Drivers Prefer Self-Insurance Over Traditional Auto Insurance

Drivers are increasingly ditching their auto insurance companies in favour of more affordable options. This is because insurance agents are paid on commission, so they are incentivised to sell policies at the highest possible rate. By comparing rates and discounts from an unbiased source, drivers can often find cheaper insurance with the same level of coverage. In addition, drivers who have not received a ticket or been in an accident in the past year may be eligible for a large discount. Another way drivers are saving money is by reporting their vehicles as stolen, then claiming on the insurance policy.

Drivers can save money by comparing insurance quotes and switching providers

Drivers can end up paying too much for their auto insurance, and comparing insurance quotes and switching providers can be an effective way to save money.

Firstly, it's important to know that you're not locked into your current policy. You can cancel at any time and be refunded your balance. However, it's crucial to have a new policy in place before cancelling your old one to avoid a lapse in coverage, which could lead to a damaged driving record or legal consequences.

There are several reasons why switching auto insurance providers can be beneficial:

• Lower rates: You may find a different company that offers more competitive rates, especially if your circumstances have changed (e.g., improved credit score, moved to a new area, added a new driver). It's recommended to compare quotes at least once a year to ensure you're getting a good deal.
• Better service and coverage: Some companies may offer stronger service standards, improved claims processes, and more comprehensive coverage for similar or lower rates.
• Potential discounts: You may be eligible for additional savings opportunities, such as discounts for multiple policies, safe driving, or paying in full.
• New driver or vehicle: If you've recently gotten your first driver's license or purchased a new vehicle, shopping around for quotes can help you find more affordable rates.
• Lifestyle changes: If your driving habits have changed (e.g., working from home, retiring), you may be able to find a company that offers lower rates that align with your new lifestyle.

When comparing insurance quotes, it's essential to consider not just the price but also the coverage options, customer service, and any available discounts. Take the time to find a company that offers the right mix of cheap rates, useful coverage options, and dependable customer service. Getting quotes from multiple companies will help ensure you get a good deal. Additionally, be sure to review any cancellation fees and refund policies before making the switch.

Insurance agents are incentivised to sell policies at the highest rate

While insurance agents are not responsible for setting insurance rates, they do have a vested interest in the policies they sell. Agents are incentivised to sell policies by earning commissions, which are a percentage of the premium paid by the policyholder. The commission structure varies depending on the type of insurance, the company, the agent's experience, and the specific policies sold.

For instance, captive insurance agents, who work exclusively for a single insurance company, typically earn lower commissions of about 5% to 10% for auto policies in the first year, while independent agents, who represent multiple companies, can earn up to 15%. Life insurance agents can earn significantly higher upfront commissions, sometimes up to 120% of the first year's premium, but these rates drop off in subsequent years. Health insurance agents' commissions vary depending on their providers, with an average of 5% to 10% of the policy's total premiums.

Supplemental and contingent commissions may also be offered by insurers as incentives for agents to meet certain business targets. Additionally, some insurance companies implement profit-sharing programs, rewarding their partner agencies with a percentage of premiums as a bonus when revenue targets are met.

The incentive structure for insurance agents can lead to higher premiums for policyholders. Agents may be motivated to sell policies with higher premiums to increase their commission earnings. This practice can result in policyholders paying more than necessary for their insurance coverage.

It is important to note that insurance agents have a responsibility to act in the best interest of their clients and provide them with suitable coverage options. However, the commission-based incentive structure may influence the policies agents offer, potentially prioritizing higher commissions over the most affordable rates for their clients.

Drivers can be overcharged if they drive under 50 miles per day

Drivers who cover less than 50 miles per day are often overcharged for their auto insurance. This is because insurance agents are paid on commission, so they are incentivized to sell policies at the highest possible rate. While there is no specific policy or guideline for drivers who use their cars less than 50 miles per day, some companies do offer low-mileage insurance at a discount. This is based on the idea that the less you drive, the less likely you are to file a claim.

In 2015, the American Automobile Association (AAA) found that motorists drive an average of 29.2 miles per day, meaning that a large number of Americans could be eligible for low-mileage insurance. However, it is important to note that low-mileage insurance is not always straightforward, and the best insurance for low-mileage drivers can vary. Some companies may ask how many miles are driven annually or to and from work, as commuting to a larger metro area could increase the risk of an accident.

To take advantage of low-mileage insurance, drivers may need to install plug-in devices or download apps to monitor their driving. Some companies that offer these programs include American Family, Allstate, Esurance, Farmer's, GEICO, Liberty Mutual, Nationwide, Progressive, Root Insurance, and State Farm. These programs can provide significant discounts, such as up to 30% off with State Farm's Drive Safe & Save program, or up to 20% off with American Family's KnowYourDrive app.

It is always a good idea to compare rates and discounts from unbiased sources before purchasing insurance, as policies and rates can vary by state. By shopping around, drivers can avoid being overcharged and find the best coverage for their needs.

Drivers in certain zip codes are eligible for discounts

For example, in Detroit, there were $3,750 in incentives for a 2017 Chevrolet Impala LT, compared to $2,750 in Charlotte, North Carolina. A 2017 Buick Envision had $2,000 in incentives in Detroit, compared to $4,000 in Tampa, Florida.

In addition, insurance companies may offer discounts to drivers who live in certain zip codes. For instance, in Texas, drivers who live in qualified zip codes and drive less than 50 miles per day are eligible for a massive discount on their insurance. Similarly, drivers in certain zip codes with higher overall crime rates can benefit from lower insurance rates if more people use public transportation than own a vehicle, or if local drivers are less likely to file insurance claims.

Therefore, it is important to compare rates and discounts from unbiased sources to ensure you are getting the best rate for your specific location.

Drivers with no tickets or accidents in the past year can get large discounts

In general, drivers with good records can save anywhere from 10% to 30% on car insurance premiums. Some companies even offer up to a 40% discount on your premium. The exact definition of a "clean record" varies by company, but it typically refers to a record that is free of any accidents, speeding tickets, or other violations within a set time period, usually three to five years.

In California, for example, drivers who meet the state's definition of a good driver are legally entitled to a 20% discount. To qualify, drivers must have continuously held a license for a minimum of three years, have one or fewer points on their driving record, not have attended traffic school more than once, have no at-fault accidents resulting in death or injury, and have no DUI-related convictions for the past 10 years.

It's important to note that insurance companies take different approaches to rewarding safe drivers. Some may offer accident-free or violation-free discounts, while others combine these into a single safe-driving discount. Some companies may also lower your rates if you've avoided accidents for a specified period without offering a specific discount. Additionally, taking a defensive driving course can often earn you a discount, and some companies reward low-mileage drivers who stay off the road.

By shopping around and comparing quotes, you can find the best discounts and ensure you're not being overcharged.

Frequently asked questions