Five Things You Might Not Know about Car Insurance | Auto and Carz Blog

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Five Things You Might Not Know about Car Insurance | Auto and Carz Blog

Five Things You Might Not Know about Car Insurance

Your Inside Track to Hidden Car Insurance Facts

Understanding the basics of car insurance can be difficult enough, let alone understanding the lesser-known intricacies involved with the guidelines, policies and procedures of today's insurance providers. Below, we've outlined some important, yet oftentimes obscure, insurance facts, so you're "in-the-know" when you're on-the-go.

1. Your credit impacts your insurance rates 

Believe it or not, your credit may impact your insurance rates. Insurance providers have found that certain credit characteristics for an individual are useful to predict of how likely it is that the individual will have an insurance claim. These characteristics are not the same ones that a bank uses to measure lending risk, but rather, insurers may use credit-based insurance scores in conjunction with other variables to assess the likelihood of claims submitted. These variables may include age, driving record, claims history, place of residence, the type of car and the average miles driven, among others. As a general best practice, do what you can to improve your credit, be sure to monitor your credit report on a regular basis, and contact the credit bureau to clear up any errors.

2. Brand loyalty can cost you 

If your mindset about automobile insurance is "set it and forget it," you might want to reconsider. Years ago, insurance companies evaluated a short list of factors when calculating your premiums. Today, that list has grown to a confusing labyrinth of criteria causing insurance rates to differ dramatically from provider to provider.

Instead of allowing your policy to automatically renew, comparison shop once a year to ensure you're getting the best auto insurance rates. Some companies provide policies direct to consumers, while others sell policies through agents or brokers. An easy place to start is by getting auto insurance quotes online, which could save you money. If you're worried that lower rates mean less coverage or poor service, don't be. Today, there are plenty of insurance companies that offer affordable premiums, well-rounded coverage and excellent customer service.

3. Stopping payment? You'll pay in the long run 

If you think switching car insurance companies is as easy as stopping payment, think again. Sure, your policy will cancel, but your existing insurance company could report you to the credit bureaus for non-payment, damaging your credit score in the process. What's more, your insurance history will reflect a cancellation which may cause a new provider to decline your application or charge you higher premiums in the future. Instead, be sure to complete the necessary paperwork with your existing provider, such as a policy cancellation form, and time it right by starting your new policy on the date your old policy ends.

4. Your car insurance company can cancel or non-renew at any time 

Your insurance company can cancel your policy at any time if you violate one or more of its guidelines during your policy period. Same goes for non-renewal. Things such as failing to pay your premium on time, losing your driver's license due to suspension or revocation, submitting too many at-fault claims, or misrepresenting your driving history or past insurance claims could all be reasons for cancellation or non-renewal.

In either case, your carrier must notify you in writing within a timeframe legally required by your state. When it comes to cancellation, your insurance company is required by law to state the reason, not so with non-renewal. If you want a reason but aren't provided with one, you must send your insurer a written request. If you believe you've been unfairly treated, you may have legal recourse through your state's department of insurance.

And don't forget about your "binding period," the time when your insurance company is especially conscious of your risk level. The binding period usually occurs within 60 days following your auto insurance application. If your insurer finds a discrepancy on your application, on your driving record or with your credit, it can cancel your policy.

5. You could save money by paying your car insurance premium in full 

You might be surprised to learn most car insurance companies charge an administrative fee to break up your premium payments into installments, such as paying every six months, every three months or every month. The more you divvy up your payments in installments, the more these "convenience fees" add up, and your once-cheap car insurance can now cost substantially more. There may also be charges for the method of installment payment you choose, such as automatic bill pay or pay-by-phone.

Be sure to ask your provider what its administrative fees are. If it makes financial sense and you can swing it, pay your premium up front and in full. Not only will you avoid the added expense, you won't have to worry about missing a payment, or being late on payments, both of which could be grounds for cancellation. Other factors, such as the type of car you drive, can cost or save you money on car insurance as well. Our article on the most and least expensive cars to insure goes over this topic in greater depth.


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