12 Secrets Your Auto Insurance Company Won't Tell You
It is difficult to get a good deal on car insurance today and keeping your premiums from rising is like playing a game wherein you don’t know the rules. Fortunately, there are a dozen tips that will help you save money.
Good Credit
Every insurance company, including the top five insurance companies, will pull your credit report. Anyone who has good credit will pay less for their insurance. This is because studies have shown that there is a direct correlation between your credit score and how likely you will be to file a claim. Insurance companies also know that if you pay your bills on time and have had the same credit accounts for a long time, then you are more stable than someone who pays their bills late and opens and closes accounts on a frequent basis. So, this information is used to create what is known as your “insurance risk score,” just one of the many factors that is used to determine just how much you will pay for car insurance. While you cannot see your insurance risk score, more than likely it will be similar to your credit score. Therefore, if you have really bad credit, you should work to improve it before purchasing car insurance.
Your Car Model
The type of car that you drive will affect your premium. Unfortunately, your insurance company won’t tell you this information but there is a rating system for every make and model of car. Usually the Insurance Services Office devises this system. They begin by looking at how much money you paid for your car and then factor in safety and theft information. With this information your car will then be given a number rating between 1 and 27. The higher this number is, the higher your premium will be. If you are planning to purchase a new car, you should not only keep this in mind but you should also ask your insurance company about the different insurance premiums for the cars that you are considering purchasing.
Pay In Full
Whenever possible, you should pay your car insurance in full so that you can avoid installment fees, which are known as “fractional fees.” These are fees that are usually charged whenever you pay your annual premium in installments. While insurance companies will allow you to pay on six month, quarterly or a monthly basis, they will charge you this administrative fee because they had to break the payments down for you. This is why you will want to ask them about any fees that you will incur whenever you pay in installments. Usually, the more that you break it down, the more you will have to pay in fees. However, if these fees are small enough, then it may be worth it to pay in installments. Of course, you don’t want to miss any of these payments because the insurance company can cancel your policy for missed or late payments and they only have to give you minimal notification before doing so. Paying up front really will simplify the process and save you money at the same time.
Safety First
Any personal items that are stolen or damaged from your car aren’t covered by your car insurance policy. However, you can file a claim on your homeowner’s insurance. Most of these policies will cover small, inexpensive items such as CDs. If you plan to be carrying around expensive computer equipment though, you will want to ask about a rider to your homeowner’s policy. You may also want to take pictures or vides of any of your expensive personal items before they are stolen.
Don’t Be A Bad Driver
Bad drivers will have to pay 40% more of a premium on their insurance base rate after their first at-fault accident. For instance, if you are already paying $400, your premium will go up an additional $160. Not all car insurance companies operate this way. In fact, there are some that will increase your individual rate by 40% instead. Fortunately, there are some insurance companies that will forgive your first accident. There are a wide range of qualifying variables here so you will need to ask your insurance company if they have such a policy and how you can qualify for it.
Your Friends’ Bad Driving
You are also going to find yourself having to pay for your friend’s bad driving to. For instance, if your friend borrows your car and gets into a wreck, then you will need to file a claim with your insurance company. You will then have to pay any applicable deductible and your rates will more than likely increase due to your claim. The only thing that may save you from this is if your friend didn’t have your permission to borrow your vehicle. Most of the time you won’t be held liable in such a case. However, if your friend is uninsured and causes damage that exceeds your policy limits, the injured party can sue you for their medical and property damage expenses. This is why you are better off not letting your friend borrow your car.
Know Your Car’s “Real” Worth
You may be surprised by the cost of your totaled car. This is because car insurance companies don’t use the standard Kelley Blue Book values, nor do they use the National Association of Automobile Dealers values. Instead, each insurance company has its own proprietary list of what each car is worth. Most insurance companies also have specialized software that they use for valuing a car depending upon where you live, your car’s mileage and its condition before the accident. Some insurance companies also ask local car dealers what they would charge for a similar replacement car. As such, you may have a long drive in order to reach the cheapest dealer then only to find that the insurance company was quoted a better deal.
