Category: Personal

Yet Another Reason to Improve Your Credit – Lower Insurance Rates

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Your credit rating can affect a lot more than you may think. Almost all insurance companies factor in credit ratings to set rates for new and existing auto insurance customers. Yet, blemished credit doesn’t necessarily translate into higher insurance premium rates. Instead, it is the overall insurance risk score that can cause a rise in your rates. 

Insurance risk scores are similar to those used by lenders to determine whether or not to approve a loan or line of credit because both look at your credit information.  But credit risk models are formulated to predict the likelihood of loan default. Insurance risk models, by contrast, are built to predict the likely loss ratio of any particular individual. In other words, whether you will result in more or fewer losses than average to the insurer. The higher your insurance risk score, the less likely you are to file a claim.

Following is the information many insurance companies use to formulate a risk score and how each is weighted:

  • ·         Past payment history (approximately 35%)

A past payment history is determined by:  how you’ve paid your credit bills in the past; if your bills have been paid on time; items in collection status; the number of adverse public records (bankruptcy, wage attachments, liens); and the number and length of delinquencies or items in collection.  

  • ·         Credit owed (approximately 30%)

Credit owed is how many accounts, what kind of accounts, and how close you are to your credit limits. 

  • ·         Length of time credit has been established (approximately 15%)

Length of time credit established is how long you have had your credit accounts and how long you have had other specific accounts. 

  • ·         New credit (approximately 10%)

New credit is the number and proportion of recently opened accounts versus already established accounts; the number of credit inquiries; and the reestablishment of credit history after payment problems. 

  • ·         Types of credit established (approximately 10%)

Types of credit established are the various types of credit accounts including credit cards, retail store accounts, installment loans and mortgages. 

In summary, insurers rely on factors that show long-term stability. So, by demonstrating responsible use of credit and keeping your balances low, you should be able to improve you insurance risk score. A lower insurance risk score could translate into lower insurance premiums if you’ve been impacted by a negative credit history in the past.

Traffic Deaths Decline to Lowest Levels Since 1961

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The number of Americans killed on U.S. highways in 2008 reached the lowest level since 1961, according to a recent release from the Department of Transportation. Higher gas prices, which caused many to limit their driving activity, certainly helped the cause along with increased seat belt usage in many states.

The Department of Transportation’s National Highway Traffic Safety Administration estimated that 37,313 people were killed in vehicle traffic crashes during 2008. That’s 9.1 percent lower than in 2007, when 41,059 died, and the fewest since 1961, when 36,285 deaths were reported.

Another positive, the nation’s fatality rate, the number of deaths per 100 million miles driven, reached a record low at 1.28 in 2008 down from 1.36 in 2007.

It’s not uncommon for tough economic times to cause similar declines in traffic deaths. From 1973 to 1974, such deaths fell more than 16 percent as the U.S. dealt with the oil crisis and rampant inflation. Similarly, deaths dropped nearly 11 percent from 1981 to 1982 as the nation battled a recession.

The government reported that miles driven in 2008 fell by about 3.6 percent, to 2.92 trillion miles, proving that many adjusted their driving habits as gas prices rose and the economy tumbled. The number of miles driven by motorists had risen steadily over the past three decades.

Nationwide seat belt usage reached a record 83 percent in 2008. Fourteen states and the Washington, D.C. had usage rates of 90 percent or better. Michigan was the highest at 97.2 percent, followed by Hawaii with 97 percent and Washington state at 96.5 percent. Massachusetts had the lowest rate, 66.8 percent, while New Hampshire and Wyoming were also both under 70 percent.

Add a Teen Driver to Your Policy Without Breaking the Bank

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For many families, adding a teen driver to their car insurance policy can prove to be painfully expensive. After all, insurance companies generally consider teens as high-risk drivers. Fortunately, there are a few ways to keep teen insurance costs to a minimum.

Here are a few things to keep in mind as you get ready to add your teen to the family insurance policy:

Make the grade

Typically, the higher grades a teen earns in school, the less their car insurance coverage will cost. Most insurers offer anywhere between 10 and 25% discounts for teens who maintain a B average or higher. Not only will this save you money, but it will also be a great incentive for your teen to keep up her grades. Consider telling your teen if their average drops below a B, she’ll have to take a break from driving until she can make the grade.

Increase your deductible

Most people cringe at the thought of a high deductible insurance policy. However, a higher deductible often means lower premiums-and that can save you loads of money when you’re adding a teen driver to your policy.

