Drivers across America are aware of the costs associated with owning a car. From routine maintenance to really cool rims, an automobile can be a money pit on wheels. One of the more expensive (and yet legally necessary) bills you have to pay each month is for your auto insurance.
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Although some people are well educated on the truths of insurance, many people are still unaware of the real bottom line. The following confessions are things that most car insurance agents WON’T tell you.
1. Color isn’t everything
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This car is expensive to insure. Because it’s red.
Most people believe red cars are more expensive to insure, due to their higher likelihood of being involved in traffic stops. The truth is, this belief is false for many reasons. Not only does the color of a car have no bearing on the price of insuring it, but the belief that red cars are more frequently stolen, are involved in more accidents, or are the recipients of more speeding tickets, is inaccurate, too.
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What is completely accurate is that sports cars are stolen, wrecked, and caught speeding more than the average sedan, as the person driving them may typically be far more reckless, and excited to show off their new ride. Since red happens to be a becoming color on most sports cars, this legend was born, and has since been perpetuated.
2. Age is more than just a number
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High risk for both insurance companies and the ladies in the neighborhood.
Not only are there price breaks at certain ages, but there are also price hikes at others. The truth is, insurance companies live by the numbers. These companies make a living gambling on risk, and for that reason, they have done extensive statistical analysis. The result? Dudes under 25 will pay the most for an individual insurance plan.
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While most people know this, few people know that once you become a senior citizen, the likelihood of an accident, and therefore the price of insurance, goes back up as well. Young males are encouraged to stay on their parents’ plan for as long as possible in order to save cash. Elderly drivers are encouraged to have their statistically safer children drive them instead.
3. Credit scores affect premiums
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There is no extra credit on this test.
A relatively new development in the insurance world is that many companies have begun checking credit as a way of determining an appropriate premium for their drivers. The thinking is relatively simple; if a company is banking on minimizing risk encounters, a customer who is $30,000 in debt can be viewed as irresponsible, and therefore, much more risky than someone who is on top of payments.
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What’s more is the fact that people in debt are less likely to pay their premiums on time, but may be just as likely to turn in claims as they happen. This all equates to the insurance company taking on a higher risk by insuring these people, and therefore, charging a higher premium to do so.
4. Love and marriage are great for your insurance
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The rings symbolize steering wheels.
Married people are boring. Married people with children are even more boring than newlyweds. For this reason, the more you have to live for, the less you have to pay to insure it. In general, young, single people are far more likely to go on a 4 AM bender at downtown clubs than parents of a newborn who consider themselves lucky to be sleeping at that time.
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And, when said parents get behind the wheel of their car, their newly acquired precious cargo makes them instantly drive safely, as they are now driving for two. The reality check and 18-year-sentence of having children may take years off your life, but those years are less likely to be eliminated in an auto accident.
5. Being late on a payment does NOT mean you are not covered
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Don’t be late. But if you are, it’s probably fine.
Perhaps one of the biggest misconceptions (much to the joy of insurance companies) is that being late on your insurance payment means you are uninsured. The reality is, you are just late. And kind of a jerk. Much like the electric company won’t turn off your lights the day after your bill is due, neither will an insurance company cease to insure you if you are late getting your premium in on time (unless it is after the cancellation notice period!).
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This is less about legal obligations and more about good business. At the end of the day, customers have many different auto insurance companies to choose from, and being quick to pull coverage may be a move that loses clients.
6. Uninsured motorist is NOT what you think
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This is NOT covered…
Terrifyingly, many people have no idea exactly what “uninsured motorist” covers in the event of an accident. Many people freely lend their car to friends, because they have an “uninsured motorist” clause in their policy. The reality, however, is that if their friend gets in any sort of accident, that clause does nothing.
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No matter who is driving your car, you are the only one who gets the bill. Uninsured motorist protects you in the event that the other drivers involved in an accident are uninsured, but does NOT protect you if your cousin Jethro wrecks your minivan on the way to the air and water show. On the other hand, Jethro could sue you for letting him drive your car.
7. One in the hand is worth two in the bush
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Semi-annual payments = more money for candy.
One of the easiest ways to save money on a premium involves taking a bigger bite out of savings, but doing so far less often. For those with extra liquid cash to spend, paying car insurance twice per year, or annually, can result in significant savings when compared to those who pay for it monthly.
The downside to this practice is that the driver is usually shelling out a sum between $500-$1,200 at a time, but the upside is that when compared to the same plan for the same driver, that ends up being a savings of anywhere from 5-10% annually.
Although few agents rush to share secrets, the fact remains that educated consumers save hundreds of dollars, simply by making a few modifications, and by being aware of a few basic principles. With knowledge like this, car insurance is infinitely less sucky.