Here are ways to save money on car insurance that aren't commonly known.
If your friend borrows your car and crashes it, you'll have to file a
claim with your insurance company. You'll have to pay any deductible
that applies, and your rates could go up as a result of your claim,
especially if you have made other recent claims.
What you can do:
If the person who took your car didn't have permission to take the
vehicle, in most cases you won't be held liable for the damage. If your
friend is uninsured and causes damage that exceeds your policy limits,
the injured party can come after you for medical and property-damage
expenses. Best bet? Don't loan out your car.
Stolen or damaged items like compact discs aren't covered by your auto insurance.
What you can do:
You can file a claim on your home insurance (if the cost of the lost
items is more than your deductible). However, if you carry expensive
items such as computer equipment, you'll need a rider to your home
insurance policy for proper coverage above the normal limits. You'll
also be in better shape if you have photos or video of the items.
Most states require insurers to pay sales taxes on
total loss settlements, according to the Property Casualty Insurers
Association of America. Some states require the insurer to pay it at
the time of loss while other states require it to be paid only if you
purchase a replacement vehicle within a certain time period. In
addition, some states require it only for first-party claims (the claim
you make on your own policy) but not third-party claims (the claim you
make on someone else's policy). For more, see Recouping expenses after your car is totaled.
What you can do: Make your request for sales tax reimbursement no matter what state you live in. Even in states that do not require sales tax reimbursement, you should request it.
Be aware that the tax will be calculated based on
the pre-accident value of your old car, not the new car you buy. If the
insurance company values your old car at $10,000 and you purchase a new
car for $20,000, the tax reimbursement will be calculated on the
$10,000.
Diminished value is based on the idea that any car that has been in an
accident, regardless of how well the repairs are done, is worth less
than the exact same car that hasn't been in an accident.
But for first-party claims, meaning accidents where
you're making a claim on your own insurance policy, you are unlikely to
be entitled to diminished value reimbursement. That's because the
Insurance Services Office (ISO), which provides insurance forms and
data, authored policy language that insurers can now use in 45 states
and Washington, D.C., that officially takes them off the hook for
diminished value payments in physical-damage coverage claims.
The ISO's exclusion for diminished value has not
been approved in Georgia, Hawaii, Kansas or Maryland. Massachusetts has
not adopted ISO policy language, but a May 2002 "advisory opinion" from
the department of insurance states that diminished value is not covered
under collision policies in the state. (Hawaii and Massachusetts are
both under independent insurance bureaus.)
What you can do:
There's one way you may be entitled to a diminished value claim: If
someone else hits you and you make a damage claim on that person's
insurance. That's called a third-party claim and it's possible to get
diminished value damages as a third party because you don't have a
contract with that insurer. The ISO's diminished-value exclusion form
applies only to first-party physical-damage claims, not to third-party
liability claims.
Also, in tort claims, the measure of damage is
generally calculated as the difference in value before and after the
loss, sometimes making diminished value a viable claim. However, there
is still a wide variation among state case law in pinpointing when a
third-party claimant is entitled to diminished value. For more, read Diminished value payments when your car has been in a wreck.
Stacking uninsured/underinsured motorist coverages
means you can collect payment more than once within the same auto
policy or among two auto policies. There are two scenarios for
stacking: First, if you have multiple cars on your policy with UM/UIM
coverage on each, you can collect the limit of your UM/UIM coverage
under as many vehicles as necessary to cover full payment for damages.
Second, if you have more than one policy with UM/UIM coverage, even if
they're from two different insurers, you can make a claim under each
policy until all your damages are recovered.
What you can do: You'll
have to check the language of your policy to see if it's allowed. In
some states, such as Pennsylvania, you'll be able to choose stacked or
unstacked coverage when you buy your policy (stacked coverage will cost
more because you'll have the right to more coverage). For your state's
law, see Stacking your UM/UIM auto coverage.
When an insurance company decides to raise your
premiums because you make a claim, it doesn't follow any hard and fast
rules; many factors are involved. That's why you might find yourself
getting double- or triple-whammied by your individual circumstances.
For example, if you make a claim and have a birthday before renewal
time, your birthday might bump you into a higher risk category along
with the claim, shooting your rate through the roof.
Remember, too, that circumstances can work in your
favor at times. If you turn 40 and enter a lower-risk category, or if
you buy a car that's less expensive to insure, your savings might help
offset any increase due to an accident.
Many auto insurance companies follow the Insurance
Services Office's (ISO) standard of increasing a premium by 20 to 40
percent of the insurer's base rate (not your current rate) after your
first at-fault accident. A base rate is the average amount of claims
paid plus the insurance company's claims-processing fee. According to
the ISO, for multicar policies the surcharge is 20 percent of the base
rate, and for single-car policies it is 40 percent. For more, read How much can your rates go up after one accident?
