Posts Tagged ‘Car Insurance’

Get a Competitve Edge on Auto Insurance

Wednesday, December 7th, 2011


I recently shared an article I read on “12 Tips to Saving Money on Auto Insurance” with my wife; her first response was, “How much can you save if you make these changes?” Half of any insurance equation is always cost; unfortunately, the answer is more convoluted.

 

Since there are so many factors affecting the pricing of each and every type of insurance, the cumulative effect on changing one or more of the rating factors will vary accordingly. Overall, there is no set formula or even “rule of thumb” that insurance companies have for setting rates based on different risk factors. Every company will assign rates based on actuarial analysis of their current policy holders.

 

There are numerous possible discounts credited by most if not all companies today. Because urban drivers typically pay higher premiums than rural drivers, cost savings will be easier to accumulate for an urban driver. Here are the top things to consider and/or modify when seeking lower premiums:

 

 

Vehicle Choice

 

A major factor in determining rates for auto insurance is the type of vehicle being insured.

 

Obviously, a high performance car will typically be more prohibitive to insure than a family sedan. You may also be surprised to know that some relatively inexpensive autos are much more costly to insure than one may think because their repair costs are relatively high.  If you are looking to buy a car and insurance premiums are a major concern, contact a broker to determine which vehicles will have a lower premium to insure.

 

Clean Record 

 

One of the most important insurance rating factors is your driving record including tickets, accidents and any other claims filed. In general, the less activity, the better the rates.

 

Miles & Usage

 

There are separate rating categories for usage and annual miles driven; if you use your vehicle for  business the premium will be more substantial than if it is being used to run errands on the weekend. The same holds true for the annual mileage driven. The more you drive, the higher the premium.

 

Raise the Roof

 

Consider raising your deductible (the amount you would pay before the insurance pays the balance of a claim). Doing this can be a huge money saving plan, however, review the savings potential before blindly implementing a change – often times raising a deductible by an additional $500 will result in a minute change in premium. Determine whether the cost savings warrants the increased exposure.

 

Good Credit

 

Your credit rating can affect your premium; this is a rating factor that is not typically known to insureds. Most companies are now using credit ratings as one of the determining factors in rating contracts.

 

Location, Location, Location

 

Are you geographically undesirable when it comes to auto insurance? Location plays a huge part when determining premiums for insurance. Actuarially, companies have found that the congestion in urban areas lead to a statistically higher probability of having a claim.

 

Drop the Baggage

 

Get rid of unnecessary coverage. A good example of this would be to drop coverage on an older vehicle. As your vehicle declines in value, the amount that an insurance company will give you in the event of a total loss will also decrease accordingly. At a certain point in time, it becomes illogical to retain comprehensive and collision coverage on the vehicle.  

 

Crime Busting

 

Install anti-theft devices; in some instances the savings in premium will validate the initial outlay of cash to install such a device. Even if this takes a couple of years, it may be a wise move financially.

 

Combine & Conquer

 

Insurance companies typically will reward you for loyalty. They will give discounts for insuring all of your vehicles on one policy. They will also offer discounts if you have other insurance with their company such as homeowners, umbrella, and/or life insurance coverage.

 

Other Considerations

 

There are many company-specific discounts that may also be available. Examples of these would be discounts for college-degreed individuals, good students, military, employees of specific companies, and specific occupations.

 

For Illinois Seniors, there is a defensive driving program called 55 and Alive which teaches aging drivers how to adjust their driving to compensate for slowing reaction times etc.  Many senior centers offer these programs and taking these courses can help senior rated drivers.

 

Wrap Up

 

There is no one size fits all in the auto insurance market. Due to the number of companies doing business in this market, it is a must to shop around. If nothing else, it gives you a chance to review whether your existing limits remain adequate or whether they should be adjusted to better protect you and your family.

 

Shopping around will also help you determine whether or not your current insurer is still providing a good value for you. Are you truly receiving great value for the premium dollars that are being expended?

 

Kurt Rusch  CLU, ChFC

 

Online Auto Insurance

Thursday, September 15th, 2011

 

Do-It-Yourself is big online today. Consumers like to pick out what they want and get quotes from the anonymity of their own computers. Except, of course, for those annoying vendors who call incessantly once you hit “submit”, people can shop incognito most of the time.

 

The insurance industry offers equal accessibility. Who doesn’t like the thought of not having to talk to the Boogeyman (aka insurance agent) when looking for a good deal online? There is no doubt that D-I-Y is convenient, but getting a good deal does not translate to getting good coverage in the insurance biz. More often than not, it’s more like D-Y-I: Do Yourself In.

 

Cyber Gap

 

The most common insurance market being hawked online by companies today is automobile insurance. My personal observation: consumers really don’t understand what they are purchasing. For example, let’s take a look at Joe Blow. He has a $400,000 home and just switched his auto insurance (online) to save $400 a year keeping the same deductible.

 

Joe saved premium by dropping the liability coverage on his three vehicles from $250,000/$500,000/$100,000 to the state minimum: $20,000/$40,000/$15,000 (in Illinois). What Joe did in saving that extra $400 per year was expose himself, his paychecks, savings and home.

 

Many people don’t understand the significance of this switch. When Joe switched to minimum liability coverage, in reality he agreed to the following if at fault in an accident:

 

1. He will be personally responsible for any injuries caused over $20,000 per person.

 

2. He will be personally responsible for any personal injuries totaling over $40,000 for all passengers in the other vehicle.

 

3. He will be personally responsible for any property damage over $15,000.

 

The shortcomings here are obvious; medical costs are exorbitant and low end new cars are selling for more than $15,000 these days. That $400 a year won’t do much towards replacing property or paying doctors’ bills. Add to this what could happen to Joe in the worst case scenario: causing someone else’s death. A wrongful death lawsuit stemming from an auto accident could have you working for the decedent’s family for the rest of your life.

 

Lesson Learned

 

Simply put, when consumers opt for the lowest price with disregard for the very benefits they’re buying, they open themselves up to a plethora of problems down the road.

 

Tread very carefully before you cyber drive insurance. Be armed with the knowledge of what is and is not covered and do your homework before you make a decision – don’t jeopardize your lifestyle.

 

Alternatively, work with an insurance broker, (yes, I am one), who has access to numerous carriers to draw from in finding coverage appropriate to your cost and benefit standpoint.

 

Kurt Rusch  CLU, ChFC