5. California

Mostly Costly Violation: Reckless Driving, DUI
Dollar Increase on Premium: $2,869

6. Colorado

Mostly Costly Violation: Racing
Dollar Increase on Premium: $842

7. Connecticut

Mostly Costly Violation: Racing
Dollar Increase on Premium: $1,790

8. Delaware

Mostly Costly Violation: Racing
Dollar Increase on Premium: $2,125

9. District of Columbia

Mostly Costly Violation: DUI
Dollar Increase on Premium: $1,016

10. Florida

Mostly Costly Violation: Reckless Driving
Dollar Increase on Premium: $1,735

11. Georgia

‘Mostly Costly Violation: DUI
Dollar Increase on Premium: $812

12. Hawaii

Mostly Costly Violation: Racing
Dollar Increase on Premium: $2,396

13. Idaho

Mostly Costly Violation: DUI
Dollar Increase on Premium: $594

14. Illinois

Mostly Costly Violation: Reckless Driving, Racing
Dollar Increase on Premium: $1,619

15. Indiana

Mostly Costly Violation: Racing
Dollar Increase on Premium: $462

16. Iowa

Mostly Costly Violation: Reckless Driving
Dollar Increase on Premium: $622

17. Kansas

Mostly Costly Violation: DUI
Dollar Increase on Premium: $512

18. Kentucky

Mostly Costly Violation: DUI
Dollar Increase on Premium: $1,435

19. Louisiana

Mostly Costly Violation: At-Fault Accident
Dollar Increase on Premium: $791

20. Maine

Mostly Costly Violation: Racing
Dollar Increase on Premium: $623

21. Maryland

Mostly Costly Violation: Reckless Driving
Dollar Increase on Premium: $666

22. Massachusetts

Mostly Costly Violation: DUI
Dollar Increase on Premium: $961

23. Michigan

Mostly Costly Violation: Reckless Driving
Dollar Increase on Premium: $2,312

24. Minnesota

Mostly Costly Violation: Reckless Driving
Dollar Increase on Premium: $1,019

25. Mississippi

Mostly Costly Violation: Reckless Driving
Dollar Increase on Premium: $790

26. Missouri

Mostly Costly Violation: Racing
Dollar Increase on Premium: $529

27. Montana

Mostly Costly Violation: Racing
Dollar Increase on Premium: $640

28. Nebraska

Mostly Costly Violation: Racing
Dollar Increase on Premium: $755

29. Nevada

Mostly Costly Violation: Racing
Dollar Increase on Premium: $945

30. New Hampshire

Mostly Costly Violation: Racing
Dollar Increase on Premium: $759

31. New Jersey

Mostly Costly Violation: At-Fault Accident
Dollar Increase on Premium: $1,229

32. New Mexico

Mostly Costly Violation: Racing
Dollar Increase on Premium: $896

33. New York

Mostly Costly Violation: DUI
Dollar Increase on Premium: $1,150

34. North Carolina

Mostly Costly Violation: Racing
Dollar Increase on Premium: $2,888

35. North Dakota

Mostly Costly Violation: Reckless Driving
Dollar Increase on Premium: $761

36. Ohio

Mostly Costly Violation: Racing
Dollar Increase on Premium: $607

37. Oklahoma

Mostly Costly Violation: Racing
Dollar Increase on Premium: $1,187

38. Oregon

Mostly Costly Violation: Reckless Driving
Dollar Increase on Premium: $1,079

39. Pennsylvania

Mostly Costly Violation: Racing
Dollar Increase on Premium: $1,032

40. Rhode Island

Mostly Costly Violation: Racing
Dollar Increase on Premium: $1,473

41. South Carolina

Mostly Costly Violation: DUI
Dollar Increase on Premium: $793

42. South Dakota

Mostly Costly Violation: DUI
Dollar Increase on Premium: $1,009

43. Tennessee

Mostly Costly Violation: DUI
Dollar Increase on Premium: $743

44. Texas

Mostly Costly Violation: Reckless Driving
Dollar Increase on Premium: $1,268

45. Utah

Mostly Costly Violation: Reckless Driving
Dollar Increase on Premium: $606

46. Vermont

Mostly Costly Violation: DUI
Dollar Increase on Premium: $892

47. Virginia

Mostly Costly Violation: DUI
Dollar Increase on Premium: $722

48. Washington

Mostly Costly Violation: Reckless Driving, Racing
Dollar Increase on Premium: $736

