Monthly Archives: August 2018

Underwriting Auto Policies

It is the most affordable type of auto insurance, yet it complies with state’s regulations. All optional coverage for example Rental Reimbursement and Roadside Assistance are not in the policy to reduce the premium without losing the necessary protections.

Standard and Non-Standard Insurance Market

There are two different types of insurance markets including standard and non-standard markets. The former is the typical auto insurance for drivers with little to zero traffic tickets in the driving records. Insurance companies regard consumers of this market as low-risk drivers. Non-standard is for drivers who have major traffic violations histories such as speeding or DUI. For these drivers, acquiring auto insurance from the standard market can be difficult due to strict approval requirements by providers.

Standard market insurers are reluctant to provide policies because of the following reasons:

· High-risk drivers have tendencies to commit the same traffic violations

· There is a chance that the insurer must pay a considerable amount of compensation for repeated violation

· Some drivers get their high-risk status because of policy cancellation from the previous company as a result of frequent late payment

Non-standard market insurance consumers or high-risk drivers must pay a higher price for the policies, but the system allows them to get an easy approval. Regardless of past driving records or involvement in the accident, all applicants should acquire auto insurance policies to help them get back on the road without problems.

Minimum Auto Coverage

Every driver only needs to acquire the state’s minimum coverage requirements to drive without breaking the law. Depending on the states, the coverage limit can be different, but most states require at least the following coverage in the policy:

· Bodily Injury Liability: the coverage that provides payout or compensation following an accident in which the policyholder is at fault. The payout is for someone else who sustains injuries.

· Property Damage Liability: similar to Bodily Injury, the payout is for someone else whose properties or cars suffer from damages in an accident. The at-fault party must help cover repair or replacements.

In some states, Personal Injury Protection (PIP) is also a mandatory coverage. This applies in states that use no-fault regulation.

Collision coverage is a financial protection for a policyholder’s vehicle in case it suffers damages from the accident. The payout from this coverage is available to help repair or replace vehicle’s parts.

Comprehensive also has the same purpose, but it only applies when damages are results of non-accident occurrences for examples falling objects, flood, theft, or hitting an animal. Both optional coverage types are sometimes mandatory by a leasing or financing company.

Payment Options

All high-risk drivers can revoke their high-risk status after taking some obligatory courses for example Defensive Driving or Driver’s Education Course. Please remember that driving without insurance is an illegal act. The price for insurance from non-standard market is higher, but the company allows for flexible payment options as follows:

· Economy Plan: payment system which allows policyholder to pay the down payment to acquire a policy. Installment every 30-day applies for the remaining amount.

· Quarterly Plan: another installment plan in which policyholders can spread the payment and pay once every four months for a year.

· Annual Plan: this is the simplest payment method with one-time payment up front for a year policy.

The rates remain the same throughout one-year policy period regardless of the payment plan applied. The insurance firm guarantees the rate for a full calendar year.

High-risk Drivers

Many people associate the term “high-risk” with repeated violations or major infraction, but most insurers have different views towards the case. Besides bad driving records, some other factors can determine whether or not someone is high-risk including:

· Age: new or teen drivers fall under high-risk category because they have very little experience in driving. Elderly people (70 years or older) are also high-risk due to hearing/vision issues. The company helps these people to get auto insurance in an easy way.

· Address: living in an area where the crime rate is high makes a driver high-risk as well. Cars in such neighborhood often fall victim to vandalism or theft.

· Credit history: The company does not use drivers’ credit history to determine approval.

Apart from those three factors, insurers use many variables to decide whether an applicant deserves approval or cancellation. the company only needs basic personal data to start underwriting auto insurance policies for customers.

Discounts

To help policyholders save money on insurance, the firm offers multiple discounts. There are three categories for discounts:

· Driver Discounts: eligibility requirements include taking Defensive Driving Course or Driver’s Education. Students with good grades are eligible for the discount as well.

· Policy Discounts: more affordable premiums for policyholders who registers multiple vehicles under one policy. Those who pay in full get 31% off premium.

· Vehicle Discounts: installing safety devices such as airbag, passive restraint, cell-phone blocking, and anti-theft system grants more discounts, too.

How To Cut Teen Insurance Rates

Teens ages 16-19 are three times more likely than drivers older than 20 to be involved in a fatal crash (or any crash, for that matter) according to the Insurance Institute for Highway Safety. It’s not too surprising, then, that teen drivers tend to have high insurance premiums. For parents, this can mean a big jump in insurance premiums once you add your teen driver to your policy. However, there are ways to reduce your costs right out of the gate, even for very inexperienced drivers. Here are some ways to keep policy costs at a minimum.

