auto insurance

What Determines Your Car Insurance Premiums Might Surprise You

June 6, 2018 By Travis Pizel Leave a Comment

Insurance companies keep the exact formula for calculating car insurance rates a highly guarded secret. However, there are known things that affect car insurance premiums. Some of them will surprise you.

Your Gender

Car insurance costs less for women because numerous statistics show they are much safer drivers. The following statistics from the Insurance Institute for Highway Safety were found on the website for the Department of Motor Vehicles:

Men accounted for 71 percent of driving fatalities during 2012;
Men are more likely to drive while under the influence (38 percent of males killed in a car accidents during 2012 had blood alcohol levels higher than 0.08 — compared to 20 percent of women; and
Men are more likely to drive over the speed limit (23 percent of male drivers involved in fatal accidents were speeding at the time, in contrast to 14 percent of female drivers in those circumstances).

Your Age

Young people between the ages of 16 and 24 have higher premiums because they have a higher accident rate.

Drivers aged 16-17 are 3.5 times more likely to be involved in a fatal crash, according to a study by the AAA Foundation for Traffic Safety.

Your Career

Some insurance companies factor occupation into their car insurance rate calculation, and it can make a $500 difference in your premiums.

Occupations that lead insurers to charge the most tend to have the following attributes:

High stress levels
The person spends a lot of time in the vehicle
Heavy cell phone usage

By contrast, ocupations on the low end of the rate spectrum have the following characteristics:

Low stress levels
They’re responsible for the well-being of others
They use public transportation
They need to pay attention to details, which insurers believe carries over to their driving

These factors together account for scientists enjoying the lowest premiums — at an average annual cost of $870; at the other end of the spectrum, business executives have the highest rates, with an average annual cost of $1,375.

Your Education

Apparently better educated drivers represent less risk to insurers — and vice versa.

People who have not finished high school are 4.3 times more likely to be killed in a car accident than college graduates, according to data published in The Washington Post.

The more education you have attained, the lower your monthly premiums, and vice versa.

Your Marital Status

Marriage tends to make people drive more responsibly than single drivers.

Unmarried drivers were twice as likely to be injured in an accident as married drivers, according to a study published in a journal called Injury Prevention.

Because of the reduced risk of injury, being married can reduce your insurance rates.

Your Credit Score

Insurance companies use your credit score as an indication of whether you will pay your premium on time — and the impact on annual rates can be significant.

Single drivers with good credit ratings each paid $68 to $526 more per year on average than those with the highest credit rating, according to Consumer Reports

Your Car’s Characteristics

Several things about your car impacts how much it costs to insure:

Age – generally new cars are more expensive to repair and therefore have higher premiums.
Safety features – Enhanced safety features can discount your insurance 5 to 30 percent.
Theft history – The recovery rate stolen cars can be as low as 19 percent in some states, so the cars that get stolen most frequently have higher premiums.

Your Claim History

Many people believe submitting an accident claim will increase your insurance rates, but that’s not always true.

Circumstances surrounding the accident in the claim dictate whether rates will be increased, and by how much:

Fault – If you are not at fault, your rate may not increase since your insurance company did not have to pay.
Severity – A claim for a minor scratch may not affect your rates, but a major at fault claim exceeding $2,000 could result in a premium increase of 41 percent.
Accident Forgiveness – Some policies include accident forgiveness, which can lock in your rate even if you get into an accident.

Your Traffic Tickets

Non-moving violations, such as a parking ticket, is unlikely to affect your insurance rates. However, moving violations such as speeding may depending upon your insurance company. For example, a single speeding ticket in California results in an average annual insurance premium increase of $688. The more tickets issued, the more your rate may be affected.

Your Coverage and Deductible

The more coverage opt for, the higher your premiums are; similarly, having a high deductible can lower your premiums.

Increasing your coverage isn’t a matter of dollar amounts but types of policies. Most states require liability insurance as a bare minimum. If you choose to adding optional collision and comprehensive coverage that can increase. your premiums.