49. West Virginia

Mostly Costly Violation: Racing
Dollar Increase on Premium: $1,057

50. Wisconsin

Mostly Costly Violation: Racing
Dollar Increase on Premium: $550

51. Wyoming

Mostly Costly Violation: DUI
Dollar Increase on Premium: $709

Why Are There Variations by State?

So many things about insurance pricing vary by state and situation, and violations are no exception. Just as marital status, gender, and homeowner status affect your rate differently depending on your state, the same can be said for traffic tickets.

The risks associated with accidents are statistically different for each state, so what insurance companies consider the “worst” (and thus costliest) ticket in each state will come down to the ticket which leads to the greatest amount of risk caused by drivers in that particular state. For example, certain states (even certain zip codes) have higher frequencies of DUIs that lead to collisions than others, so insurance companies factor the likelihood of someone getting into a collision based on those statistics.

What Can Drivers Do to Keep Their Car Insurance Rates Low?

  1. Drivers should consider shopping around every six months or every year for new rates. Insurance companies may increase their rates due to various factors, so you might be paying a higher rate if you stay. Be honest about your driving history when you compare quotes to truly see the lowest rates for your coverage needs.
  2. Maintain continuous coverage. Insurance companies will raise your rates if they see gaps in time when you didn’t have an active insurance policy.
  3. Consider sharing or combining policies with a family or household member if you aren’t able to afford a policy on your own. Combining policies can make you eligible for additional discounts that you might not qualify for on your own, such as a homeowner discount or multiple vehicle discount.
  4. Bundle your auto policy with a renter’s or homeowner’s policy if you like the insurance company and can get the coverage you need. You could earn a substantial discount.
  5. And, of course, maintain a clean driving record. As we’ve seen above, a driving violation nearly always raises your rates – and can sometimes double or triple your annual premium – so stay focused on the road when driving and watch that speed limit.

[Editor’s note: Your credit score can also influence your car insurance rates. You can view two of your scores for free, updated every two weeks, on Credit.com.]

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27 Data-Based Tips for Saving on Car Insurance

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The complexities of car insurance pricing, made even more complex by varying state coverage requirements, can make finding the right policy for you an incredibly frustrating ordeal for countless consumers. Oh yeah, and coverage can be pretty expensive.

As a licensed insurance agent, I know a few more tricks than the average consumer to help lower that auto insurance premium. So, in an attempt to help bring transparency to the world of car insurance, here are some data-verified savings tips, culled from The Zebra’s State of Auto Insurance Report.

1. Avoid Letting Your Insurance Coverage Lapse

Even after being insured for just one year, rates drop 7.7%. The discount for maintaining continuous insurance offered by most companies is also affected by the amount of liability coverage on your policy. The higher your limit of liability, the better your prior insurance discount will be.

2. Consider Bundling

Bundle your auto policy with homeowner’s insurance and you could save an average of $110 per year or bundle renter’s with auto to possibly save $72 per year.

3. Do Some Research

Take a few minutes to learn about which companies, minimum coverage requirements and other factors apply to your state.

4. Get Ahead of the Game

Purchase your policy at least 10 days before you need it activated for a better rate. This is especially helpful if you know your policy is coming up for renewal and you want to switch to a new company.

5. Pay in Full Up Front for Your Policy

Drivers save an average of $62 per year by paying in full rather than an installment plan.

6. Shop When You Move

If moving to a new state — or even a new ZIP code — make sure to shop for a new policy. The most expensive state for insurance (Michigan) is almost three times as expensive as the least (Ohio), so you could be in for huge savings depending on the state you’re leaving (or increases, so make sure you’re informed).

7. Boost Your Credit

Drivers who increase their credit score by one tier save an average of 17% off their annual premium. (You can see two of your credit scores for free, updated every 14 days, on Credit.com to find out where you stand.)

