5 Things to Know About Car Insurance

1. It’s not as simply as it seems.

Your premium is the result of a fairly complicated formula, and in some cases different formulas are used by different companies and locations. Some common factors that influence your premium include:

• The age of the primary driver
• Driving record
• Type of car being insured
• Location
• Average driving distance

…to name a few. Basically, if you park or keep your car in a location with a high crime rate or drive your car more than average, you will probably pay a little more because you’re seen as riskier to insure.

Some insurers also use your Credit Based Insurance Score (CBIS) which factors in things like your credit history – yet another reason to improve your credit score!

Also note that rates on new model cars are based in part on the MSRP, since they lack the historical data of used cars and average accident occurrence and repair costs.

2. Vanity will cost you.

Whether you’re experiencing a mid-life crisis, or just want to look like you are, that sports car is going to cost you more to insure. A recent list of Insure.com’s priciest cars to insure for 2009 lists the usually suspects at the top: BMW M6, Dodge Viper and the Nissan GT-R. At the bottom of the list are the family cars – no one steals the family minivan, and it’s hard to qualify for nascar with one.

Another factor is the average cost of repair. At the top of the low cost of repair list for 2009 were Kia Sportage,Hyundai Santa Fe and Hyundai Entourage.

3. Remember: safety first!

Having two or more accidents will drive up the cost of our premium, and so will traffic and speeding tickets. In some states, these count as points against your license. Get too many points and you lose your license. But you can be far from losing your license and still have enough points to tack on another 30-50% to the cost of your premium.

The lesson here is clear – keep your nose clean. Avoid reckless driving, tickets and DUI/DWI’s.

4. You don’t need everything.

If you have enough of an emergency fund to be able to pay for car repairs out of pocket, or if your car is older than five years and the loan is paid off then you can save a bundle by canceling the collision and comprehensive coverage. If it’s not paid off, but you can afford most repair costs, then consider raising the deductible.

5. Don’t forget the discounts.

Common discounts include:

• Multi-policy discount (same insurer for auto and home owner’s or renter’s)
• Taking a defensive driving course
• Driving a car with certain safety and security features.
• Low-mileage discount if you drive less than 10,000 miles a year.

It never hurts to ask the agent if there are other discounts to be had – every percent helps.

Top Five Things Insurance Companies Don't Want You to Know

1. The insurance company is NOT on your side. Claims adjusters and insurance company lawyers are paid to minimize the money they pay out to claimants, even if it is your policy (as in the case with uninsured or underinsured motorist coverage). The insurance company works for its shareholders, not the people who pay their premiums.

2. After a serious car accident or truck accident, a claims adjuster, lawyer or investigator working for the insurance company is at the scene putting together evidence to support either denying your claim or minimizing the amount of compensation. For this reason, it is important to contact an experienced car or truck accident attorney to gather evidence and statements to help maximize your compensation.

3. Insurance companies and their employees will ask you questions designed to confuse you or to have you admit to something you don't fully understand that can be used against you in court. Therefore, you should not give any statements to the insurance company without first engaging an experienced attorney to represent you.

4. If the person who hit you does not have sufficient insurance coverage to cover your claim, and you have underinsured motorist coverage that exceeds that person's coverage, then you may be entitled to compensation from your own insurance company. We can help you make that determination.

5. Even though the insurance company may attempt to discourage you from retaining the services of a qualified car or truck accident attorney, they have high-powered lawyers protecting their interests and representing them. You should retain your own high-powered attorney to protect and represent your interests. It is much better to take advice from someone who is totally on your side as opposed to someone whose interests are in direct conflict with yours.

How To Shop For Car Insurance

Determine the policy you need. While there are only a handful of nationally-recognized car insurance companies, A.M. Best, an industry credit rating firm, says there are about 450 insurers in the car business. The best place to start, experts say, is by getting an idea of what kind of policy you need and the kinds of companies you're willing to get it from. 

Compare companies. Now that you may have narrowed down the list, experts say price should be factor when selecting a company, not a determinant. Consider buying your car insurance from the same company as your homeowner's or renter's insurance. Many company offer discounts. 

Toggle your premium. Once you have settled on the terms of your car insurance policy, there are still opportunities to reduce costs. 

What not to do when shopping for car insurance:

• Don't skimp on coverage. It may be tempting to purchase only the minimum amount of liability required by law, but experts warn against this as accidents can cost way more than you could ever expect. Experts recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident. You should also consider raising your liability coverage to protect your savings and assets from an accident in which you're at fault. You'll also need to purchase both collision and comprehensive coverage if you want to protect your vehicle from damages like falling tree limbs, hail, flood, fire, as well as from theft and vandalism.
• Don't wait for discounts. If you don't drive your car that often, some insurers offer usage-based insurance -- a sort of mileage discount that may save you up to 30 percent. But insurers can't know this unless you speak up. Even signing up for an automatic payment plan may provide a discount of up to 5 percent. Other discounts may apply if you belong to certain associations, install an anti-theft device in your car, or complete a defensive driving course. Ask! Ask! Ask!
• Don't buy the car, then shop for coverage. Experts recommend comparing insurance costs before buying a car, since the premium is based in part on the car's sticker price, repair costs, overall safety record and likelihood of theft. Even among similar cars in the same price range, premiums can vary widely.