On the other hand, increasing your deductible lowers your premiums because you assume more risk, but how this calculates can be surprising. For example, increasing your liability insurance deductible from $50 to $1,000 could reduce your premiums by 56 percent.

Your State’s Laws

From here, insurance rate formulas can vary based on different state laws. Some states prohibit insurance companies from basing premiums on certain factors. For example, California, insurance companies cannot use occupation and education levels.

Your Insurer

Individual insurers can also have their own variations in the way they calculate premiums — reach out to your insurance company to find out exactly how it computes premiums.

You can also get more information on this topic from the Department of Motor Vehicles.

Readers, which of the factors affecting car insurance premiums surprise you surprise you the most?

10 Types of Insurance You Either Need or Should Strongly Consider

July 30, 2015 By Will Lipovsky 6 Comments

Not many people enjoy insurance shopping. Insurance policies use legal jargon that often makes the contract hard to understand. Sometimes the end goal doesn’t seem to be worth the effort. After all, why would you buy a policy if you can’t understand all the details about its coverage? Despite the downsides, insurance usually wise. Let’s explore the 10 types of insurance everyone should consider:

1. Health Insurance (Mandatory)

Health insurance is probably the most important form of insurance. Not only do you want to make sure you have doctor’s visits and prescription medication covered, but you want to make sure you have insurance in case you fall extremely ill. If you aren’t offered health insurance through your employer, there are plenty of private health insurance plans you can buy. There is also Obamacare. There are also state plans for people who have financial difficulties.

Also not that health insurance may affect your tax refund.

2. Dental Insurance

Unfortunately, a lot of health insurance plans don’t offer dental insurance. Dental insurance is important to have, especially considering that it’s incredibly expensive to have teeth pulled, filled, or drilled. A lot of people pay out of pocket for dental visits or surgery when they could have a portion of that visit covered by insurance. If you have an employer that offers health insurance without dental coverage, consider seeking out additional coverage.

3. Auto Insurance (Mandatory)

If you own a car, auto insurance is also important to have. Auto insurance differs depending on various factors such as location, age, the type of vehicle, and your driving history. Shop around for an insurance policy before settling on one. The main purpose of auto insurance is to cover the financial loss or liability of your vehicle if you’re involved in an accident. While liability coverage varies depending on your policy and the extent of the accident, having an auto insurance policy can save you a lot of money if you are ever involved in an accident or lawsuit.

Here are tips on how to get the best auto insurance rate. Read this post about getting cheap auto insurance ($18.07/month).

Members who switch to USAA Auto Insurance save an average of $434 a year

4. Homeowner’s Insurance (Mandatory with Most Mortgages)

Homeowner’s insurance policies cover the protection of private homes and any items of value that are stored inside. It also acts as liability insurance for any accidents that occur in the home, such as vandalism or theft. Homeowner’s insurance policies vary depending on the location and size of your house, and policies are usually more expensive when you have more items or add-ons you want covered such as a covered garage or house extension. Additionally, it’s important to see whether or not your homeowner’s insurance covers damage from natural disasters since not all policies will cover those events.

But remember… sometimes homeowner’s insurance is not enough.

5. Renter’s Insurance

If you rent an apartment or house, you should definitely consider buying renter’s insurance. Some issues that fall under homeowner’s insurance might be covered through your landlord, such as vandalism or unexpected natural disasters. However, it’s still a good idea to purchase renter’s insurance to cover the cost of your belongings in case of theft or other unexpected occurrences.

6. Property Insurance

Property insurance falls under a different category than homeowner’s and renter’s insurance policies. While some of the previous forms of insurance don’t cover natural disasters, property insurance usually does cover damage from floods, hurricanes, earthquakes, or fires. However, there are two different types of property insurance policies: open perils and named perils. Open peril policies cover all losses that are not excluded in the policy, and those exclusions are usually items like terrorism, earthquakes, war, or nuclear incidents. Named peril policies mean that the exact cause of loss – i.e., floods, hurricanes, theft, fire – need to be listed in the policy.

7. Life Insurance

If something happens to you, life insurance will provide your beneficiary with monetary compensation. Life insurance is generally purchased for people who have financial dependents. Single people really don’t need this type of insurance.