8. Buy an Older Car

A 5-year-old version of a certain model is nearly 13% less expensive to insure than its current model year version.

9. Provide Your VIN When Getting Quotes 

Most new vehicles come with factory alarms so giving your VIN might help you qualify for an anti-theft device discount.

10. Drive Safely

While this is a good idea for your own well-being and that of others around you, of course, you’ll also save yourself from a potential rate increase.

11. Remember: Not All Car Insurance Companies Are Created Equal

They have unique business models designed to serve certain types of drivers who pose different levels of risk. Make sure to find the right fit for your needs and behaviors.

12. Don’t Stop Looking

It’s a good idea to shop around every six months to see if a new insurance company or policy fits you better and compare car insurance quotes to make sure you’re considering all rating factors and companies applicable to your unique needs.

13. Go Paperless

Agreeing to go paperless and signing your policy documents electronically can lead to discounts with some providers, so consider opting in and providing your email address when buying a new policy.

14. Tout Your Education

Listing your highest level of education can lead to a lower rate because many companies use it as a rating factor and may even offer discounts for college grads. Check the answer to that question on your policy; you could be leaving money on the table.

15. Consider Usage-Based Insurance

If you live close to work and are a safe, low-mileage driver, you may want to consider adding a telematics device in your vehicle to share your driving behavior with your insurance company. Having this device on your car may be able to save you up to 30% on your coverage, based on your driving habits and other regulations.

16. Study Up On Insurance Lingo 

Spend some time researching and reading to help you understand what you’re buying and make sure it actually fits your needs. There is no one-size-fits-all car insurance policy.

17. Make it Automatic

Consider signing up for auto pay or electronic funds transfer (EFT) instead of receiving a bill. Many providers offer a discount for doing this, which can certainly add up over time.

18. Venture Out on Your Own

Have you been listed as a driver on someone else’s policy for at least six months? Most insurance companies will offer a discount on your own separate policy.

19. Share More Than Your Space

Do you share a residence with another driver? Consider combining policies to share the cost of your insurance for more savings.

20. Bump Up Your Deductible

Increasing your deductible from $500 to $1,000 could save you about $150 per year.

21. Budget for Auto Insurance

Always consider auto insurance as a significant portion of the total cost of ownership of your vehicle. In fact, in many cases, insurance can be the largest car-related expense after the car itself, so make sure you factor insurance into your budget and can afford your coverage.

22. Celebrate Your Age

Everyone knows that some birthdays are more monumental than others and it seems like car insurance companies feel the same. We found that drivers can see significantly lower rates after their 19th, 21st, and 25th birthdays, so consider shopping around at those times. It’s also important to note that, on the whole, rates drop each year drivers age until they turn 60 when rates typically level out.

23. Avoid Getting Left Out in the Rain

It’s a good idea to add coverage to your policy at least a week before a large storm hits your area (if you know it’s coming) to help you avoid being stuck paying for the damage yourself. Insurance companies may set binding restrictions that prohibit agents from selling policies for comprehensive and/or collision coverage as a storm nears — though you will still be able to get liability coverage (as it’s required by every state).

24. Be Aware of Local Traffic Laws

Tickets and violations can affect your insurance rate for three years from the date of the ticket. Accidents can affect your rates for up to five years from the date of the accident. In California, DUIs can hurt your rate for up to 10 years from the date of the incident.

25. Factor in More Than Just Price

It isn’t just about how much you’re paying. Getting the right coverage from a reliable insurance company can help keep you from paying big in the event of a collision or other incident.

26. Be Honest & Detailed

Insurance companies will run background checks on your driving record, address and (sometimes) your credit to price your rate, and any guessing could mean your quote and final premium differ substantially.

27. Baby Your Car

Filing an expensive claim not only costs you your deductible, it is one of the most surefire ways to raise your rates for several years to come. If possible, park your car in a garage to help keep it protected from potential damage caused by hail, windblown sand or debris, and other harmful objects. (You can find more ways to save on car insurance here.)