Your insurance premiums will probably increase significantly when you add your teen driver, so you’ll want to do everything possible to bring that premium down. You can achieve a lower premium by raising your deductible. However, if you choose a higher deductible, it’s important to stress that all the drivers in your family must be extremely careful on the road. If someone gets into an accident, you’ll have to pay more out of pocket before your insurance kicks in-and to top it off, your insurance rates will go up. Be sure to communicate this clearly to your teen driver.

Keep a clean record

According to the Insurance Institute for Highway Safety (IIHS), 16-year-olds have the highest rate of car crashes than drivers of any age. Sadly, many of these accidents prove to be fatal.

Many teens start off driving safely, but after a few months, become overly confident and start driving recklessly to show off for their friends. It’s critical to make sure that your teen is and remains a safe driver-not just for the sake of your insurance rates, but also for their safety.

If your teen has an accident or even gets a speeding ticket, your insurance rates will jump significantly. You may want to give your teen extra motivation to be safe behind the wheel. Explain to them that driving is a privilege, and if they receive a traffic violation you’ll have to take away that privilege.

Consider an older car

Many parents are tempted to buy their teen a new car that includes all the latest safety bells and whistles. However, it’s important to remember that new cars often mean higher insurance premiums. Consider buying an older used car for your teen or giving him or her the oldest car on your insurance policy.

Keep your policy up-to-date

Be sure to review your insurance policy at least once a year and ensure that all the information is accurate and up-to-date. Once your teen graduates from high school or celebrates his 18th birthday, your insurance rates may drop. Also, if your teen heads off to college without a car, you may be able to take them off your policy for the time being. (However, before you remove your teen from your policy, confirm that your teen will not be driving at all. It could cost you big if he were to have an accident without insurance.)

In the World of Cars, Is Bigger Always Safer?

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When it comes to cars, is it true that bigger is always better…and safer? Based on an April 2009 study by the Insurance Institute for Highway Safety (IIHS), the answer to this longstanding question is a resounding yes. The study shows that larger, heavy-duty vehicles are fundamentally safer than smaller, lightweight cars.

Considering recent announcements, this revelation is more important than ever. This May, President Obama unveiled his massive fuel efficiency plan. Under the new standards, auto makers will be ordered to increase the fuel economy of vehicles sold in the U.S. to 35.5 miles per gallon by 2016. This means manufacturers will have to produce smaller, more lightweight, fuel-efficient vehicles.

While supporters of the plan say it will help cut our nation’s greenhouse-gas emissions, opponents argue that the mandate will result in thousands more Americans dying or becoming seriously injured in auto accidents. Critics say that the number of auto fatalities could swell if hordes of “unsafe” subcompacts hit the road in coming years.

The physics behind car crashes

Why are bigger cars intrinsically safer? It all comes down to physics. According to the IIHS report, “These tests are about the physics of car crashes, which dictate that very small cars generally can’t protect people in crashes as well as bigger, heavier models.”

Based on the law of physics, when a large object crashes into a smaller object, the larger object creates a greater impact. This rule holds true for car crashes, as confirmed by the IIHS study.

For this study, the IIHS conducted three front-to-front crash tests, each involving a microcar or minicar colliding with a midsize model from the same manufacturer. The Institute did not use SUVs, pickup trucks or even large cars to pair with the micros and minis in the tests. “The choice of midsize cars reveals how much influence some extra size and weight can have on crash outcomes,” the report explains.

Instead, the Institute chose pairs of 2009 models from Daimler, Honda and Toyota because these auto makers have micro and mini models that have earned good frontal crash ratings in barrier tests.

According to the final IIIHS report, “In a collision involving two vehicles that differ in size and weight, the people in the smaller, lighter vehicle will be at a disadvantage. The bigger, heavier vehicle will push the smaller, lighter one backward during the impact. This means there will be less force on the occupants of the heavier vehicle and more on the people in the lighter vehicle. Greater force means greater risk, so the likelihood of injury goes up in the smaller, lighter vehicle.”

Real-world car crash statistics confirm this theory. In 2007, the death rate in 1 to 3-year-old minicars involved in multiple-vehicle crashes was nearly twice as high as the rate in large cars.