What you can do:
Some insurance companies have "accident forgiveness" guidelines, but
the qualifying variables can be wide-ranging. You should ask when you
buy or renew your policy if there is accident forgiveness and how to
qualify.
"Usage-based"
car insurance allows you to buy coverage based on how much you actually
drive. If you're reducing your driving based on gas prices or other
factors, usage-based insurance could be a good match for your reduced
insurance needs. Progressive pioneered this type of insurance in 1998
when it began testing usage-based coverage in Texas.
Progressive plans to roll out its MyRate program
nationwide in 2008 and 2009, pending state approvals. Customers who opt
for MyRate coverage will plug a wireless device into a port in their
cars that will measure mileage.
After the device is installed, your premium goes up
or down at renewal time based on how much you've driven. Progressive
says the rate change could be anywhere from a 60 percent discount to a
9 percent surcharge. In some states, you might also pay a technology
expense for the cost of the device and data transmission.
Even if your car insurer doesn't offer usage-based
coverage, it may have "low-mileage discounts," so if you've reduced or
eliminated your commute to work you may garner a reduced premium.
Auto insurers believe that your credit score is an
indicator of whether you are going to make a claim, and price your
insurance policy accordingly. A July 2007 report from the FTC confirmed
a correlation between one's insurance score and the likelihood of
filing a future insurance claim. Read the FTC's report on "Credit-based Insurance Scores: Impacts on Consumers of Automobile Insurance."
Auto and home insurers also make ample use of
"insurance risk scores," which are similar to credit scores but weigh
credit factors differently. Not all states are keen on insurance
scoring as a factor in pricing car insurance policies. To see what your
state says, see State laws on insurer use of credit information.
What you can do: You can buy your own auto or home insurance score report through ChoiceTrust, which is operated by ChoicePoint, a provider of consumer insurance scores and other data to insurance companies.
Most auto insurance companies state in your policy
that you can cancel your coverage at any time by notifying the company
in writing of the date of termination. However, most consumers assume
that if they decide to terminate the policy at the end of the coverage
period, all they have to do is ignore the bill. The insurance companies
don't see it that way. They will send you another bill for the next
premium payment, and when you don't pay it, the company will cancel you
for nonpayment, which goes on your credit record.
What you can do:
Call your insurance agent or the company and let them know you are
canceling your policy. Be sure to give them a specific date, or you may
end up uninsured for a period of time. The company will then send you a
cancellation request. Most often, the form is already filled out and
all it requires is your signature. Make sure you read it to check for
errors.
You may also have to prove to your former insurance
company that you have new coverage, and if you've financed a car
through a dealership, the dealer will need to know your new policy
information, since purchase contracts often require proof of insurance
coverage.
In most cases, insurance companies don't require
you to add your teenager to your policy until the teen has his or her
driver's license. The exception may be if you are in a high-risk
insurance pool; you may then have to add your child when they receive
their permit.
What you can do:
If you forget to tell your insurance company that you have a licensed
teen and you have to file a claim for them after an accident, they will
still be covered, but your insurance company is entitled to then charge
you back premiums from the date your teen received a license.
You are not required to add your teenager to your policy just because he or she has reached driving age.
"Fractional premium" fees are usually charged when you divide your
annual premium payment into installments rather than pay for a year of
coverage all at once. Payments are usually offered on a six-month,
quarterly, or monthly basis, but almost every insurance company charges
an administrative fee for breaking up the payments. It can be as little
as a few dollars per payment, but the more you break it down, the more
it adds up.
What you can do:
Be sure to ask up front when you apply for the policy what the fees are
for paying in installments. If the fees are small enough, it may be
worth it. However, remember that insurance companies can cancel your
policy for late payment if you forget one of your installments. If you
can pay the premium annually, it will simplify the process and save you
a few dollars.
Auto insurers have a premium-rating system for
every car model, usually based on "Vehicle Series Ratings" (VSRs)
received from the Insurance Services Office (ISO). This rating
indicates how comparatively expensive your vehicle should be to insure.
The ISO describes the ratings this way: "VSR captures differences
caused by factors such as attractiveness to theft and susceptibility to
damage. It's unlikely that a $30,000 minivan would generate the same
amount of theft losses as a $30,000 sports car or that the vehicle
damage sustained in an accident would be the same for a $40,000 luxury
car with a fiberglass-based body as for a $40,000 sport utility
vehicle."
What you can do:
If you are buying a new car, contact your insurance company and ask
about the premium difference among the cars you are considering.
|