Whenever you disagree with the value that your insurance company placed upon your car, you should do one of the following things:
· Get “gap” insurance, which pays the difference between what an insurance company covers and what you owe. This can save you as much as several thousand dollars.
· Keep your maintenance and inspection records to show that you have had your oil changed every 3,000 miles and that you have had routine maintenance performed on a regular basis. This can be used to show that your car was in good condition.
· Make sure that you have paperwork showing that what you have been paying for special parts or upgrades. This should be included in your insurance company’s evaluation.
· Get a price quote on a replacement car from three car dealers who are within a reasonable driving distance, then submit these to your insurance company. Make sure that the insurance company does the same thing for you.
· If you are still unsatisfied, take it to mediation (present your case to a neutral party so that you can reach a compromise) or arbitration (a binding decision). You can also take the decision to court.
Know Your Car’s Diminished Value
The diminished value of your car is what your car is worth whenever it has been repaired after being in an accident. If you find that your car is worth less money, you can file a claim for that lost value in 14 states (Florida, Georgia, Hawaii, Kansas, Louisiana, Maine, Maryland, Massachusetts, North Carolina, South Dakota, Texas, Virginia, Washington and West Virginia). Of course, this means that 36 states, including Washington D.C., you will be unable to claim this loss. However, if you live in one of the states that does allow for this and you weren’t at fault in the accident, you can usually make a successful case against the insurance company of the driver who did cause the accident.
Sales Tax
There are only 28 states Alaska, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Maryland, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Vermont, Washington, West Virginia and Wisconsin) that require you to pay sales tax whenever you replace your totaled car with a new or used car. You will need to make the request though because your insurance company isn’t going to offer to pay this money upfront. Even if you don’t live in a state where this type of a sales tax reimbursement is required, you should still go ahead and request it. There are actually a lot of car insurance companies who won’t deny this request because your car insurance policy requires that your insurance company make you “whole,” which means that they must return you to the same condition that you were in before the accident without any cost to you.
It is important to understand that this tax is going to be calculated on the pre-accident value of your car. This means that if the insurance company values your car at $10,000 and you purchase a new, replacement car that costs $20,000, the tax will be calculated on the $10,000, not the $20,000.
Uninsured Motorists And You
Whenever an uninsured motorist hits your car, you should try to “stack.” This means that you will be able to collect from more than one car insurance policies that you hold. While most states forbid this practice, there are 29 states that either allow it or don’t address it at all (Alabama, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kentucky, Mississippi, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Texas, Utah, Vermont, Virginia, West Virginia, Wisconsin). Make sure that you check to see if your policy allows stacking.
There are two scenarios in which stacking is allowed:
· If you have multiple cars on your insurance policy and have UM/UIM coverage on both, then you can collect the limit of the UM/UIM coverage on as many cars as necessary in order to recover full payment for damages.
· If you have more than one policy with UM/UIM coverage from two different insurance companies, you can make a claim on all of your policies until all of your damages have been recovered.
Your Teenage Driver
Wait until your teenager actually has their driver’s license before adding them to your policy. Of course, you don’t want to forget to tell your insurance company as soon as your teenager gets their license. This is important because if you have to file a claim on behalf of your teenager, your insurance company can charge you back premiums from the date that your teenager got their license.
Changing Insurance Companies
You will need to officially cancel your insurance policy whenever you are changing insurance companies. More than likely your insurance policy clearly states that you are allowed to cancel your coverage any time that you want as long as you notify the insurance company in writing of the date that the termination will take place. If this is done at the end of a coverage period, you cannot cancel your policy by simply ignoring the bill. The insurance company will not view you as canceling your policy and so they will send you another bill and when you don’t pay it, then they will cancel you for nonpayment, which will go on your credit record. For this reason you will want to make sure that the insurance company knows that you are canceling your policy as of a specific date so that you will not go uninsured for any time whatsoever. Once you do this the company will send you a cancellation request form that is usually already filled out and thus will only require your signature. Before signing it, you will want to make sure that there are no errors on it. Sometimes you will have to prove that you have new insurance coverage and update your dealer with this new information if your car has been financed by them and thus requires proof of coverage.
