Auto Insurance, everyone needs it, nobody wants it!
Auto insurance is one type of insurance you are “required” to have if you want to drive a car, but this doesn’t mean everyone actually has it. When you are out on the road it is crucial to be protected, especially from those people who are uninsured or carry minimal coverage. Tragically everyday many people are involved in serious accidents that affect them financially, physically and mentally. The one time you’re glad you paid your premiums is the day you have to handle this type of situation. It’s good to know what your policy does and how insurance carriers determine the rate you pay in order to know what you can do to keep your rates low like a Ninja.
Essentially an auto policy is a contractual agreement between you and the insurance company that says you pay a premium and in return the insurance company agrees to pay your losses outlined in the policy contract. Auto coverage usually provides for property, liability, and medical costs, along with many other additional features you can add on.
The first thing I would like to emphasize is that insurance is a shared risk. This means the money you pay for your policy is added to a “pool” with everyone else’s premiums, and that “pool” is used to pay for claims. With cell phones, touch screen displays, and more people driving than ever before, being in your vehicle can be really dangerous these days. We all need to understand that no matter how clean a person’s driving record is or how long it’s been since a claim was filed, we ALL pay for others distracted driving and accidents. I can’t express how hard it is for some people to understand this concept. They fight and argue till they’re blue in the face not realizing it’s getting them nowhere. If you accept this fact and move on, you can start focusing on the things that will actually help you keep your rates down.
The hardest part for most is understanding what the insurance company has outlined in the contract, not all auto policies are created equal. Each policy will typically run for 6 months or 12 months, and at each renewal your policy premium can be re-assessed. They will look at all kinds of rating factors to determine your premium but the major ones are:
- Insurance history and driving history
- Age, gender, and experience
- Vehicle repair cost and claim frequency
- Credit and consumer reports
- State wide claim payouts and rate changes
A lot of people ask me “I got a ticket or accident what will happen to my rates?”
This is probably the most common question I get and it is usually asked in a panicked, high-pitched voice. Unfortunately I always have to respond by saying you will not know your renewal rate until your next renewal processes, which is usually 45 days prior when your current policy expires. Also, most insurance companies may not even pull your motor vehicle report every renewal, so they may not find out about a ticket for years, unless you tell them.
It’s always a good practice to call your agent or company the month prior to your renewal, just to go over the details and ask about any rate changes. If you have an agent and they didn’t let you know your rate would be going up, it may be time to think about getting a new agent.
Regardless of who you are you will probably be seeing auto rate increase over the next few years. Insurance is rising faster than inflation and based on industry trends it looks like it will continue until something changes. Understanding this trend and paying attention to your policy renewals is the best way to keep your rate low and your coverage at the right level for you.
What you really need to know about auto insurance.
The future is bleak for auto insurance. The big agent based carriers are loosing market share rapidly to the online companies that have lower operating costs with better loss ratios. Down the road the “Big Three” may just get out of the auto insurance business all together.
If we go further into the future, with self driving cars and new advancements in their safety, there is a real possibility that auto insurance may not even be needed within the next decade or two. Until that day you can prepare yourself by knowing that rates are going to rise and companies are going to try and cut costs wherever they can.
You may think buying the cheapest policy out there is right for you (and your wallet will certainly thank you) however it is good to note that like everything else, you usually get what you pay for. Spending a little more for better coverage and customer service can go a long way when you need to use the policy. This is where having a good insurance agent comes in, but it all depends on the type of person you are.
I believe that if you educate yourself and stay proactive in reviewing your policies, online providers can work for you. 9 times out of 10 you will pay less and you won’t have someone bugging you every month with new things to sell you.
If you have a complex insurance situation or you don’t want to be involved in your insurance maintenance, than you may like having a licensed professional to oversee your policies. In that case go find a great agent, but make sure they are doing their job.
If your agent doesn’t call you proactively to let you know about changes in your rates or coverages, it’s time to start looking. If your current agent is a “bum” you can switch agents within the same company or shop your insurance to other agent based carriers. I usually recommend getting a referral from a friend or trusted online source.
Either way don’t let your agent get lazy and think he can just collect your money without working for it. Managing insurance can be a lot to handle so there is value in having an expert on your side, but always be skeptical and do your homework. Ask questions, read documents and don’t say yes until you research what they are offering.
If you follow these tips and use the information on this site I’m sure you will be kicking insurance butt in no time.
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