Auto Insurance Secrets: What They Don't Want You To Know

Auto insurance companies are in the business of making money, and they do this by attracting new customers and keeping their existing ones. However, there are some things they don't want you to know, and understanding these can help you make better decisions when purchasing or claiming insurance. For instance, did you know that your location, credit history, gender, and marital status can affect your insurance rates? Or that insurance companies don't always operate on an honour system and may pull reports on your mileage, vehicle registration, and undisclosed drivers? In addition, insurance companies use various methods to determine the value of a totalled vehicle, and you may end up with a cheaper car than the one that was totalled. It's also important to note that filing a claim can increase your premium, and while some companies offer first-accident forgiveness, this isn't always the case. Finally, remember that your insurance agent works for the insurance company, and their interests may not always align with yours.

Your credit history matters

Insurance companies use your credit history to calculate an insurance or credit-based insurance score, which predicts the likelihood of you filing an insurance claim. A lower score indicates a higher risk, which translates to a higher premium. Conversely, a higher score means you're a lower-risk customer and will likely be offered a lower premium.

Several factors from your credit history are used to calculate your insurance score. These include the presence of accounts in good standing, no late payments, and a long credit history. Conversely, accounts in collections, late payments, a short credit history, and a high amount of debt can negatively impact your insurance score and, consequently, your premium.

According to research, drivers with poor credit pay significantly more for their auto insurance than those with excellent credit. For example, drivers with poor credit pay on average 91% more than those with excellent credit, while people with average credit pay 24% more. In some states, like New York, drivers with poor credit can pay up to $7,625 per year for full coverage car insurance.

Improving your credit history can take time, but it is worth the effort to ensure you get the lowest possible rate for your auto insurance. Paying all your revolving debt on time and making delinquent accounts current can help improve your credit standing. Additionally, maintaining old lines of credit and keeping your credit utilization ratio low can also positively impact your credit score and, in turn, your insurance premium.

You can be denied coverage for living in a high-risk area

Auto insurance is mandated nearly everywhere in the United States, but you might find it difficult to get a policy if you are a high-risk driver or live in a high-risk area. One factor that can contribute to you being considered a high-risk driver is having a poor driving record. This includes a history of collisions, traffic violations, or DUI/DWI convictions. If you are a high-risk driver, insurance companies may deny you coverage, as they believe you are more likely to file a claim.

Another factor that can affect your auto insurance coverage is your location. If you live in an area with high theft and vandalism rates, or an area prone to severe weather such as hurricanes, windstorms, tornadoes, or hail, you may be denied coverage. This is because there is an increased possibility of body damage, stolen car parts, or an entire stolen car, which can make insurers turn you away.

If you are denied coverage by one insurance company, it is recommended to get quotes from other companies or get a local agent to find a company that will cover you. Different insurance companies have different parameters, so it is worth shopping around. If you are denied coverage by several insurers, you may need to consider other options, such as joining a state-assigned risk pool or getting a policy from a private insurance company that specializes in "high-risk" drivers. These options may be more expensive, but they can provide you with the coverage you need.

It is important to note that car insurance companies can deny you coverage for any reason except those explicitly forbidden by law, and the exact laws vary by state. Therefore, it may be worth confirming that the reason your policy was denied was not in violation of the law.

Your age can affect your premium

Auto insurance companies take a multitude of factors into account when determining your premium. One of the most significant factors is your age, as it can significantly influence the cost of your insurance policy. Here's how your age can affect your auto insurance premium:

Younger Drivers

Younger and less experienced drivers, particularly teenagers, are often considered high-risk by auto insurance companies due to their inexperience behind the wheel and their greater tendency towards unsafe driving behaviours. As a result, insurance premiums for younger drivers tend to be higher. Insurance companies view younger drivers as more likely to be involved in accidents or commit traffic violations, making them a greater financial risk. This perception of higher risk is reflected in the cost of insurance for this age group.

