What you don’t know about auto insurance can cost you a lot of money. There are many facts about auto insurance that insurers will not tell you even though some of these facts can lower your premium.
Here are a few things that you probably didn’t know about auto insurance that your insurance company will not tell you. Knowledge of these interesting tidbits can help you save a lot of money when you go shopping for a policy.
A Few Things That Your Car Insurance Company Doesn’t Want You to Know
Here are a few things you probably didn’t know about car insurance but should:
- Auto insurance rates are often based upon pure guess work. Even though the insurance industry likes to brag about its risk analysis, insurers simply lack the detailed data needed to set car insurance rates. That means rates are based upon insurance professionals’ opinions and guesswork rather than on math or hard data. New technologies might be able to change that by giving insurers a detailed picture of actual driving habits.
- Auto insurance rates are often based on factors that have little or nothing to do with your driving record. Such factors as students’ grades, your credit score, home ownership, your job, and even marital status are routinely used to set car insurance rates. The reason for this is that insurers don’t have a good method of determining individual driving records. They have to use other factors that often make little or no sense.
- The insurance company will pick the mechanic and the auto body shop that will do the repair work after an accident. Many insurance companies have direct repair programs in which you have to use the professionals hired by the company. This can lower costs, but it can also be inconvenient and lead to lower quality work. Many people don’t find this out until they need work done.
- “Bundling” policies will not save you any money. Insurers are constantly trying to get you to bundle; that is, buy your auto, homeowners, and other policies from the same company by claiming it will save you money. This is simply not true; the savings from bundling are usually less than what you could get by shopping around. Keeping policies separate makes it easier to switch to cheaper alternatives.
- The biggest factor in determining your auto insurance premium is your address. Simply living in certain states can double or triple your rates. Louisiana residents pay $2,700 a year, or more than $1,200 more than the national average for car insurance for example. If you live in certain cities or rural areas, you might also pay a much higher premium. There is often little or nothing you can do about such high rates because they’re based on factors such as state law.
- You might have less car insurance than you think you’re paying for. Many cheaper policies only provide the minimum amount of coverage mandated by state law. Contrary to popular belief, this isn’t always enough to meet your needs. If the minimum amount of coverage is $50,000 and you get sued for $100,000 after an accident, you could end up paying the extra $50,000 from your own pocket. There are also states where some basic types of insurance, including uninsured motorist coverage, are not mandated by law.
- Your policy might not cover all of your vehicles. Many motorists have unstacked uninsured motorists coverage, which only covers the vehicle listed in the policy. If you have more than one car, you need to get stacked uninsured motorists coverage, which covers all of your vehicles. Some insurance companies and agents will only sell stacked car insurance if you ask for it. They make a standard practice of selling unstacked policies.
The bottom line here is that you must read your insurance policy and see what it actually covers. You should also be willing to shop around and find a policy that actually meets your needs.
When you’re dealing with auto insurance, what you don’t know can cost you a fortune. Unfortunately, insurance companies and agents are not always willing to tell you these things, because your ignorance can make them more money.