Good engineering makes a difference

Despite the recent IIHS study, some experts point out that vehicle safety doesn’t come down to car size alone. They say that quality engineering and design are more important to vehicle safety than the actual car size. Added safety features, such as front and side airbags, seatbelts with pre-tensioners and force-limiters, rollover prevention mechanisms, head restraints and crash avoidance systems can also greatly improve a vehicle’s safety.

Experts also say the size of a vehicle’s front end can determine how the car fares in crash. If a lighter vehicle is engineered with a large front end, creating a bigger space between the front of the vehicle and the front seat, the car would be much safer. That’s because a car with a large “crush space” decreases the severity of an impact and reduces the force to the car’s occupants.

Plus, auto makers can also reduce a vehicle’s weight without losing too much structural integrity by using aluminum, titanium or plastic. Unfortunately, most manufacturers steer clear of these materials because they carry a high price tag.

Protect Your Identity (and Your Finances) with Identity Theft Insurance

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Identity theft is the fastest growing crime in the U.S, according to the Federal Citizen Information Center (FCIC). In 2006 the Federal Trade Commission (FTC) reported that approximately 8.3 million Americans were victims of identity theft, and that number is growing. Recent reports indicate that as many as 10 million people in the United States fall victim to this crime every year. Identity theft costs businesses $50 million in fraudulent charges each year, and innocent consumers pay a grand total of $5 million just to repair their good names.

According to the U.S. Department of Justice, identity theft refers to “all types of crime in which someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain.”

Fortunately, there are ways to protect yourself from this prevalent crime. First and foremost, consumers can take multiple precautions to protect their identities. On top of that, most major insurance carriers now offer Identity Theft insurance protection through standard homeowner’s and renter’s insurance policies.

Identity Theft Insurance 101

If you become an identity theft victim, Identity Theft insurance covers many of the costs associated with restoring your identity and repairing the damage to your personal financial information. This type of insurance generally reimburses victims for:

  • Lost wages
  • Phone bills
  • Mailing and notary costs
  • Attorney fees

An increasing number of insurance carriers are adding identity theft coverage to their standard homeowner’s insurance policies. Some other insurers offer it as optional coverage or as a stand-alone policy. These policies generally cost between $25 and $50 a month for up to $25,000 worth of coverage.

Is it worth it?

Victims of identity theft aren’t merely inconvenienced-they generally lose a significant amount of money, as well. According to Javelin Strategy and Research, victims of identity fraud in 2007 lost an average of $6,000 each. The average identity theft victim spends over $800 on administrative expenses alone, including phone bills, and postage and notary expenses, according to the Identity Theft Resource Center, an independent non-profit organization.

Of course, that $800 price tag does not include lost wages from missed days of work, the number of hours victims spend trying to resolve the issue or the emotional price victims often pay. Statistics show that the average victim spends more than 170 hours trying to repair the damage caused by identity theft.

According to a 2004 identity theft study conducted by The Identity Theft Resource Center (ITRC), identity theft victims reported a number of unexpected secondary effects, including difficulties in obtaining credit, clearing accounts, obtaining or holding a job and adverse effects on insurance or credit rates. And oftentimes, the harms of identity theft can reach far beyond a person’s finances. The ITRC discovered that in 2004 more than 40% of identity theft victims reported stressed family life and 9% of the victims said their relationship was “on the rocks” or ended altogether as a result of the identity theft.

Considering these alarming statistics, Identity Theft insurance is absolutely worth the cost for most, if not all, consumers. In the long run, this insurance coverage could save you untold amounts of time, money, stress and heartache.

Be proactive

You can take a number of proactive steps to shield your personal information. Here are a few of the precautions the US Federal Trade Commission recommends consumers take to protect themselves from identity theft:

  • Shred documents and paperwork that contain personal information before you discard them.
  • Never click on links in unsolicited emails; instead, type in a web address that you know.
  • Use firewalls, anti-spyware and anti-virus software to protect your home computer.
  • Keep your personal information in a secure place at home.
  • Request your credit report each year and check the reports for inaccuracies.
  • Always look for discrepancies in your financial bills and statements and question them immediately.
  • Collect your mail as soon as possible and drop outgoing mail containing financial information at the Post Office.
  • When shopping online, make sure the company is reputable, displays an approved security symbol and uses an encrypted page to take payment details. The encrypted page should not generate warnings about being signed by an unknown authority.
  • Stop pre-approved credit card mail offers by calling 888-5-OPT-OUT (888-567-8688).
  • Don’t carry your Social Security card in your wallet or write your Social Security number on a check.
  • Freeze your credit so that no one can open any form of credit in your name.