Older Drivers

Older drivers may also experience higher insurance premiums, although the reasons differ from those for younger drivers. Ageing can bring about changes in physical and cognitive abilities, which can impact driving performance. Insurance companies may consider older drivers as potentially more prone to accidents due to factors such as slower reaction times or impaired vision. Additionally, older drivers may be more likely to have age-related health conditions that could affect their driving abilities. As a result, insurance providers may charge higher premiums to older individuals to mitigate the perceived increased risk.

Impact on Premium

The relationship between age and insurance premiums is complex and varies with different age groups. Generally, younger and older drivers tend to pay higher premiums compared to middle-aged individuals. For example, a 25-year-old may pay a significantly lower premium than a 40-year-old for the same level of coverage. This trend continues as individuals age, with premiums typically increasing by a larger margin for each year of age after 50. Actuarial tables, which estimate life expectancy and mortality rates, play a crucial role in determining insurance rates and premiums.

Location-Specific Considerations

It is important to note that age-based insurance decisions may be prohibited in certain states or countries. For instance, in Montana, insurance companies cannot make decisions based on gender. Therefore, it is advisable to familiarise yourself with the specific laws and regulations pertaining to insurance in your location. These regulations can have a significant impact on the availability and cost of auto insurance for different age groups.

You may not be covered for items inside your car

Auto insurance is a necessity if you want to drive your car on the road. It can, however, be tricky to know exactly what your insurance covers and what it doesn't. It's important to understand your policy so that you can avoid any nasty surprises if you ever need to make a claim.

One thing that many people don't realize is that auto insurance usually doesn't cover personal items that are damaged or stolen from your vehicle. So, if someone breaks into your car and steals your laptop, phone, or other valuables, your auto insurance won't reimburse you for these losses. This can be a shock to many people, especially if they've never had to make a claim before.

In this situation, you may be able to make a claim on your homeowner's, renter's, or condo insurance policy. These types of insurance policies often cover personal items that are stolen or damaged outside of your home, including from your vehicle. So, if you have any of these policies, be sure to review them and understand what they cover.

It's also worth noting that if your car's interior is damaged during a break-in, such as a smashed window or broken door lock, your auto insurance may cover these repairs if you have comprehensive coverage. Comprehensive coverage typically covers damage to your car that occurs outside of a collision, such as vandalism or theft.

To protect your personal items, it's a good idea to take some simple precautions. Try to avoid leaving valuables in your car, especially where they can be easily seen by potential thieves. If you must leave valuables in your car, hide them out of sight and consider investing in a car alarm or other security measures to deter thieves.

In summary, while your auto insurance may not cover personal items inside your car, there are steps you can take to protect yourself. Review your insurance policies, take precautions to secure your belongings, and be aware of what your insurance does and doesn't cover to avoid any unpleasant surprises.

You can be denied coverage for having no insurance history

Auto insurance is mandated nearly everywhere in the United States, but it can be difficult to get a policy if you are a high-risk driver. One reason you might be denied coverage is that you have no insurance history. If you haven't owned your car for very long, you are an unknown risk to the insurance company. They may be concerned that you have an unsafe driving style or that you are an irresponsible car owner. This lack of information about you and your driving habits can lead to a denial of coverage.

In addition to having no insurance history, there are other factors that can contribute to a denial of coverage. These include having a poor driving record, being a teenage driver, having a bad credit rating, living in an area with high theft and vandalism rates, and owning a high-performance car. Any one of these factors, or a combination of them, can make it difficult to obtain auto insurance.

If you are denied coverage by one insurance company, it is important to remember that each company considers these factors differently. So, you may be offered coverage by another company even if you were denied by the first one. It is worth getting quotes from other companies or working with a local agent to find a company that will cover you.

If you are repeatedly denied coverage by multiple insurers, there are still some options available to you. One option is to join a state-assigned risk pool, where auto insurers voluntarily participate and must accept the motorists assigned to them by the state. While the premiums are higher than those of a private company, they do provide coverage regardless of the driver's history. Another option is to get a policy from a private insurance company that specializes in "high-risk" drivers, offering "non-standard" policies for people with bad accident records, high-performance cars, or those who live in high-risk neighbourhoods. These policies tend to be more expensive and offer less choice, but they can provide a solution for those who are unable to obtain traditional coverage.

Frequently asked questions