3 Unlikely Things that Affect the Cost of Car Insurance

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently...

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business...

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UPDATED: Mar 13, 2020

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There are three unlikely things that affect the cost of car insurance and if you are in the process of shopping for a new policy, you may want to take heed of this information especially since most people will not remain with their current car insurance provider for more than three to five years.

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In the past, most consumers would select a car insurance company and stick with them for the life of their vehicle. If they purchased a new car, they would continue doing business with the same auto insurance company out of loyalty and longevity. However, with so many different agencies providing numerous features and benefits, people are beginning to look elsewhere for value or convenience.

In addition, there seems to be a complete saturation of the car insurance industry on television, the Internet, and radio. Advertisers are consistently wooing consumers by way of funny spokespeople or cute, little characters. While all of these tactics may tickle your funny bone, it is still essential that you know the facts before you select your next car insurance provider.

In fact, the Texas Department of Insurance (TDI) explains how the majority of the people in their state actually save a minimum average of approximately $100 every year simply by completing an hour of research before they make their final purchase. That is a huge amount of money, especially in light of the current economic state of affairs.

In addition to your research, it is also important that you dig deep and look beneath the surface.

In other words, your research should explain not only the common factors that affect the cost of car insurance, but also the most unlikely things that may cause you to pay more or less on your annual policy.

Consistently Loaning Out your Vehicle

If you are one of those people that consistently loan your car to friends or co-workers, you may find yourself in a sticky situation if they are involved any type of moving violation. While the driver will accrue points on their driver’s license, you will be affected because the police officer will need to document your registration and car insurance information.

This means you may see increased rates due to the incident. If your friend or co-worker is involved in a serious accident, you will more than likely need to file a claim so your car insurance company can authorize payment to begin repairing your vehicle. Once your car insurance provider logs the claim, you may face an increase or surcharge.

Additionally, if you are not with the driver and your vehicle is stolen, you will also suffer the negative impact. The National Highway Traffic Safety Administration (NHTS) shows the number of vehicles stolen over a 12-month period as well as the most popular vehicles that thieves look for.

If your vehicle tops the list, you may want to pass on loaning it out simply because you will not know the exact location while it is being used.

You may trust the driver to keep your car safe while, but if they park in a part of town where you would never frequent, your car may be placed at risk while they are away.

The best way to avoid these unnecessary charges is to stop loaning your vehicle. This may seem like a harsh step, especially if they really need transportation and are relying on you, but you cannot afford to suffer the consequences from an incident that you did not commit or where you were not present. Instead, offer to drive them to their location and wait for them to finish their business.

Choosing the Easy Installment Payment Plan

When your car insurance company provides you with your annual or semi-annual rate, they usually give you the option of paying in full, or over a period of time; they generally refer to this option as installments or a payment plan. Over time, this can cost you hundreds of dollars in service or administrative fees. They also call them surcharges or convenience fees.

While you are discussing the details with your car insurance company, make sure you know the exact amount you will be expected to pay, in addition to your monthly installment. Do the calculations and decide if it is more cost-effective to pay the entire bill upfront. If you are financially able, pay the premium in full after the first 30 days. If not, try to make a larger down payment than the minimum.

This will help keep your monthly costs lower and even if the surcharge for installments is $3 to $5, you will still save some money. It is always best to consider all of the alternative before you agree to the terms and sign your contract.

If you elect to make changes mid-way through your policy, you may be subjected to other fees, which may negate your ability to come out ahead.

Failing to Notify Your Current Insurance Provider of Your Cancelation

Many consumers are under the impression that they can switch to a new car insurance company and just begin making payments. They then stop making payments with their old insurance provider. This is a common mistake that can have dire consequences.

For example, your old car insurance provider may cancel your policy due to non-payment. This is because most require that you advise them of your decision to switch in writing. If you simply stop paying, they assume the worst and this can affect you in other ways. Your credit rating may take a dip if they report your cancelation as a non-payment default.

Your credit rating is not the only way you can be negatively affected; you also have an insurance history. If the car insurance company lists your cancellation as a default, your new provider may send you a notice increasing your premium, or worse, deny your application for failure to disclose this information.

You can protect yourself from these negative implications by contacting your current car insurance provider and verifying the terms of cancelation. It is always best to receive this information directly from a representative, as the terms of your policy may have changed over time.

Do not cancel your current policy until you have secured a new one. Once you fully understand all of the necessary steps, you can purchase your new policy, and then cancel your old policy in accordance with their requirements.

You Need to Know the Laws of Your State

In order to successfully receive the most comparable quote for car insurance, you need to know the laws of your state. You can find this information by going to the National Association of Insurance Commissioners, or the NAIC. This website has information for every state, including the minimum requirements for automobile coverage. If you reside in a state where only liability is required, have an older vehicle and an excellent driving record, you may not need any additional levels of coverage.

This is also true if you have a vehicle that is being financed by the bank or other lending institution. Most states require that you choose a higher level of coverage if you do not own your vehicle. This also includes leased cars. Sometimes, car insurance companies may offer you too much coverage, on the premise of keeping you protected. However, most of these options are very costly.

It may be better for you to determine what you need based on how you drive, when you drive and where you drive. Especially since these are the three ways most car insurance companies establish your rates. Even if your vehicle is leased or financed, you still may not need excessive coverage if you commute to work and only drive your vehicle during the weekends and live in a rural area.

Find Out the Average Cost of Car Insurance in Your State

Knowing the average cost of car insurance in your state is the perfect starting point when you are shopping around for comparable prices. Some states may vary as much as $300 to $400 per year and you need to know where your options lie.

3 unlikely things that affect the cost of the car insurance

By going to the Rocky Mountain Insurance Information Association, you can see a complete list of every state. Find your state and make sure to take note of the price. This can be your bartering tool when you start speaking to insurance representatives. Having prior knowledge of these average costs can save you a lot of time and money.

Look for Other Pitfalls

Other pitfalls include your deductible amount. If you increase your deductible from $500 to $1,000, your annual premium can drop substantially. Of course, this means you will have to pay more upfront if you are involved in a collision and require repairs. However, since the amount of the repairs may be costly, it may be better in the end.

You can also inquire about state-based programs with your local Motor Vehicle Commission, or MVC. Depending upon your state, you may qualify for programs, like defensive driving that can lower your car insurance premiums if you successfully pass the course.

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