If you suspect that you have been a victim of identity theft, do the following immediately:

  • File a police report to document the theft.
  • Contact one of the three major credit bureaus and ask them to place a fraud alert on your Social Security number. (The three credit bureaus are Equifax: 800-525-6285; Experian: 888-397-3742 and Trans Union: 800-680-7289)
  • If your wallet was stolen, call your credit card companies and cancel all your missing cards.
  • Check your credit report to see if any fraudulent accounts have been opened.
  • If your wallet contained any checks or ATM cards, notify your bank right away.

File a fraud complaint with the Federal Trade Commission at www.consumer.gov/idtheft.

Hands-Free Phones Not As Safe As You May Think

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It seems like everywhere you turn these days, you see drivers chatting away seemingly to no one at all. Of course, by now we usually assume they’re talking to someone on their hands-free cell phone headset or their built-in OnStar phone.

Although many drivers believe they’re safer using these hands-free options, recent research proves otherwise. A new study shows that drivers are no safer talking on a hands-free phone than if they were using a hand-held one. 

Look mom, no hands!

The new study, conducted by Yoko Ishigami, Dalhousie University and Raymond Klein, appeared in the National Safety Council’s (NSC) Journal of Safety Research this summer. The study shows that any type of cell phone use distracts the driver from focusing on the road. The human brain simply can’t focus on the conversation and safe driving at the same time.

The researchers discovered that hands-free phones are just as dangerous for drivers as hand-held phones. According to the study’s findings, talking on any type of cell phone impairs a driver’s reaction times and causes them to reduce their vehicle speeds. This leads to more driving errors and car accidents.

Based on the study, there’s at least one difference between drivers using hands-free phones and those using hand-held ones. While drivers talking on any type of cell phone tend to slow down, those using hand-held phones typically slow down more.

Don’t talk and drive

This new study is not the only research that shows hands-free phones are no safer for drivers. Several other studies have made the same claim.

However, until now, many lawmakers obviously believed hands-free phones were safer. As a matter of fact, five U.S. states and Washington D.C. have passed laws requiring drivers to use hands-free phones instead of hand-held ones. But these new studies claim that it’s the conversation-not the act of holding a cell phone-that causes drivers to lose focus.

It’s clear that cell phones cause serious problems and lead to countless car accidents on our nation’s roads and highways. According to some estimates, more than 636,000 car crashes, 330,000 injuries, 12,000 serious injuries and 2,600 deaths are caused by distracted drivers talking on a cell phone in the U.S. each year.

In January 2009, the NSC called for a complete ban on cell phones for drivers. Other national organizations and lobbyists may follow suit.

In the meantime, drivers may want to take caution. Although no laws have officially been passed, you may want to refrain from taking calls or at least limit your cell phone use when you’re behind the wheel. While avoiding cell phone calls when you’re driving may be an inconvenience, it could end up saving your life in the long run.

Steer Clear of Expensive Car Insurance Mistakes

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As the economy continues on its downward spiral, consumers across the nation are tightening their belts and trying to save money wherever they can. Unfortunately, many people don’t realize that they’re losing untold amounts of money by overpaying on car insurance.

If you’re looking to save on auto insurance, steer clear of these common car insurance blunders:

Blunder #1: Not shopping around for the best car insurance quote.

If you go with the first car insurance company that comes your way, you could be losing hundreds of dollars each year. It’s worth your while to shop around and try to find the best deal out there. When it comes time to renew your insurance, it may be easy to stick with the same insurer you’ve had for years-but you won’t save any money that way. Car insurance companies will calculate your rates differently, so you may be able to find a much better deal from someone else.

Blunder #2: Choosing your state’s minimum coverage requirements

Although you may be tempted to choose the bare minimum coverage amounts required in your state, this could cost you in the long run. Just because you are in compliance with state laws doesn’t mean that you’re fully protected. If you’re underinsured, a major car accident could wreak havoc on your personal finances. Everyone’s situation and budget is different, so talk to your financial advisor to discuss how much coverage you need.

Blunder #3: Opting for the lowest car insurance deductible

In the car insurance world, the deductible is the amount of money you’ll have to pay out of pocket on car repairs before your insurance company starts covering costs. Many consumers make the mistake of assuming the lowest deductible will save them money. However, this is not always the case.