Image: Solovyova

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Will Driverless Cars Lower the Cost of Auto Insurance?

Tesla has installed autopilot software on roughly 90,000 of its cars over the last two years. (Photo Source: Tesla)
Tesla has installed autopilot software on roughly 90,000 of its cars over the last two years. (Photo Source: Tesla)

Dozens of companies — from tech giants like Tesla, Google, and Microsoft to auto manufacturers like Jaguar and Audi — are in a race to put driverless cars on the roads in the U.S.

By some accounts, there could be as many as 10 million cars with self-driving functionality on North American roads by 2020. A more conservative estimate, coming from the Insurance Institute for Highway Safety, predicts there will be 3.5 million self-driving vehicles by 2025, and 4.5 million by 2030. We’re still quite a long way off from those benchmarks. Tesla, for example, has only installed autopilot software on roughly 90,000 of its cars over the last two years. The software is still in beta testing.

The question now is whether safer, driverless vehicles will lead to any significant declines in auto insurance costs. If driverless cars make roads safer and lead to fewer accidents, shouldn’t that be reflected in auto insurance rates? And, in a driverless car society, if computers are technically “manning” the wheel, shouldn’t the insurance burden be shifted from the driver to the auto manufacturer itself?

MagnifyMoney reached out to several experts in the auto insurance space to see how they expect driverless cars to change the insurance landscape.

A change is gonna come … slowly

Google delivered the first real build of its driverless vehicle prototype in December 2014. (Photo source: Google)
Google delivered the first real build of its driverless vehicle prototype in December 2014. (Photo source: Google)

Among other benefits, driverless vehicles are expected to significantly reduce auto accidents, as driver error is the cause of 94% of all accidents, according to U.S. government figures. When driverless cars finally become mainstream, car accidents could decline by 80%, according to KPMG, the audit, tax, and advisory giant.

By and large, accident liability won’t go away completely even with powerful computers behind the wheel. That issue came to the forefront with a recent fatal crash in Florida, where a 40-year-old man was killed as a passenger in a Tesla self-driving vehicle.

Don’t expect insurance rates to drop if you purchase a car with an autonomous driving feature, several experts say.

“Insurance premiums will remain flat even with self-driving vehicles,” says Ashley Hunter, president of HM Risk Group, an underwriting firm located in Austin, Texas. Some automakers have made impressive progress in creating self-driving vehicles, but there is still room for error. “It still requires a driver behind the wheel in the event you need to take over,” Hunter adds.

Hunter likens driverless auto insurance to aviation insurance. “Once autopilot technology was created and became pervasive in airplanes, you didn’t see premiums go up – they roughly stayed the same,” she says.

Other insurance industry professionals agree.

“Liability insurance will definitely still be needed,” says D.J. Noland, an agent with McGhee Insurance Agency in North Little Rock, Ark. “The possibility of
the computer to malfunction is very real. Computers are only as good as their
designers and therefore have imperfections.”

The question of liability in the event of an accident is much trickier to answer. Who’s to blame when a self-driving car has an accident and is at fault while operating autonomously — the automaker or the driver?

“It will be interesting to see the insurance industry evolve to adopt new models to address the risk,” says Noland. “Ordinarily, the driver is the answer. Now we’ll have to look at the manufacturer of the car and the software company as possible liable parties.”

For that reason, new auto insurance policies will have to include a new price for these factors, and new underwriting models will be required to develop the pricing, Noland adds.

“Admittedly, without much data this early on, I think insurance prices will decline with mass adoption of driverless vehicles, but we’ll need more data — and a better understanding of the underlying technology — to accurately understand the risk and pricing by insurance companies,” he says.

A “nightmare” for insurance companies

For insurance companies, self-driving vehicles represent a “nightmare scenario,” says Joel Ohman, a certified financial planner and chief editor at CarInsuranceComparison.com, in Seattle, Wash.

Ohman sees a frightening scenario for auto insurance CEOs, where “perfect” robotic drivers will drive down accident rates and thus force insurers to drastically reduce their premiums.