You want to make sure to purchase a policy that would provide your financial dependents with the same amount that you would annually make. There are many different types of life insurance policies out there, including ones that accumulate cash values and others that allow you to liquidate a certain amount when needed. Again, ignore this type of insurance unless you have someone who depends on your income.

8. Disability Insurance

Disability insurance covers a portion of expenses if you are suddenly unable to work due to injury or illness. Short-term disability insurance usually covers you for up to six months and provides a monthly stipend to cover your expenses and missed wages.

9. Liability Insurance

Liability insurance covers an insured party in the event of a lawsuit for certain events. For instance, if someone comes over to your house and slips on a sidewalk and then sues you for negligence, liability insurance will cover your legal bills. Liability insurance is also important if you run your own business. It protects you from employees who might damage your property or litigation costs caused by employee errors.

10. Natural Disaster Insurance (Sometimes Mandatory – Depending on Location)

If you don’t have coverage for natural disasters through your homeowner’s, renter’s, or property insurance, you might want to consider buying an insurance policy. In certain areas (like flood zones) this type of insurance is mandatory.

You won’t need to buy every single policy for a natural disaster, since it’s impossible to know when those might occur. But if you live in an area that has frequent earthquakes or floods, for instance, earthquake insurance or flood insurance should be something to consider.

Suggested further reading: 25 ways to save money on all types of insurance.

Tips to Get the Best Car Insurance Quote

January 26, 2015 By Lori Kelley 1 Comment

Are you thinking about getting new car insurance? Before you do, it will be well worth your time to find out how you can get the best quote. Any insurance company can give you car insurance quotes, but in order to ensure that your quotes are as accurate as possible, you will want to keep the following tips in mind:

Be As Accurate As Possible With Your Information

In order to get an accurate quote for your car insurance, the information you give must be accurate, too. For instance, information such as your address, the type of car you drive and even your credit score can affect the amount you pay. You will also find that past accidents and tickets may have an effect on your quote. Not mentioning these things, for instance, in order to get a better quote might seem like a good idea. However, when you get your first invoice, you might find it is a lot more than you were expecting. Avoid this by being as accurate as possible when you apply for your quote.

Know What To Expect Before Getting A Quote

Another thing that you will want to do before getting a quote for car insurance is to do research on average quotes in your state and area. Someone living in an urban area who often parks their car on the street will pay more than those who park their cars in a garage located in a rural area. Average car insurance costs are available on the Internet and can be found with just a bit of research. Once you have this information, you will know if the quote you receive is fair or not.

Know What You Need And What You Don’t

Finally, you should know what you need from your car insurance and what you don’t. For instance, if you have a car that is 20 years old that will not last for more than a couple of years, you probably don’t want to spend the money on a top of the line insurance policy. However, if you just spent $40,000 on a brand new car, you likely won’t want state minimum coverage.

Know What Deductible You Can Afford

When it come to the deductible on your insurance, you should know how much you can afford. The higher the deductible (the amount you have to pay before insurance kicks in if there is an accident), the lower your insurance cost will be. It’s important to know you’ll be responsible for this amount if you do get into an accident, so if you don’t have an emergency fund, a high deductible, although it saves you on the insurance costs, can put you in a financial bind if you do have an accident. You want your deductible to be as high as you can comfortably afford in case there is an accident.

Ask What You Can Do to Lower Your Insurance

Once you get an insurance quote, don’t simply accept it. Talk with the agent and ask what steps you can take to lower the cost over time. There may be a number of easy steps you can take which can lower the cost of your insurance. Even if it isn’t an immediate reduction in the cost, taking those steps will reduce the amount you pay over the long-term. This can put you in a position to get a better rate rather than staying with your original quote for years and years.

As you can see, it is best to keep these tips in mind before you get a quote. This way, you will save time and most likely, money.