Choose the Right Car
It’s simply a matter of economics. There are some cars that cost more to repair and replace than others. There are also some cars that are more likely to be stolen and others that protect passengers better in a crash. Combined, these three characteristics have a lot to do with how much you’ll pay for the collision and theft portions of your policy, says David Goldstein, the author of Insure Your Car for Less: A Practical Guide to Saving Money on Automobile Insurance.

There are several ways to choose the least expensive car to drive. First, check the Insurance Institute for Highway Safety’s Top Safety Pick awards and the National Highway Traffic Safety Administration’s 5-Star Safety Ratings to see which cars scored the best in crashworthiness. You’ll also want to check the National Insurance Crime Bureau’s list of Hot Wheels: cars that are most commonly stolen.

Your insurance broker or company can also help you find the best rate for the cars you’re considering, says Goldstein, who has worked as an insurance and claims adjuster. “If you’re considering several cars, call and ask for a rate quote on each,” he suggests.

Midsize family cars are generally the cheapest to insure, says Jeanne Salvatore, senior vice president and chief communications officer at the Insurance Information Institute, a nonprofit information service. “You want a car that’s easy to drive and highly protective. Those are the cars that are going to keep your teen safe and cost the least to insure,” she says.

You may also want to consider a car that doesn’t need collision insurance, which will cut your rates considerably, says Salvatore, and either way, the age of your car may lead to more discounts.

“Some companies offer a utility discount for cars older than a 2002 model year,” she says. That said, make sure any older car you purchase has a solid crash rating and all of the safety features that a newer car might have including airbags, an antilock braking system (ABS), daytime running lights and (for SUVs) electronic stability control.

Adjust Driver Assignments
When you call the insurance company to add your child to a policy, the representative will ask you to designate which car will be driven by each member of your family most often.

You can save money by designating and having your child drive the car that’s the least expensive to insure. The trick is finding out which car that is, says Goldstein. “Driver assignment can really affect your rates,” he agrees.

If you get someone on the phone who is willing to work with you, he or she can take you through all the different scenarios. “Occasionally, I’d quote rates for four people and four different cars: two parents and two kids. If we played around with it, we could often save money,” Goldstein says.

Look for Alumni Discounts or Resident-Student Discounts
One of the perks of going to college is that many schools ink alumni deals with large organizations, such as insurance companies. While the discount is usually around 5 or 10 percent, it’s still worth looking into. Geico, for instance, offers an 8 percent discount for DePaul University students and alumni. Liberty Mutual offers special rates to those who attend Arizona State University.

If your child goes away to college and doesn’t take a car along, you can save a lot on your premium. Allstate, for example, offers a 35 percent discount off premiums for students who live at a school that is more than 100 miles from where their car is garaged. “There’s an assumption that they are only going to be driving on weekends and school vacations,” says Salvatore.

Finally, all full-time high school and college students who get good grades can benefit from their diligence. Most companies offer up to 25 percent discounts for good report cards. You’ll also see rates drop as your child advances in school. Seniors in college have better rates than freshman, so if your child takes college credits over the summer or in high school, let your insurance company know when he or she reaches the next college milestone, says Goldstein.

Wait an Extra Year Before Licensing
Some teens may not like this idea, but you can save a lot of money simply by having your son or daughter wait an extra year to get a driving permit.

“Wait until they are as old as possible before they get their permit,” says Goldstein. “For instance, in some states you can get your learner’s permit as early as 16 but you’re probably not going to be driving [without restrictions] until you’re 18. Why pay for insurance those two years unless you have to?”

Delaying the process is more common than you may think, according to several recent studies. The AAA Foundation for Traffic Safety reports that just 44 percent of teens get their licenses within 12 months of the minimum age and only 54 percent get their licenses before they turn 18.

However, if you go this route, make sure teens know that they’ll still need the practice and supervision that a graduated driver licensing program affords.

Tracking for Discounts and Better Driving Habits
In recent years new devices that connect to a car’s computer and use GPS technology to track driving habits and routes have flooded the market. While they can be very useful for parents who want to make sure that their teen isn’t speeding or driving outside an approved area, they’re also being used by insurance companies to help set rates for drivers of all ages in an approach called use-based insurance.

Snapshot, a program by Progressive Insurance, is one such option that uses a pocket-size telematics device that transmits car data using cell-phone technology. The device plugs into a car’s onboard diagnostic port and measures driving habits such as how and when someone drives, tracking behaviors like mileage, time of day and if the person performs hard braking maneuvers.