“That’s why robotic driverless cars should be causing car insurance company CEOs to break out in a cold sweat at the mere thought of trying to sell insurance on cars that never get into accidents,” he says.
Other industry insiders say that while driverless-based insurance rates may decrease over time, there will still be risks that need to be covered.

Tesla’s “Autopilot” feature is currently in a public beta testing phase in roughly 90,000 cars. (Photo source: Tesla)

“For example, many self-driving car prototypes have sensors on the bumpers, so they’ll likely be one of the first parts damaged in the event of a simple rear-end collision,” says Ryan Ruffing, a spokesperson for EverQuote.com, the largest online auto insurance marketplace in the U.S. “Furthermore, there may be satellite damage to cover, cybersecurity claims and general wear and tear of self-driving cars.”

In the long run, as cars get safer, drivers should expect insurance rates to go down, Ruffing says. “However, it may be decades before that is the case,” he states. “In the meantime, self-driving car owners should ask their insurance agents what their future plan is, and how they plan to insure self-driving vehicles. They may want to ask their agents if they foresee rates rising or decreasing. If car owners aren’t satisfied with the response, they can always shop around and ask other insurance companies.”

What to ask your insurance agent

Ruffing offers three key questions to ask your insurance agent if you’re in the market for a self-driving car:

  1. What happens if my autopilot goes awry?
  1. Will you cover that type of claim?
  1. Will my insurance rates rise because of that, even though it would not be my fault?Right now, virtually no insurance companies are proactively insuring self-driving cars, primarily because there are no commercially available self-driving cars on the road today.  One of the rare insurers already offering robotic driving insurance is U.K.-based Adrian Flux Insurance Services. The policy covers several self-driving features, like self-parking and autopilot technology, as well as satellite-based systems failures and hacks from cyberfraudsters.

“We wanted to help provide confidence and clarity around the ongoing debate of ‘who is liable?’” says Gerry Bucke, Adrian Flux general manager.

Derek Benavides, an insurance agent with TWFG-Benavides Insurance, in Brownsville, Texas, says to tread cautiously before getting into any self-driving cars.

“Unfortunately, the majority of insurance companies don’t have programs in place or rating systems that will aggressively price self-driving cars,” Benavides says. “Before you get into any self-driving vehicle, it’s extremely important to be clear with your agent that they are insuring that vehicle, and get it in writing.”

 

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The Strange Connection Between Car Insurance & Hurricanes

car-insurance-and-hurricanes

Meteorologists and weather reporters often whip up a frenzy about major impending storms, and though many of these peter out with little impact, others leave devastating wreckage in their paths. When these storms are predicted, many folks want to prepare for the worst — power outages, evacuations and potentially sizable property damage. Folks fearing major damage to their vehicles might want to pile up extra coverage for them at the last minute, but insurance companies might not let them.

Why You Can’t Get Auto Insurance Coverage Before a Big Storm

Before a big storm, The Zebra’s resident insurance expert Neil Richardson explained, insurance companies put restrictions in place called “binding restrictions.” These prevent insurance agents from selling new insurance for vehicle damage (also called “full coverage”) in certain zip codes, or even whole states, if the probability of a damaging storm is high.

“This means that the company will not write any new policies that include comprehensive and/or collision coverage, nor will they allow existing customers to add comprehensive and/or collision to their policies during this restriction,” Richardson said.

Insurers place binding restrictions for new business ahead of predicted severe weather because the potential claims payout is far higher than the fees the insurance company would earn from those new policies.

“Let’s say that you buy a new policy that includes comprehensive and collision,” Richardson said. “You make one payment and then you file a weather claim that comes out to $5,000. The insurance company would lose a ton of money by taking you on as a customer before the storm, so it’s not worth the risk.”

Note: You will always be able to purchase your state’s minimum auto insurance requirements (in fact, you legally have to have at least the state minimum to drive), even while a storm warning is in effect. However, while the details differ state-to-state, minimum requirements cover only liability, property damage, and personal injury, and won’t cover damage to your vehicle (either in terms of repairs or replacement).

How Long Before a Storm Do These Restrictions Occur?