(Photo courtesy of Tony Alter)

52 Week Save Money Challenge: Week Four

January 25, 2014 By Jeffrey Strain 2 Comments

This week I was able to cross off the largest amount on the 52 week save money challenge sheet. It’s always a good week when you are able to save the highest number that you’re shooting for, so I’m pleased with that. Even better, it was a simple call that I have had on my list for quite some time. This is how I saved over $150.

Car Insurance

I have been meaning to call my car insurance company for some time to see if there was a way to lower my car insurance costs. I had done a couple of online searches that said I could save quite a bit if I was willing to switch car insurance companies. The main issue was that I really didn’t want to switch since I like the current company I’m with and they give quality service.

After talking with the agent and letting him know that I would not be driving nearly as many miles this year as I have in past years, plus my good driving record with them, they were able to lower my insurance rate by $150 ($75 for each 6 month period) without lowering any of my current coverage. I doubt I would have changed carriers if they weren’t able to offer me a better deal, but I didn’t have to let them know that during the conversation. The agent worked hard to keep me as a customer (I’d mentioned that I had found a number of better deals from other companies searching on the Internet). That $75 put me over the $52 which was the most on my 52 week chart.

If you haven’t called your car insurance agent lately, I would highly suggest that you do. It’s a competitive business, and even if you don’t wish to change companies (as in my case), you can still save money. Get a few quotes online to give you some bargaining power and see what you can work out. The worst case scenario is you spend 15 minutes on the phone and don’t get a reduction, but you could also save hundreds.

Saved: $75.00

House / Pet Sitting

I had another pet sitting opportunity this week for two days which meant that I didn’t need to pay for any food for those two days. While it really doesn’t matter this week since I already reached the $52 goal, that would have been an additional $10 I could have added had I not already reached the goal. The good news going forward is that I actually have quite a few house sitting opportunities lined up for the next couple of months that should help quite a bit with saving money on food costs.

Saved: $10.00

Money Jar & Pay to Use My Car

Since I reached the goal, I decided not to add the amounts I’d saved in change this week, or the dollars I paid to drive the car. I will leave those to accumulate even more and roll them over to the next week. it will be nice to let them build for an extra week.

Saved: $0.00

The total amount I was able to save for the week came to to much more than $52, but I will only cross off $52 (below in red) for this week. I was tempted to cross off two numbers (and I probably would have if I was trying to save as much as I could), but I decided that it was a better approach to stick with the challenge the way it was meant to be. I now have a total of $132 saved over the first four weeks.

Total Saved Week 4: $52.00

$1 $2 $3 $4 $5 $6 $7 $8 $9 $10
$11 $12 $13 $14 $15 $16 $17 $18 $19 $20
$21 $22 $23 $24 $25 $26 $27 $28 $29 $30
$31 $32 $33 $34 $35 $36 $37 $38 $39 $40
$41 $42 $43 $44 $45 $46 $47 $48 $49 $50
$51 $52

Goals for the Coming Week

I should be getting the utility bills this week which will allow me to compare the amount paid this month to the same month last year, since I dug up all those old bills. This should be a good test to see if simply being aware that I’m trying to save, plus being away a few days for the house sitting, equates into lower utility bills. If not, I will need to come up with some further ways to try to save money in these areas.

For those who have decided to participate in the challenge, how did you do during week four?

The 2014 Challenge
Week One
Week Two
Week Three

Dropping Car Coverage Can Affect Rental Car Costs

November 20, 2013 By Jennifer Derrick 2 Comments

Finance gurus will tell you that you should drop the “Comprehensive and Collision” coverage on your auto insurance once the value of your car drops to the point that the insurer would automatically total your car in the event of any accident. The thinking goes that you shouldn’t waste the money on the premium when any money you get as a result of the accident will only be a few hundred dollars. In other words, the premium you’ll pay to maintain comprehensive and collision will be more than any settlement you would receive.

This is somewhat sound advice and the reasoning behind it is true. Why not cut your insurance bill if you have the chance and if doing so won’t leave you on the hook for thousands of dollars if you have a wreck? Well, as I found out, if you travel and rent cars, you might end up paying more to insure that rental car than you would to keep the extra coverage on your insurance policy. Here’s my tale and some considerations that you can take away from my mistake.