“Our Snapshot program gives all consumers, including teens, more control over their car insurance costs by offering personalized discounts based on their actual driving behavior,” explains Jeff Sibel, a spokesman for Progressive Insurance. “People who drive less, in safer ways and during safer times of day are most likely to receive a discount.”

Some companies are offering the device for parental tracking, but without an immediate insurance discount. Its use could result in lower rates going forward, says Rebecca Hirsch, a spokeswoman for insurer USAA. “We’re offering the device for free and parents get the monitoring for a year free,” she says. “Parents can get text messages if their teens are doing things like hard braking. It enables the parent and the teen to have a conversation around safe driving habits. The first few years are so critical. Anecdotally, we’ve seen that the devices help build better driving behaviors.”

Take a Class
Adults and teens alike can save money by taking a six-hour driving safety course either online or in person. Some insurance companies are offering teen-specific courses that can help reduce the number of crashes that involve teens by providing realistic driving simulations.

Liberty Mutual, for example, offers something it calls teenSMART, a program that focuses on the six factors that most commonly cause teen car accidents. The company says teens who complete the program may get “special savings” on their auto policies, but doesn’t offer any examples of what those savings might be.

State Farm offers a program called Steer Clear for drivers under the age of 25 or new drivers with less than three years of driving experience. It requires drivers to watch a video, sign a safe driving parent/driver agreement and complete a certain number of supervised trips of 15-30 minutes over the course of a month, filling out a log after each trip. By completing the program, drivers can get a discount of up to 15 percent on their coverage, says State Farm spokeswoman Rachael Risinger.

Finally, driver-training classes — so-called driver’s ed — can also help lower your premiums by up to 10 percent, depending on your insurer.

Make Smart Choices
Even if they apply every discount imaginable, most people will find there’s no getting around the fact that rates will go up with a teen driver on the policy — at least for a little while. And while it might be tempting to simply “forget” to inform your insurance company that Junior has his license, take note: Doing so can have serious consequences if your child is in an accident.

You’ll also want to make sure you have enough insurance coverage. “Don’t go for the minimum limits,” suggests Burl Daniel, a former insurance agent and corporate risk manager who testifies as an expert witness in insurance cases. “You’re exposing yourself to potential problems, if your kid does have a wreck and seriously injures someone. Don’t take the bait now just to save a few hundred dollars when it could end up costing you a lot down the road.”

Should Newlyweds Combine Car Insurance Policies?

Chances are, car insurance wasn’t the first thing you thought of after the proposal. In fact, you might not have thought about how marriage might affect your car insurance rates at all. But after the decorations have been cleared and honeymoon adventures logged, you’ll want to consider adding “check on combining car insurance policies” to your newlywed to-do list. Car insurance is usually cheaper for married couples — with a few important caveats.

No Matter What, You’ll Likely Save
Even if you do absolutely nothing, the sheer fact of being married is likely to have a positive impact on your rates once your policy is up for review. The Zebra, a car insurance comparison engine and digital auto insurance agency, projects a premium savings of 10-12 percent when all other factors remain the same.

Why is this the case? According to Frankie Kuo, an auto insurance specialist at Value Penguin, “Insurers find married people less likely to file a claim compared to single drivers of comparable profile, and so consider them less risky to insure.”

When Combining Policies Makes Sense
To nab an even steeper discount, consider combining your car and your beloved’s in a single policy. This makes the most sense if you both have spotless driving records and no recent gaps in insurance coverage, Esurance explains.

Remember, too, that in addition to lower rates, having two cars on the same policy can often earn you multi-car discounts from insurers. Moreover, even if your household only has one vehicle, you can still earn discounts for sharing a policy.

“Even if a family only has one car, we would still recommend a single policy that would cover both drivers, since it ensures that both drivers are insured without incurring the extra cost of a second policy,” says Eric Madia, vice president of product for Esurance.

Finally, combining your auto insurance policy with existing homeowners’ or renters’ policies from the same company could lead to even greater discounts overall.

Take a Combined Policy Test-Drive
Many factors shape one’s insurance premium, and driving is only one of them. In some states, insurance companies use credit scores as one element in determining rates. So you may have some choices to make, based on your separate driving and financial histories.

For example, what if your spouse has a decent driving record but a poor credit score? Or what if you’re a great money manager, but your lead foot has recently scored you a speeding ticket?