Each car insurance company’s actuary determines when the risk is large enough to turn down business and put restrictions in place, according to Richardson, so the pre-storm timeline will vary by insurer.

“The range is normally a few days before a storm hits a particular area. With a tropical storm or hurricane, there is no way to tell how far onto land the storm will travel, so the restrictions timeline often moves with the storm,” Richardson explained. Still, you might be turned down by one company but still find coverage elsewhere.

“There’s plenty of news coverage of potential looming storms, so if someone is concerned that there could be damaging severe weather, they’ll likely have time to add coverage to their policy,” Richardson said. “But waiting is the worst possible move, because if you wait too long, your company may have already placed a restriction on coverage until the storm has passed.”

Be aware that just because you carry comprehensive and collision doesn’t mean your insurer will always provide coverage for weather-related damage to your vehicle. If the damage is determined to be the result of an act of God, your policy will have to explicitly state that you’re covered for each scenario in order for you to receive an insurance payout. And if you’re in an area that causes you to be worried about flooding, ensure your policy covers that ahead of time, too.

Auto Insurance After the Storm

Do big storms have lasting impacts on insurance premiums?

“Large weather events absolutely affect rates, as evidenced by recent news coverage of many insurance companies raising their rates,” Richardson said. Insurance companies stay in business by determining each customer’s rate based on the total risk the company is assuming from all customers.

“Crashes, weather, vandalism, and theft claims are all risks that insurance companies consider to determine how much they will charge for insurance coverage,” Richardson said.

However, increased rates for customers in areas hit by severe weather aren’t likely to be immediate. After a storm in which many customers make insurance claims, the insurance company will determine what new rate they must charge to stay in business. Then, they must file rate updates with each state before they can charge customers more.

As summer kicks off — and the potential for big storms increases get your vehicle ready for the season with these essential maintenance tips and prepare yourself for driving in severe weather this summer ahead of time.

[Editor’s Note: A good credit score can help you qualify for better rates on an insurance policy. You can see where your credit currently stands by pulling your credit reports for free each year at AnnualCreditReport.com and viewing two of your credit scores for free, updated each month, on Credit.com.]

More on Auto Loans:

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3 Steps to Take After You Caused a Car Accident

Loss Adjuster Inspecting Car Involved In Accident and taking pictures

If you’re a driver, it is likely that over your lifetime you will be in a car accident. Hopefully, that accident only involves injuries to your car and not to you.

The next time you find yourself in a car accident and you’re the offender, follow the tips below.

1. Evaluate the accident scene

Immediately after an accident you should evaluate the accident scene. This means you should pull over right away and call the police. Put your hazard lights on and keep in mind your environment. Be very careful if cars are driving around you that you’re safely to the side. Make sure you’re okay and everyone you’re with is okay. Take note of any injuries that you or anyone else has.

After you’re safe, call the police. Whether the accident is big or small, it’s important that you call the police to the scene right away so there’s a record of the accident.

Approach the person you hit and exchange contact information with him. Get his name, address, and phone number. If you can see his identification, that’s even better, because you can confirm his identity. If there are any witnesses at the scene, you should also get their contact information, too. The more information you have, the better.  This may be done by you directly, or it may be done by the police. If it is done by the police, make sure that you get the information from the police officer, so you have record of it personally.

Take photos of the accident scene, including your vehicle, the vehicle of the person you hit, and any additional photos that could be relevant (like photos of the entire scene to show the exact space and geography of where the accident took place). If shooting a video is possible, consider recording the scene. The more documentation you have, the less opportunity there is for dispute over the scene itself.

2. Watch what you say (don’t admit fault)

While you are evaluating the accident scene and speaking with anyone other than the police, do not talk about how the accident happened or who was at fault. Do not admit that you were at fault and do not make monetary offers to the person you hit. It is tempting to apologize during a highly stressful situation, like a car accident, but it’s to your benefit that you do not say sorry or that it was your fault. Doing this could put you at risk for additional legal liability. Even if you think or know you are at fault, do not admit it.

It’s equally as important not to discuss how you’re feeling. If you say you are completely fine and later you discover you’re injured, it will be harder to prove with statements that you made saying you weren’t injured after the accident. The bottom line is that you should be very careful with what you say at the scene of the accident. Less is more.