Generally, if you go with a lower deductible, you’ll have to pay a higher premium. In the long run, you may be able to save more money by choosing a high deductible insurance plan with a lower premium. Do your homework to figure out what makes the most sense for your unique situation.

Blunder #4: Choosing car insurance based only on cost

While you should definitely shop around for a great price on car insurance, this isn’t the only factor you should consider. As you compare car insurance, look at the various benefits each insurer has to offer. Choose the coverage that best suits your needs and then compare prices.

Blunder #5: Missing out on major discounts

If you’re a safe driver or if you insure your car and home with the same company, you may be eligible for a discount. Take some extra time to look into what discounts are available from various insurers. You could save hundreds of dollars this year.

Will Your Insurance Cover That Water Spot on Your Ceiling?

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Most people who buy homeowner’s insurance tend to think about protecting themselves from financial loss should the house burn down. A much more common cause of damage to homes, though, is water. Leaky roofs, broken pipes, and blocked drains can produce a mess that is expensive and difficult to clean up and repair. However, insurance coverage for these losses is not always certain.

The standard homeowner’s policy may cover rain damage, depending on how rain enters the home. If a storm damages the roof or a window and allows rainwater to enter, the policy should cover the cost of repairing the damage. However, if the roof has no apparent damage but instead has suffered normal wear and tear, the policy will not cover the loss.

The policy will normally cover damage caused by water leaking from pipes, with some restrictions. If a pipe breaks and floods a few rooms, the policy will cover the cost of repairs to the rooms but not the cost of replacing the pipe. However, the policy will not cover the damage caused by a burst frozen pipe unless the homeowner has used reasonable care to either maintain heat in the building or shut off the water supply and drain the pipes and appliances of water. People who leave for warmer climates during the winter must make sure these steps are taken.

One lesson that many people learn the hard way is that homeowner’s policies do not cover damages caused by flooding. The standard policy does not pay for damage caused by floods; water on the surface of the ground; waves; tides; overflows of bodies of water; or water spray whether the wind drives it or not. It also will not pay for damage caused by water or floating debris that backs up into the home through sewers or drains or which overflows or discharges from a sump or sump pump. Finally, it will not cover damage to structures such as driveways, sidewalks or foundations from water pressure under the ground. A flood insurance policy from the National Flood Insurance Program may cover some of these types of losses. Also, many insurance companies may offer a small amount of coverage for damage resulting from sewer, drain or sump backup for an additional premium.

When a water loss occurs, it is very important to stop the water flow and begin the drying process as soon as possible. Broken windows and holes in roofs should be boarded up and water shut off to broken pipes. If the water is allowed to accumulate, mold and mildew may grow in the area. The longer the affected area remains wet, the longer and more expensive the repairs will be.

A good restoration contractor can help contain the damage and speed up the repairs. He can perform emergency work, such as removing carpets, installing fans and dehumidifiers, and vacuuming up the water. He will also protect furniture by setting it on blocks so that the legs are above the water. Because the wet carpet pad may produce a foul odor, the contractor will remove and dispose of it and replace it with a new one. This may save the carpet, thus holding down the total repair cost.

Homeowners who suffer water-related losses should work closely with their insurance agents and companies. Cooperation with the company may result in a fairer settlement; the agent can be the homeowner’s advocate with the company. Most importantly, the homeowner should act quickly to limit the damage and protect undamaged property. More than anything else, this will reduce the cost and inconvenience of the loss.

Replacement Cost Value or Actual Cash Value – Which Option Suits Your Needs?

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Homeowner’s insurance policyholders usually have the option to insure to actual cash value (ACV) or replacement cost value (RCV).  To make the best decision, the individual first needs to gain a clear understanding of the difference between the two policy options.

In a nutshell, the difference between RCV and ACV is wear and tear; otherwise known as depreciation.  ACV considers that the lost property has most likely depreciated over time, and endeavors to insert depreciation into the equation.  For instance, suppose the ruined property was a sofa that would cost $700 to replace.  Even though the sofa was in good shape for a 10-year-old piece of furniture, it was definitely not brand new.  In ten years time, some wear and tear inevitably occurred.  With ACV, the insurance company may determine that $30 of depreciation occurred each year since the sofa was purchased. In this case, the sofa would only be valued at $400 at the time of the loss.  The company would pay you $400 minus any applicable deductible. In a sense, you would be paying an increased deductible in the form of the $300 of depreciation.  To summarize ACV, the insured would pay the difference between the replacement cost, the amount the old sofa depreciated by, and any deductible. In essence, the policyholder is “co-insuring” that amount. 