You should first get a quote for adding your spouse to your insurance or vice versa, says Jean-Marie Lovett, president of independent insurance agency MassDrive Insurance Group in Boston. Asking for a quote doesn’t obligate you to follow through with the change. (If your spouse is a champion speeding-ticket holder, however, you might have to list him or her as an excluded driver in your household. More on that in a moment.) Lovett says it’s a good practice to first get quotes for two drivers on one policy.

If putting the policies together does not help you save on the premium, you can just list your spouse on your policy and defer them to their own individual insurance, Lovett says.

When it comes to credit scores, one of the smartest things you can do is place the person with the best credit score as the primary named insured. “Their credit is the one that will be portrayed to the insurance company,” Lovett notes, “and will be the credit score that the insurance company will rate off of.”

Keep in mind this is only true in states where it’s legal to use credit scores as a rating factor. Some states, such as Massachusetts and California, do not permit the practice. In that case, Lovett explains, the person with the best driving record should be the primary insured.

Still unsure on whether to combine policies? It can help to know the value of your cars. “Maybe your spouse has a good driving record,” Lovett says, “but a junker of a car.”

“If you have a 1995-2005 vehicle, you should debate whether to have collision coverage, or increase the collision deductible to $1,000,” she continues. “Cars that get over the 10-year-old mark tend to take a significant drop in value, and you want to weigh the cost of the collision coverage on the vehicle versus the actual value of the vehicle.” She adds that in the event of an accident, having the $1,000 deductible “gives you the option to junk the caror make a claim while keeping your insurance premium manageable.”

When Not To Combine Policies
Though you’re now joined in holy matrimony, there are some cases in which it just doesn’t make sense to bring that partnership to your car insurance. Esurance warns that if one of you has a truly poor driving record, separate policies could end up costing you less.

“Combining a low-risk driver’s policy with a high-risk driver’s will likely increase the low-risk driver’s car insurance rates,” according to Esurance. There’s also the chance that your insurance company simply won’t insure your accident-prone partner, no matter the cost. “If one spouse has more than three accidents, your insurance carrier may not accept the spouse,” Lovett says.

Here’s where the really bad news comes in: Even if you don’t combine policies, simply living under the same roof as a high-risk driver could have a negative impact on your car insurance rates.

Esurance explains why: “Because insurance companies consider the driving histories of all family members living within the same household when underwriting policies, having a high-risk driver under your roof makes you riskier by association.” Car insurance follows the car, so your policy would have to cover the damage if your spouse caused an accident on an errand in your vehicle, for example.

There may be a way around this, though. “In most states, you are required to list all drivers in your household on your policy,” Lovett says. “However, you can ‘defer’ someone, meaning they have their own insurance policy.”

Also called a driver exclusion, this is an easy way to keep insurance costs low, even if your spouse is high risk. Keep in mind that exclusion truly means excluded: If your spouse borrows your vehicle and gets into an accident, you’re responsible for any and all damages.

The Bottom Line
“Nine times out of 10,” Lovett advises, “it will be beneficial to merge the insurance” for a newlywed couple. And if it doesn’t make sense right now, Kuo recommends doing what you can to mitigate your high-risk profile. Taking a certified defensive driving course may unlock an automatic discount, or at least facilitate a negotiation for lower rates.

“Having a spotty record is inconvenient, but people usually have a chance to get lower rates just by shopping around and comparing prices across companies,” Kuo adds.

Additionally, Kuo points out that minor traffic violations usually do not haunt a driver’s record for more than three years. Staying clean for that long can also remove a driver from the high-risk pool.

Even if you can’t combine policies immediately, Kuo recommends taking another look at your insurance every now and then. If couples think it makes sense to combine their policies, they can meet with their agent for a review. “Many circumstances of life could change, such as work, age and even where they live,” Kuo says. As always, obtaining quotes from multiple companies can help you get the best deal.

Personal Factors That Affect Insurance Rates

A reporter recently asked Edmunds about the kinds of personal information that can affect the cost of car insurance. She also wanted to know whether people could do anything to address personal factors that were keeping their car insurance rates high.

They’re good questions, and Edmunds was happy to help answer them. During the research it became clear that when it comes to car insurance, there’s hardly anything that isn’t personal. Here are five all-about-you factors that can affect your car insurance premium:

1) Your driving profile. Such factors as the number of miles you drive annually and your accident and ticket history are major elements in setting your insurance rate. The less you drive, the less risk of an accident and a claim. Safer driving — meaning a history free of accidents and moving violations — also points to someone who’s less likely to file a claim.

