Saving on Car Insurance

Home Home and Auto Automobiles Insurance Saving on Car Insurance

These days someone else may be taking a peek at your credit history, and the results could cost you money.

Like banks, retailers and mortgage companies, auto insurers now regularly review credit status when measuring up new customers. In fact, underwriters study a lot more than demographics and driving records to adjust rates, and savvy drivers should wise up to the latest. By becoming knowledgeable about industry trends and practices, consumers can reduce their premiums, and improve the quality of their coverage. The key is to stay informed, and understand what determines your policy premium.

Credit Scoring

Your signature on the insurance application allows companies to access your credit information. It's a common practice in the underwriting process to "credit score" - to assess a customer's risk by considering his/her credit status - and the effect on premiums is substantial. The idea is that a person's credit report reveals a lot more than bill paying, and that poor credit may indicate the presence of other 'problems'. Insurance companies are wary that these 'problems' could translate into potential claims, and they pass along these fears in the form of higher premiums.

If you're shopping for coverage, ask the agent if the company uses a credit scoring system. If it does and your credit's good, make sure that the quoted rate reflects this. Conversely, if your credit's spotty, seek out those companies that don't rate by credit status, or consider staying with your current insurer until your record or credit changes. Both can improve with a little time.

CLUE Reports

Insurance companies have their own information clearinghouse on drivers and vehicles. CLUE Reports (Comprehensive Loss Underwriting Exchange) provide prior claim information that's gleaned from a database of driver license numbers, VIN numbers, and even households. These reports show when and where a car or driver was involved in an accident that resulted in a claim to an insurance company.

But CLUE Reports don't indicate blame, only that a claim and a resulting payout was made, so insurers just see a red flag against a driver or car. This information can work against the applicant, even if he/she wasn't responsible for the accident.

This is when good documentation can clarify and correct the record with the company. Police reports, copies of claim checks or any other statements that verify your blamelessness can address the CLUE Report incident. If you can prove that the accident wasn't your fault, then the claim won't be held against you, and won't result in a raised premium.

If you were at fault, tell the agent. The incident may cost you, but the increase varies. States usually set an 'accident threshold' - the total cost per claim at which an insurance company can raise the rates of the insured. States mandate the figure that, once reached in a claim, can result in a point against the insured, and these points bump premiums. If applied, the rate will jump for no less than three years, by 10-40%. Still, you should disclose prior accidents when asked. Your driving record will then verify, and not challenge the information you've provided.

Driving Record

Every consumer should know the content of his/her official driving record, and these are available from state DMV websites. For a small fee, drivers can often obtain their record for the previous three years. This is generally as far back as insurance companies will delve, yet they may also check periodically for new violations or suspensions. Any black marks could result in higher premiums, and perhaps even non-renewal. Check your records for correct information.

Vehicle Information

Obviously, the type of car you drive will factor into your insurance costs. Owning a high performance vehicle, for example, will result in high premiums, despite a clean driving record.

Yet surprisingly, moderate and low profile automobiles can warrant higher premiums too, due to the anticipated repair costs if involved in an accident. Make and model dictate the charges to fix a wrecked vehicle, and not all cars take damage the same. American-made cars are generally cheaper to fix than foreign, since replacement costs are usually less. And smaller cars can sustain more damage than larger ones. Hence a Hyundai, for example, may cost a lot less to purchase than a Buick, but coverage may be more, based on the anticipated higher cost of repair.

Know the value of your car. Insurance companies do, and it affects your premium pricing. Several websites offer vehicle market information, and they're updated regularly. Later models, say ten years or more, may not warrant collision coverage since annual premiums for this option may not be worth the benefit of coverage. Review your policy regularly, and examine the value of having coverage on an older car.

Agent Relations

Stay in contact with your agent and seek his/her advice. A very simple but often overlooked savings strategy combines home and auto coverage with the same company. Most insurers love to offer their customers a companion policy discount, and by doing this you avoid duplication of coverage and charges.

Ask your agent about any other discounts or benefits that you've accrued as a long-established customer with a good driving record. Some companies feature a reward program that forgives a first accident, typically after five years of uneventful driving. This accident forgiveness is a 'gimme' that many companies offer, and it may already be incorporated into your current policy. Don't overlook this benefit when considering changing insurance companies.

Finally, keep apprised of how the industry changes, and how it reviews customers and coverage. Read your policy and know consumer and industry trends. A little effort and attention can result in premium savings and better coverage.

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