When you are speaking with the police, be very clear about what you know happened. If you don’t remember or can’t recall exactly, then say that (don’t try to fill in the blanks).

3. Complete follow up actions after the accident

After you leave the accident scene there are follow up actions you need to take. If you are injured, seek medical attention right away. Even if you don’t start to feel pain until the following day, or some other time after the accident, make sure you get the proper attention you need.

Report the accident to your auto insurance company

Aside from the medical attention, you need to contact your auto insurance company immediately after the car accident and report the accident. As the person who caused the accident, it is your responsibility to report the accident to your insurer. But note that even if the police report puts you at fault, it is your insurance company that will determine whether you’re at fault for insurance purposes. If your insurance company does determine it was your fault, then it is likely that your insurance will be the source of your claim and the victim’s claim. However, your insurance company may fight with the victim’s insurance company or it may decide not to cover the victim’s claims if they are minimal and it’s unclear if you’re at fault. It’s not obvious what will happen because every situation is different. If the insurance company decides you’re at fault, then in most states, your insurance company will handle your medical claims and car repair claims in addition to the victim’s claims.

Keep your own paper trail

Get the name of the agent who is handling your call and who will handle your insurance claim. If you’re given a claim number, make sure to write that down and keep it on file. The more information you document, the better.

Check-in before getting repairs done

Discuss getting your car repaired with your insurance agent. Sometimes, insurers require you to get their permission before getting your car fixed. Be sure to get accurate information from the insurer and note that you can take your car where you want to be repaired – you don’t have to follow the recommendation of the insurance company as to where you take your car. When you get your car fixed, document your repairs and keep your receipts.

Decide if you need to meet with a lawyer

Your final course of action after an accident is to determine whether to pursue legal action or if you need to legally defend yourself based on the victim’s decision. You can meet with an attorney, typically for a consultation at no fee or a very small fee, so do not be deterred from an initial meeting due to fear that it will be expensive. You don’t have to commit to pursuing legal action until after you’ve met with an attorney. So, if you’re unsure about whether to move forward legally, you’re not risking much by meeting with an attorney. The attorney will also be able to advice you on whether your situation is worth pursuing legally.

A Final Note

State law governs the specific rules that will apply to you after you’re in a car accident. Check your state’s laws to determine the specific course of action you need to take. Your insurer should be able to help you with this.

Steps to take if you’re the victim of a car accident. 

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Can I Get a Better Deal if I Bundle My Auto & Home Insurance?

bundling-insurance

Nothing can make even the savviest of consumers’ eyes glaze over quite like the phrase “insurance bundling.” And we get it — insurance products and policy details aren’t exactly the most riveting topics. But hang on for a moment because that disinterest can end up costing you a lot of money and create hassles down the line.

In this round of demystifying the insurance industry, we take on more than just auto insurance. We asked The Zebra’s insurance expert (and former agent for a national big-name insurance company), Neil Richardson, to fill us in on the what, why, and how of insurance bundling so you can get through the process as painlessly as possible, all while making sure you’ve got the coverage you need and aren’t overpaying.

Which Types of Insurance Policies Can You Bundle?

Most big-name national insurers — and many smaller regional ones, too — offer their customers the option of combining different insurance policies. Depending on the company and region, auto insurance can be bundled with homeowner’s and life insurance, and customers can add motorcycle insurance, boat insurance or other specialty insurance coverage options.

What’s the Benefit of Bundling?

The biggest reasons to bundle, according to both insurance companies and our expert, Richardson, are convenience and discount incentives. The incentives can often be substantial, and therefore enticing, he says, but in order to really save over a long period of time, consumers need to go into the process aware of the downsides.

The Downsides of Bundling

Unless customers carefully shop for all of their insurance policies by comparing rates both individually and as part of a bundle from a few different insurers (we’ll tell you how to actually do this below), insurance companies are likely to convince consumers of the ease of bundling. Richardson explains that insurance companies know that the more products customers have with them, the less likely they are to switch companies.