We switched auto insurers recently. As part of the switch, we decided to drop comprehensive and collision (C&C) on our “older than dirt” cars. We ended up chopping about $500 per year off our policy. Yay! That was great, until our next vacation came up. Fortunately, I had the foresight to call the new insurer to make certain that our rental car would be covered under our auto policy. It always had been with our old insurer but I wanted to double check. Imagine my surprise when she told me that our liability coverage would carry over to the rental, but since we did not have C&C on our personal cars we would have to pick that coverage up through the rental agency. It makes sense now that I know, but I never realized that carrying C&C on your personal policy was necessary to fully cover a rental car. That’s never a consideration mentioned by the finance gurus.

So we checked the price for insurance through the rental car company. It was $25/day. Over a two-week vacation, that would have added $350 to the rental car cost. Ouch. And that would only cover collision, not any damage done through theft, vandalism, or a storm, for example. We looked into other options, such as coverage through the credit cards that we could use to rent the car. Again, those policies would only cover collisions and the limit was often fixed at $25,000 dollars. That would probably cover the car but if we ended up with a bill higher than that, we’d be on the hook for the overage.

We called our insurer back. The cost to add C&C back on to the policy was $100. That was much less than using the rental agency’s insurance. (We learned that we only needed to have it on one car, not both, in order to cover a rental so we did still end up saving some money.) They also had an option where we could add C&C for just the duration of the trip. That was only a few dollars and the most economical option, but we decided to just pay for the whole year since we travel frequently and sometimes on very short notice. We didn’t want to have to remember to call the auto insurer before every trip and have coverage added. I was lucky enough that I remembered to call before this trip! I didn’t want to have to trust my aging brain to make that call every time.

In the end we did end up saving some money on our insurance bill, just not as much as we hoped. And we had to go through a little last-minute vacation stress while we tried to work out a solution to something that we’d always taken for granted. In summary, before you cancel C&C on your own car, here are some things to ask:

Do you frequently rent cars when you travel?

If you only rent every few years, it may be worth it to pay for the rental agency’s insurance. If you travel frequently you’ll probably find that any savings on your auto insurance are quickly eaten up by the high rental insurance rates.

Are you okay with exclusions?

If you don’t carry C&C on your car and use the rental agency’s insurance, or insurance through a credit card, are you okay with the exclusions? I noted above that we found that the insurance only covered collision, not theft, storm damage, or vandalism. While these are unlikely events they do happen and we weren’t willing to take the risk, especially since the car would be left in unsecured locations much of the time. We also didn’t like that the coverage offered by our credit card capped out at $25,000. That might be enough, but it might not be if we rented a newer car or got an upgrade to a nicer car.

Are you willing to “piece together” insurance if you have an accident?

If we’d used other sources for insurance, any accident would have meant fighting with our regular insurer for the liability coverage and then dealing with another party for collision damage. I’d much rather make one call and have it dealt with than to have to fight with multiple insurers who are going to do everything possible to force the other one to pay and drag out the claims process for months.

Does your insurer allow you to enable C&C just for the duration of your trip?

If this is an option, it can be very cheap and would work great for someone who rents infrequently. You just have to remember to make that call before every trip. If you forget, you’ll end up uninsured and hoping that your credit card offers insurance.

Do you have to have C&C on all your cars to ensure rental coverage?

We did end up saving some money since we only had to carry C&C on one car, not both. This can be a good money-saving compromise to dropping coverage altogether.

I never realized that rental coverage and C&C were tied together. Looking back I should have known because it does make sense, but none of the finance gurus who touted dropping C&C ever mentioned it. Now I know and I know that we’ll be keeping C&C on at least one car at all times. It’s far more economical (not to mention better for our peace of mind) for us than relying on other rental car insurance options.

(Photo courtesy of Chris Lawrence)

The Financial Cost of Texting and Driving

June 11, 2012 By Jennifer Derrick 4 Comments

I don’t consider myself a soapbox preacher, but the issue of texting and driving is one of those that gets me going. It frustrates me to no end that people think those little messages are so important that they are worth endangering lives over. Of course, the problem is that no one really believes they’re endangering anyone. “I know what I’m doing,” and “It won’t happen to me” are the mantras of the texters.

