Questions to Ask Before An Auto Insurance Purchase

Information about auto insurance companies and coverage options are available from multiple sources for examples the state’s department of insurance, magazines, and independent reviewers’ websites. Insurers operate within the scope of state’s regulations, so everyone will get more or less the same suggestions. There are laws that govern how insurance companies conduct their businesses. There is a clear boundary between legal and illegal practices, but customers still need to do their due diligence to not only avoid frauds but also purchase the right insurance policy that contains the right coverage from the right company.

Insurers have their own methods to determine price and coverage. Apart from company’s policy, customers’ personal data and previous DMV records, behaviors on the road are also essential. Two people who have the same car model and make can get different quotes because they have different records and preferences as well. Here are some questions policyholders must ask themselves before they decide to purchase coverage from any provider.

1. How Much Do They Drive?

More mileage per policy period means more expensive premium. A person who drives a car every day of the week to commute spends more time on the road, hence higher risk of accidents. Distance between home and workplace also helps determine auto insurance premium. Therefore, someone who drives short distance should pay less for auto insurance coverage. Some companies provide discounts for low mileage, too.

2. Do They Use Their Cars for Commercial Purposes?

There are two types of auto insurance policy: personal and commercial. Personal auto insurance is for those who drive for personal purposes for examples to their workplaces or leisure travels. All types of coverage in the policy protect the safety of the drivers and cars. Commercial auto insurance provides more complete protections such as for cargo or passengers (who are not from the same household). Financial protection for cargo means more expensive premium, but this is necessary from business point of view.

3. Do They Have Any Emotional Attachment with Their Cars?

People who love their cars very much need the best protections available from providers. In addition to minimum coverage requirement by the state, optional coverage is necessary to protect cars from wide range of potential dangers. Collision, Comprehensive, and Road Assistance are not mandatory, but they must purchase such coverage for better protections. Additional coverage increases premium rate.

4. Does Anybody Else Drive the Car?

Other drivers (for examples spouse, children, or anybody who lives in the same household) must put their names in the policy. Additional drivers mean more expensive premium, but it can be cheaper when the other driver is a teenager. Insurance companies tend to think of young drivers as high-risk, so it is best to list their names as secondary drivers to minimize cost.

5. What Type of Cars Do They Drive?

Cars with minimum safety features cost more to insure. Sports cars or luxurious models are expensive to repair, and this is why auto insurance providers charge higher premium.

6. Do They Own or Lease the Cars?

Full ownership of the car grants the right to choose any combination of insurance coverage available from provider. When the car is still under lease or finance agreement, the financial service that leases the vehicle often requires driver to include specific type of coverage as part of the deal. In this case, total cost for insurance is almost always more expensive than the amount full owners have to pay.

7. Where Do They Park?

Policyholders’ address is also an important thing to consider. People who park their cars in urban areas where crime rate is high tend to pay higher for auto insurance. There is higher risk of theft and vandalism in the area, so additional protection is necessary. Car owners who live in suburbs often pay less.

8. Do They Have Any Traffic Violation History?

Traffic law violations in the past affect the current premium rate. Records of DUI, involvement in major accidents, improper turn, and failure to produce driver license or insurance card affect premium. When an insurance company thinks that a driver is too risky to insure, the driver needs non-standard auto insurance. The term “non-standard” refers to coverage for high-risk drivers.

Car Insurance for Low-Mileage Users

What you need to know about Car Insurance for Low Mileage

  • Insurance Companies may require your annual odometer reading verification
  • Insurance by the mile bills you monthly insurance payments based on your used mileage
  • It is possible also to receive car insurance discounts without asking from insurance companies that bundle up insurance policies with a specific insurer.
  • The discounts are awarded to loyal customers or accident-free and low mileage drivers over a period.
  • Drivers on an average 5,000 miles annual range may alert an insurance company so as to receive a low-mileage discount.

Do you own a car that barely leaves the garage on most days? Most insurance companies offer a conventional low-mileage discount to drivers who maintain annual mileage under a particular brink, such as 6,000 miles a year. In most states, the discount reduces the insurance rates on a full coverage policy by 2 percent. The premium savings are bigger in California.

Insurance Companies may require your annual odometer reading verification. Some may ask you fill a form to countercheck your estimate against readings taken from other sources. Others use agents to take a photo of the reading.

There are ways to get a low-mileage discount that will give you cheaper car insurance coverage.

1. Pay-as-you-Drive

Pay-as-you-drive vehicles such as In-Drive, install telematics gadgets to monitor your vehicle, offer larger discounts for less frequent drivers and careful drivers as well. Precautious drivers on low mileages can save up to 25 percent or more. Most of the pay-as-you-drive plans give a discount of 5-%10 upon enrolling, they later use gathered data to award a discount at your renewal period. Attach a telematics gadget into the car’s onboard port (OBDII) to get a discount. Nearly all cars from 1996 onwards have an inbuilt OBDII port.

2. Pay per Mile Car Insurance

Insurance by the mile bills you monthly insurance payments based on your used mileage. This mode of payments saves you an estimated 45% in savings for careful drivers doing less than 5,000 miles a year. The device tracks the distance traveled, which is used to set your mileage rates.

This way, you are guaranteed low mileage on types of car insurance under each plan; instead of cutting coverage to save money, it limits the risk faced by insurance companies when you hit the road.

Customers are charged a standard monthly rate based on individual rating factors: age, driving record, location, type of car, credit and insurance history in some states. Every month, the driver pays the flat rate plus a mile fee charged on the miles recorded through the mileage device.