On the other hand, RCV is simply the cost of replacing the lost property with either an identical or similar piece of property.  Using our sofa example, if it costs $700 to replace the sofa, the insurance company will pay you the $700 minus any applicable deductible.  Even though the ruined sofa was showing its age, and could never be sold for $700, RCV allows the policyholder to recoup the value of a brand new replacement sofa.

Which option is best?  This question cuts to the core of what insurance is all about – making the insured whole again. In some cases, ACV falls short.  Conversely, RCV can create an overly beneficial situation for the insured. Not including sentimental value, if the sofa is old and dilapidated, but the insurance covers RCV, it is obvious that the policyholder will benefit greatly by receiving enough funds to purchase a brand new sofa to replace the old one.

An old house that has been severely damaged by a fire may provide a more dramatic example of RCV.  At the time of the fire, the house may have only been worth $200,000, because the components of the house (such as roof, flooring, HVAC etc.) were approaching the end of their life span.  In this case, the house would increase in value as the old worn-out components were replaced with brand new ones.   So the homeowner would be better off in terms of the value of their home, than if the fire had never occurred at all.

Some insurers stipulate that all repairs must be completed, in order to obtain the full replacement cost of the property.  They may decide to pay the ACV up front, and have the rest of the payment (the difference between RCV and ACV) contingent upon all repair work being completed.  This keeps the insured from pocketing the money and gaining financially from the loss. 

There is at least one caveat regarding the benefits of RCV, however. Since the real estate market can fluctuate quite a bit, sometimes replacement cost value turns out to be less than ACV.  When the housing market is strong, and home prices are high, the actual cash value can be higher than the cost of replacing a home with one that has similar features and qualities.  Therefore, the additional cost of purchasing RCV may be a bad decision.  As always, consult with an agent to see which option is right for you.

The Magic Number: Understanding Car Insurance Rates

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You just bought a new car, and now you’re searching for affordable auto insurance. Once you supply an insurance company with some information, including the make and model of your car, your age, your address, etc., they give you a quote for your monthly premium. But how exactly do they calculate that number?

Read on to learn how insurance companies determine your rate and how you can save money by shopping around.

Different companies, different rates

Many drivers mistakenly believe that insurance rates are set by the state. While auto insurance companies must follow certain laws when calculating rates, the rates themselves are not set by law.

When you ask for a quote, the insurance company considers many different factors as they figure out your rate. However, because each insurance company uses their own unique calculation method, you may receive widely varying rates from different insurance providers.

Crunching the numbers

Depending on the laws in your state, insurance companies typically determine your rate based on some or all of the following factors:

  • The year, make, model, body type, engine size and safety features of your car
  • Your age and gender
  • Your marital status
  • Your personal credit history
  • Your driving record
  • Your usage of the car (such as if you are using the car for work, pleasure or as a collectible.)
  • Home ownership status and occupation
  • How many drivers will be using the car and their ages
  • How many vehicles you own
  • What kind of coverage limits you want
  • Where you live
  • Your weekly, monthly or annual mileage

Generally, your insurance agent will enter all of this information into a computerized system. The system automatically places you into a price group based on your personal information. The insurance company then subtracts any discounts for which you qualify from your group’s rate and you’re left with the resulting quote.

Where your money goes

If you think the quote is fair and decide to purchase a policy with the auto insurance company, you’ll start paying a monthly insurance premium. But what exactly does your monthly premium cover? Here’s a typical insurance premium breakdown:

  • About 70 percent of your premium pays for losses and loss expenses
  • About 26 percent of your premium goes toward marketing, commissions and administrative costs
  • About 4 percent of your premium contributes to the insurance company’s profits

You better shop around

Each insurance company has differing sets of claim payments and expenses, and they set rates for each “price group” accordingly. That’s why you’ll likely receive varying quotes from each insurance company. This is why it’s so important to take the time to shop around and find the best rate.

Plus, while insurance companies are prohibited by law to calculate rates based on race and religion, they are allowed to consider your age, gender and marital status. However, each company places emphasis on different factors. For example, while one insurance company may place more weight on a driver’s gender, another company may think their driving record is more important.

This is yet another reason to request plenty of quotes before you settle on an insurance company. In addition to the rate, you should also consider which company offers the type of coverage you desire. Do your homework and find the best fit for your unique auto insurance needs.