Car Insurance Myths

Myth #1: Hey, You're Paying the Premiums... Insurance Should be Bought and Used for Every Accident and Disaster.

Insurance is designed to protect one from catastrophic disasters. An insurance rule of thumb: If you can pay for the loss or damage without a financial hardship then pay it, otherwise expect your insurance premium to eventually show an increase. Also, buying every type of insurance just isn't necessary. Sometimes the risk is worth taking rather than paying a premium. Learn more at Don't Buy Insurance You Don't Need

Myth #2: If I am Alive, I Must Need Life Insurance!

Life insurance is designed to take care of one's dependants after the caregiver's death. If you have no dependants, then you probably don't need life insurance. This includes children and retired persons... usually they don't have people that depend on their income so life insurance for these groups can, in rare instances, be beneficial but is usually unnecessary.

Myth #3: I'm the Breadwinner in the Home, So Only I Need Life Insurance.

Have you seen the cost of childcare lately? Add that along with housekeeping, food preparation, home accountant, and school transportation. From that list alone one can see how much a spouse really contributes to the household budget. It is estimated a non-working spouse contributes at least, but usually more, the equivalent of a full time job. For this reason it is important to buy life insurance for everyone in the household if the absence of their income would cause a financial hardship.

Myth #4: Whole and Universal Life are the Best Life Insurance Choices Since I Can Get My Money Back.

Term life insurance is probably the best choice for most. Term life is set for a specific term, like 10-30 years, with a much lower premium than whole and universal life. Your best bet? Buy term life and invest the premium difference in a retirement account. Lean more about Term, Universal, and Whole Life at Life Insurance Policy Basics.

Myth #5: Flood Insurance is Only for People Who Live in a High Risk Area.

Everyone who lives in a National Flood Insurance Program area is eligible and can buy flood insurance. These areas are not always prone to floods so even if you think your area is low risk you may be eligible. Check with your insurance agent to learn more or find additional information at Why didn't my policy pay for damage caused by a flood?

How To Get Cheap Car Insurance

Get Theft Devices: Most new cars have theft devices. Some are automatic and some have to be started at the touch of a button, but all usually get discounts on car insurance. Also, some states provide extra discounts for such things as window sketching.

Ask for a Multiple Car Discount: Did you know sometimes insuring two cars can be the same price as insuring one? If not the same price, insuring another car usually does not cost as much as you may think. If you have two cars, it is very wise to check with your insurance agent, or while obtaining your online insurance quote, to make sure you can get this discount on your car insurance. Also, if you are planning to sell a second car, the cheap car insurance trick would be to keep that car on just liability to get your multiple car discount. Sometimes people are surprised when they call their car insurance company to take a car off of their insurance, only to find that their price did not go down but possibly increased!

Stick With Yearly Policies: Choosing a yearly policy can extend your savings on your car insurance. Purchasing a yearly policy instead of a six month policy gives you a rate that cannot be changed for one year vs. changing every six months.

Look Into Comprehensive Storage Coverage: If you are planning to store your car for any period of time, you can save on your car insurance by only keeping comprehensive coverage during the storage time. Since the car would be stored, it is very unlikely it will get in a collision or need the liability coverage.

Re-Check Your Mileage: This is a great way to get cheap car insurance: If you are really close to the "miles to work" break-off, you may want to check your mileage closely. When your car insurance company or insurance agent asks you "How many miles do you drive to work one way?" this is a crucial question that will designate you into a particular class. Each class can have significant differences in prices.

Look for a Group Discount: Many companies offer a discount on car insurance for being affiliated with certain organizations. These can range from credit unions, college sororities, or just having a certain credit card. Call your service center and ask them for a list of organization affiliations.

Lower Liability, Comprehensive, Collision, or Medical Payments Coverages: Of course, you can lower your basic coverages but it may just give you the cheap insurance you need right no!. Comprehensive and collision are probably the first to look at lowering by increasing your deductibles on your car insurance. Most vehicles that are on bank loans can have up to a $1000 deductible. Next, lowering your liability and medical payments could help, but only if you are having a hard time paying for your premium and is not recommended for general savings.

Make EFT Payments: Many car insurance companies are now charging up to $5.00 or more for mail payments, but sometimes nothing if you choose to have payments automatically deducted. And, sometimes the deductions can come from your credit card, so you don't have to worry if the money will be in your bank account when payment time comes.