This is what my neighbor thought, too, until the day she was checking a text and plowed into the back of the vehicle in front of her. The car in front stopped suddenly to avoid a kid that ran into the crosswalk. Had my neighbor been paying attention, she could have stopped in time. Since she wasn’t… Bam. No one was killed, but the driver of the other car was hurt and my neighbor hurt her neck and back.

People always talk about the human cost of texting and driving; the lives lost, the injuries, the disabilities. This is all tragic and reason enough to stop texting and driving. But few talk about the monetary costs. These can be just as devastating. From talking to my neighbor, it looks like she’s dug a financial hole for herself that will bury her for quite some time to come. Here’s brief listing of her new problems.

Insurance Dropped

Her insurance company immediately dropped her and no other carrier will take her. In a state where you must carry at least liability insurance to operate a vehicle, this essentially means that she can no longer drive. She now must use public transportation or find a carpool to get to work and run errands. (And since where we live has a cruddy public transportation system and very little is within walking distance, she’s likely going to have to move closer to the center of town.) She might qualify for insurance several years from now, but it’s going to be at much higher rates. Unless she can figure out a suitable arrangement soon, she’s going to put her job in jeopardy. If she does find an arrangement, she’ll have to foot the costs for public transit or moving to a location within walking distance to work.

Car Totaled

Her car was totaled. The car was, of course, worth less than what she still owed on it. The insurance company paid $18,300, but she owes $25,800 (I think this might be due to having some older loans rolled into the current loan). She now has to come up with $7,500 on her own to pay off the lender. At least she doesn’t have to also buy a new car right away, since she can’t drive.

The Fine

Aside from everything else, she has to pay the $100 fine for texting and driving, plus court costs. Seems pretty minor compared to the rest of it.

Lawsuit

My neighbor is being sued by the person she hit (or their insurance company, I’m not sure which). Her insurance only covered a portion of the injuries to the other driver, so the driver is suing for the difference, plus lost wages, the damages to their car, “distress,” and other nebulous claims that could result in hundreds of thousands of dollars in damages. Since my neighbor doesn’t have an umbrella policy, she’s going to have to pay for any judgment out of pocket. Even if she wins, she’s still going to have to pay hefty legal fees to get out of this mess.

Injuries to Herself

While her insurance is picking up the tab for her injuries, she’s got a $5,000 deductible to meet before they kick in with 100% coverage. Should she lose her job and her health insurance, future treatments might not be affordable at all. The best she could hope for might be to buy COBRA insurance, but COBRA is often prohibitively expensive.

Lost Wages

She’s having to deal with missed work due to her injuries. She doesn’t have a disability insurance policy, so if she can no longer work, she’s not going to have an income. Right now she’s used all of her vacation and sick leave, so she’s not getting paid and she’s on the good grace of her employer who has not terminated her employment. Yet. Should she be unable to work or her employer needs more than she can do, her employer will have no choice but to let her go.

License Suspended

Not like it really matters, since with no insurance she can’t drive, but her license was suspended for 120 days. To get it back, she’ll have to attend a driving class which will cost about $200.

Permanent Record

All of this is going to be on her record for years. It may negatively impact her applications for credit and jobs even years from now.

Today my neighbor is in the hole for at least $12,800. Those are the only costs she knows about today. That doesn’t count the lost wages, any moving or public transportation costs, potential job loss, COBRA payments, long-term medical care, the long-term dings on her credit and driving records, or the results of the lawsuit. For someone who only makes an average income, this is devastating. And it all could have been avoided if she’d just left the phone alone.

So even if you don’t worry about killing or injuring someone when you text and drive, you might want to at least worry about the financial costs of texting and driving. Even if you manage not to kill someone, the amount of money you can lose is the kind that can permanently derail your dreams and make it so you can never retire or have the things and experiences you want in life.

(Photo courtesy of mrJasonWeaver)