by Chop Shop Customs
Buying
car insurance can be a painful learning experience. Finding the best
rate is just the beginning of your education. Your first challenge is
to understand how the automobile insurance industry works. This
business is remarkably tight-lipped about its inner workings.
As
with all-things-financial, your credit score counts. If you have good
credit, you pay less for car insurance. This is because the insurance
industry has found a direct correlation between credit scores and the
likelihood you will file a claim. This insight is informed by the
financial stability of those who maintain good credit. The car
insurance gurus use your credit information to calculate your
“insurance risk score,” an important factor in the rate you will be
quoted.
Your choice of vehicle definitely affects your premium. The auto
insurers have a rating system for every car make and model based on its
initial cost factored with safety and theft data. The insurance
industry keeps these ratings to themselves, but there are sources for
the information. Try an Internet search.
You’ll
also pay less for your insurance if you can pay in full. Installment
plans always come at a cost. The smaller your payments and the more
numerous your billing periods, the more you will be paying. After all,
the “installment plan” is a loan and usually involves extra costs.
It
stands to reason that bad drivers always pay more for insurance. The
industry standard calls for increasing your premium by 40% over the
base rate after your first at-fault accident. If your base rate is
$500, you’ll be paying $200 more after that accident. In most states,
your insurance will go up if and when you receive a moving violation by
Officer Friendly. Safe drivers with no claim history or “points” from
traffic tickets pay the least for their car insurance.
Believe it or not, your friends can saddle you with
higher insurance payments. If you lend your car to another and that
person crashes, you will be the one filing the claim with your
insurance company. You will be responsible for the deductible amount,
and your rate will almost certainly go up due to your claim. Even
worse, if your friend is uninsured and causes damage that exceeds your
policy limits, you will be liable. The injured party can and, usually
with the help of an aggressive lawyer, will come after you. Best
policy? Don’t lend your car to anyone.
Let’s say you are in an accident and your car is considered “totaled.”
You may well expect to receive a settlement from your insurance agency
sufficient to replace your car. Don’t count on it. The auto insurance
industry does not go by the standard Kelley Blue Book list of car
values. They compile their own information based on regional
information that they believe is the lowest replacement cost. They
figure in a depreciation factor, too, based on mileage and an
assessment of your car’s condition prior to the accident.
Should you find your insurance company’s valuation of your “totaled”
car to be low, you can try to negotiate with the insurer. This is where
your record keeping comes in. Let’s say you follow the maintenance
schedule for your car to the letter and get oil changes frequently.
Make copies of your receipts and present them to your insurance agent.
If you customized your car with extra equipment and insured the car to
reflect your investment, include proof of the upgrades. You can also
obtain quotes to replace your car. If they differ from your replacement
offer, submit them as further proof of a higher value.
One other tip: you may not owe sales tax on your replacement car!
Twenty-eight states require auto insurers to pay for the sales tax when
your replace a totaled vehicle with a new car: (AK, AZ, AR, CA, CT, FL,
GA, HI, IL, IN, KS, KY, MD, MN, MO, NE, NV, NJ, NY, ND, OH, OK, OR, SD,
VT, DC, WV, and WI).
Finally, when you switch insurers, don’t forget to cancel your current
coverage. Even when you are at the end of your coverage period, you
must notify the company, usually in writing. Should you just ignore the
bill as your way of telling the insurance company you no longer want
their service, they will send you another bill, noting the premium
payment is due. When you don’t pay it, the company will indeed cancel
your insurance, but for nonpayment, and that goes on your credit
record. Remember what we said about having good credit?