2) The car you drive. Car insurance premiums are based in part on the car’s sticker price, the cost to repair it, its overall safety record and the likelihood of theft, according to the Insurance Information Institute. The cost of fixing a brand-new $225,000 2010 Ferrari 458 Italia is going to be a lot more than the repair costs for a used $17,000 Nissan Altima. The premium will reflect this.

3) Your essential personal information, including your age, occupation and where you live. Each of these things factors into the process of setting your insurance rate because insurance companies base their premiums on actuarial information about drivers. They look for patterns of claims activity among people like you. A teenage boy is likely to have a higher insurance rate than a middle-aged driver, because statistically, teenage boys have more accidents than do 40-year-olds.

Your occupation can play a role if it affects how much driving you do. Work that involves lots of miles on the road, such as an outside sales job, can affect rates. From the insurance company’s point of view, the more miles you drive means more risk of an accident.

Insurance companies also look at where you live. They track local trends of accidents, car thefts, lawsuits and the cost of medical care and car repair, according to the Insurance Information Institute.

4) The coverage you choose. The more coverage you elect and the lower the deductible you set, the more you’ll pay.

5) Your credit score. Some insurance companies use credit scores as a factor in setting rates. This practice is coming under attack, however, with seven states in 2010 passing regulations regarding the use of credit information in insurance. In 2011, several other state legislatures introduced bills to regulate the practice.

Actuarial studies show that how a person manages his or her financial affairs is an accurate predictor of the number and size of insurance claims he or she might file, according to the Insurance Information Institute.

If you want to lower your insurance costs, you can’t change your age, or easily change your job or hometown. But there are some personal changes you can make:

1) Consider pay-as-you-drive insurance. It’s a paradox, but the more personal you get, the better your rates might be. Pay-as-you-drive programs offer better rates because they’re tailored to how you personally drive — as opposed to the people who are similar to you in terms of age or other unchangeable factors.

This means that a teenager who is an excellent driver — who doesn’t speed, doesn’t drive at night and doesn’t drive many miles — can get a better rate than the average teenager, whose actuarial profile pegs him as a greater risk, based on the accident history for people his age.

Pay-as-you-drive plans have different configurations, depending on the insurance company and state. Some require that you install a telematics device that transmits information about your actual driving (such as speed, mileage and braking patterns) to the insurance company. Others, such as plans permitted in California, only are based on the number of miles you drive, not how you drive.

2) Be a calmer, more careful driver. If you’ve had speeding tickets in the past, resolve to change from being a speedy, aggressive driver to a calm one. A side benefit is that you’ll save money on gasoline. Edmunds testing has also shown that a calm driving style gets you 35 percent better fuel economy.

3) Choose a car with a lower cost of ownership. Edmunds has a True Cost to Own ® (TCO) tool that lets you size up cars when you’re shopping. It takes into account eight components — depreciation, interest on financing, taxes and fees, insurance premiums, fuel, maintenance, repairs and any federal tax credit that may be available — and tells you what your cost would be over five years. It’s a way to get a preview of what your insurance premiums might be. Also, talk to your insurance company when you’re car shopping to get a quote on how your choice will affect your insurance. If you wait until the deal is done, you’ve lost a chance to manage your costs.

4) Change your coverage. Don’t go for every bell and whistle in an auto insurance policy. If you’re willing to pay a slightly higher deductible, you can wind up saving big on your rates. Going from a $250 to a $1,000 deductible could save you 25-40 percent on your policy. Set aside a portion of these funds to cover your costs in the event of a claim.

If you have an older car with comprehensive and collision coverage, you might find yourself paying more in insurance than the car is worth. One tip: Take your comprehensive and collision premiums and add those up. Multiply by 10. If your car is worth less than that amount, don’t buy the coverage. If you’re worried about being left overexposed, consider this: The typical policyholder makes a claim only once every 11 years, and reports a total loss only once every 50 years.

5) Explore discounts for which you might be qualified. The options available include discounts for low-mileage drivers, for seniors and for cars with anti-theft devices and certain safety devices. It’s a lengthy list — just ask your insurer about any discounts, and go from there.

6) Clean up your credit. Keep it in good shape by paying bills on time and by regularly checking that there are no items on your history that do not belong to you. You can get free annual credit report checks here.

Is there personal information that doesn’t matter? Gender, one expert told us. Insurance companies don’t care if you’re female or male as long as you’re a safe driver. And it’s a myth that red cars have higher insurance rates than those sporting more sedate shades, according to the Insurance Information Institute. Ultimately, insurance companies care about how likely it is that a particular driver would end up making or causing a pricey claim against them. Green is the only color that matters.