There isn’t much incentive to shop around when a customer has bundled policies because if they switch, say, their auto insurance, they’ll lose the discount, and if they switch everything, it becomes very complicated, very quickly. So, insurance companies can increase one policy a little and they know the customer will be unlikely to leave — this process of price optimization is used by some insurers throughout the auto industry, but Richardson says the incentive to run business this way increases with insurance bundling because the consumer is even more driven by inertia.

Another downside: The prospect of simpler bill consolidation from bundling might not play out exactly as planned. Insurance premiums are due each month on the date you opened your policy. So, if you get one policy on the 15th, and then add another a few months or years later on the 3rd, you’ll still have bills due twice a month, even if the insurance is with the same company.

A final downside: third-party lenders. Many insurance companies specializing in one type — say, auto — will give their customers the option of bundling other types of insurance — like homeowner’s or life — but they will sometimes use a third party to underwrite additional policies.

The fact that one part of your bundle is underwritten by another company isn’t a bad thing in and of itself, says Richardson, and reputable insurance companies will use good quality third parties. However, if one part of your bundle is underwritten by a second company, you’ll still need to deal with both companies in the event of a policy claim on both.

Here’s an example: A major weather event causes damage to your house and your car, and though you have a bundle with one company, you’ll be dealing with two different insurers when making your claims and getting your reimbursements, just as you would if your policies weren’t bundled. The only real benefit of bundling in this case, Richardson says, is the policy discount.

Bundling, says Richardson, most often benefits the insurance company, but there are still ways to beat the house.

Smart Bundling

If the convenience of bundling is a big draw — and if you’ve been quoted some deep discounts — bundling might be a good choice, but you’ll want to approach it the right way. A simple rule of thumb: Shop for your most complicated and expensive insurance policy first. If you’re a homeowner, your house is usually the biggest asset and has the most complicated insurance policy. Life insurance is also quite detailed and complicated. Auto insurance is more complicated and expensive than renter’s, so if you’re bundling the two, shop for auto first.

Bundling for Homeowner’s & Car Owners

For people with houses and cars to insure, homeowner’s insurance is almost always the most complicated and most expensive insurance policy they have. Not only is your home likely to be your biggest asset, the process of properly insuring a home can be long and complicated. So if you own a home, start shopping for this one first.

While shopping for homeowner’s insurance, get quotes from several insurers, narrow it down to your top choices, and tell them that you might like to bundle your auto insurance policy into your homeowner’s, and see what kind of discounts you’re offered. Richardson advises also shopping separately for auto insurance and comparing rates: Even with a discount from your homeowner’s insurance company, you might still be better served with an auto insurance policy elsewhere — the savings might be higher, or you might like the coverage better. Usually the discount you’ll receive from bundling homeowner’s and auto insurance isn’t as great as if you compared rates for both and went with the best deal from two separate companies.

Bundling for Car Owners & Renters

If you’re a renter, Richardson advises searching for your auto insurance policy first since between auto and renter’s, auto is usually more complicated and more expensive. Again, if you find a great auto insurance policy, tell your top choices you might like to bundle renter’s, compare rates, and then get some quotes for just renter’s, too.

Benefits from bundling auto and renter’s insurance policies are often worth it, says Richardson, because renter’s insurance is easy to switch. Homeowner’s and auto insurance bundling can still offer benefits, but the customer should be prepared to switch companies if rates increase.

Unbundling the Bundle

It’s frequently during a claim or other unfortunate scenario when customers realize their bundles aren’t actually as beneficial as they thought, Richardson says. Usually people will see an increase in one rate, so they will switch one policy, lose the discount on the other, and then be stuck shopping for two insurance policies. It’s better to get ahead of this by evaluating if bundling is right for you now.

Our best advice when shopping for more than one insurance policy is to look around, with the above tips in mind. Compare as many options as you can, and share quotes with various companies to see if they can offer competitive rates.

Keep in mind, nearly all auto insurance companies use credit data in their evaluations. So before you apply, make sure you know where your credit score stands. You can get started by checking your credit scores, updated monthly, for free on Credit.com.

More on Auto Loans:

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