Insurance, death and taxes? We all know the old adage that you can’t avoid death and taxes, but should we consider adding insurance to that statement? In our modern world you cannot easily survive without having insurance for your home, car, health, and various investments such as racehorses, dancer’s legs, or space rocks. So in this article I will try and shed some light onto the basics of the infinitely confusing car insurance rate calculation formulas which are being used today.
Some of the major factors the insurance companies use to calculate your auto insurance costs are the area in which you live and drive, type of car you own, your age, gender, and driving history. Add to this one of the newer developments in the formula which the underwriters use when determining your rates, your credit score. When I was recently shopping for insurance, they explained to me that this can be an indication of higher risk if you have a lower credit score. Like we all need yet another reason to worry about our credit scores.
One of the more important factors affecting car insurance rates seems to be where you live.
This plays a major role since high crime areas tend to have more damage and theft claims on car insurance policies. So even if you are an excellent and safe driver, you will most likely pay for the sins of your neighbors when it comes time to insuring your ride.
Age and gender are viewed as line items in your car insurance rate factors, and these are looked at in a similar way as your location. The age and gender “Group” you fall into can cause your rates to be much higher even if you have never had an accident or a speeding ticket. Younger men have been proven to be more reckless taking more chances, and as a result that group pays higher premiums than a similar aged group of women. If you moved these same people from an urban setting out into the country, their rates could drop by almost half depending on where you are.
Your type of car can be a major component in raising your rates. First if you drive a car model which tends to be a type that is stolen often, you will pay higher premiums. If it is a very expensive car, you may pay higher damage premiums, plus higher deductibles. Lastly, if it is a sporty car, you will probably pay more than your uncle who drives an older pickup truck. I was told that the color has no impact on your rates, so the fact that your brand new Dodge Challenger is red has nothing to do with the higher rate you are paying.
When I was younger the formula seemed to be much easier to figure out, and I was pleased to find that when I changed from a sporty car to something my dad would drive, I saved money on insurance rate. This was also true when I got married, the car insurance rates dropped significantly. At the time I thought that probably the agent felt sorry for me and cut me some slack to offset the cost I would soon face from being a newly wed person. How little did I know.
So how can we all get better car insurance rates? This is not a very easy task, but there are a few things you might consider. The first thing you can do to save money on car insurance rates is to shop around often, and don’t be afraid to make a major change once in a while. Look really hard at the options offered, as you may not need as much collision on an older car that would probably end up getting scrapped if something major happens to it. For example why pay an extra $50 per month for years on a car that is only worth $500 – $700 to completely replace? Look at your deductible, a higher dollar amount here can net you a lower monthly premium. In my experience, married people between the ages of 35 – 55 who live in rural areas seem to receive the lowest car insurance rates. You can save a lot on overall insurance if you can get your home and car policy from the same vendor.
You could drive an older non sporty model, making sure it is not one which is stolen for parts very often. Certain models are stolen for their body parts, mostly on models which have not changed over a long period of time, or where the parts can be shared between many different models. Some pick up trucks are cherished for their entire front end, where a wrecked truck can be repaired using these stolen parts. There is also a huge market out there for some of the major components like the engines transmissions, and drive gear, especially the 4 wheel drive axles.
Used axles can sell for $1500 – $ 3500 due to the extremely high cost of purchasing a new one. I have seen new axles quoted for $5500 – $7500. The major used parts market for these axles is for custom built off road vehicles, and most times the buyer has no idea the axles come from stolen vehicles since there is no simple tracking method for this kind of car part.
There are some key things to definitely avoid with regard to car insurance. It seems obvious that your rates will stay lower if you can avoid having accidents, don’t get any traffic violations, knowing that this also includes parking tickets, and this also means wearing your seatbelts. Don’t make any claims of any kind with any insurance company. Your information may be shared, and if you have any claims, they will know about them and it factors into your premiums. Based on my personal experience with DUI it can cost you quite a lot more to have car insurance for a very long time. If you happen to be unfortunate enough to get a DUI and during that event you caused an accident, then when you make an accident claim, your insurance carrier may deny your claim, and may also drop you completely because you have become a bigger risk than they are willing to manage.
We all know by now that any kind of “insurance” we pay for is sort of like a legalized gambling program. In this program the insurer and you are making a bet that you will not have any need to ask for any of the money back which you are giving to them each month. In exchange they are giving us the peace of mind which we all need in order to live successfully. The good part is that we can be covered by insurance for the insane amounts of money which we could never pay out in our lifetime in the event we are involved in some sort of catastrophic incident. For example, let’s say you bump into someone else’s car with yours, and they claim their neck hurts, the doctor bills alone would put you in the poor house before you could talk your buddy into driving you down to retrieve your car from the impound lot. In essence we are all sharing our money into a giant pool which is used to cover the costs of managing our risk. Out of this pool some of the money is used to cover accidents and various claims. It also goes into supporting the overhead it takes to manage our pooled money. The company is betting we will not need to use the funds. We just want to be free of the debilitating debt which could arise from having someone sue us for damages we may have caused.
In summary, we all have to be insured, and it is our own responsibility to find the best insurance coverage for the lowest rates. So shop around, and ask your agent a lot of questions.
Also review your policy and rates at least every 6 -12 months. Things on your history could be changing for the better and you might benefit from that by receiving a lowered premium. You will never know if there is a way to save some money unless you ask.… more