How to Qualify for Low Mileage Car Insurance Discount

It is easy to be eligible for many auto insurance discounts, and many insurance companies offer these discounts, but you have to ask. A Princeton Survey study found that 16% of motorists have car insurance standard discounts.

It is possible also to receive automatic car insurance discounts from insurance companies that bundle up insurance coverage with a specific insurer. The discounts are awarded to loyal customers or accident-free and low mileage drivers over a given period.

However, you may request for discounts such as:

  • a short travel discount or no commute
  • Paying your coverage renewal check in advance
  • Having an academic degree/s
  • Police officers or teachers

Common Low Mileage Discounts

Many people are not aware of car insurance discounts such as Low-Mileage premium discount: This is for individuals who reduced their driving mileage by either working from home or park their vehicles because they no longer need to drive. A mileage research from Quadrant Services found that driving an average 6,000 miles annually, pays nearly of 7.5 % less than driving 16,000 miles annually. 16,000 miles is, in fact, more than regular Americans drive yearly, based on the U.S Department of Transportation.

Huge Mileage Savings in Selected States

The disparity on low mileage drivers is bigger in selected states, California tops the list.

The top five states where drivers save under 5,000 miles annually are:

  • California – 17 %
  • Washington D C – 11.1 %
  • Alaska 11%
  • Alabama- 10 %
  • Hawaii – 10 %

However, some states have little or no effect on insurance coverage rates on reduced mileage. The states where little driving distance hardly moves a dime include:

  • North Carolina -0
  • Utah -1 %
  • Texas -3 %
  • Connecticut – 3 %
  • Rhode Island-3%

Vice president of iii.org, Loretta Worters, says insurance companies hike premiums for high mileage drivers because they are a risk. High mileage drivers are more likely to cause accidents than the low mileage drivers. California, for example, has insurers charging higher premiums because the State has many drivers on the road.

The role of insurance state laws passed in 1988 limits the factors California motor insurers use when determining rates for the following:

  • Mileage driven
  • Safety driving record
  • Driving experience

Insurers can set minimum rates based on these three main factors. This law magnifies the impact of driving mileage.

Insurance expert/consultant – Douglas Heller says asking for higher premium rates from high mileage drivers is fair to charge insurance policy holders. He adds on that basing rates on mileage is far better than another criterion like an education level and income.

Does Ignoring Driving Mileage Pay?

At the extreme, experts do not understand precisely why North Carolina insurers and other selected states practically ignore miles when rating auto policies.

North Carolina insurance commissioner, Wayne Goodwin says a hike in mileage doesn’t amplify the level of risk on the road. He, however, says the state’s different pricing is a key factor to prevent insurers in the state from hiking premiums on mileage.

In some states, such as North Carolina, insurers independently apply for premium rates with the state’s insurance bureau -insurers file rates with the local State Rate Bureau. The State Bureau proposes one base rate for all its insurance companies in NC. Goodwin’s office reviews the requested rates and attaches a cap indicating the exact figure insurers should charge consumers.

The bureau chief says that Mileage driving is a price factor. However, it doesn’t have any significant effect. The local government has maintained low motor insurance rates in NC State, which is ranked one of the lowest insurance premium costs in America; according to figures from NAIC.

How to Reduce Motor Insurance Mileage Rates

For drivers on an average 6,000 miles annual range, they may alert an insurance company so as to acquire a mileage discount. But, several lower mileage drivers miss the available discounts due to nondisclosure. On the contrary, not everybody reduces their mileage so as to save on insurance costs.

Additional Ways to Decrease High-mileage Usage

  • Increase your deductible
  • Shop for price quotes in several insurance companies
  • Avoid highway speeding tickets and other road violations

Car drivers may attempt to forge miles on the speedometer to avoid higher insurance coverage rates. This is unethical, and a policyholder can lose out on the entire insurance and get black listed too. Lying to the insurer is an illegal act, its insurance fraud. The best way to earn a discount on mileage is to buy a car that has done average mileage and the driver should ensure that they maintain their speed levels at all times.

Gap Insurance – Back To Basics

Once you have insured your car, you are good to go. Right? The answer is no. You still need GAP insurance. What is GAP insurance? Let’s take an example. Suppose you have bought a car making a down payment. After a couple of months, you end up getting your car totaled or stolen. You will get payment from the insurance company based on the existing value of your car in the market. The actual price of the car won’t be considered. This type of insurance provides coverage in this type of scenario. Let’s know more.

Guaranteed Asset Protection (GAP)

The term GAP is short for guaranteed asset protection. This insurance policy includes your motorcycles as well as cars. It’s a good idea to apply for insurance should you consider a finance deal in order to buy a motorcycle or car. Once you have sold your car or have paid its price, you can get a refund. You may want to keep in mind that this policy is not an alternative to motor insurance. This is just a type of additional insurance that you can consider to protect your car.

The importance of GAP insurance

The price of vehicles doesn’t remain constant. So, the insurance company will figure out your payout keeping the current value of your vehicle in mind. Not everyone has to get insurance. GAP insurance won’t be a requirement if you got a loan to make payment for the car. You can do with the regular car insurance.

However, if you take out a loan for a car, we suggest that you give a go to GAP insurance. The reason is that if your car is totaled or damaged, the rest of payment won’t be on you. Aside from this, it will be the responsibility of the insurance provider to get you a replacement car in addition to alleviate the loan you got to buy the car.

Types of GAP insurance

Typically, your car dealership can help you with insurance. Apart from this, you can go to licensed brokers as well. According to many experts, getting insurance from reliable brokers is better than car dealerships. The reason is that car dealership will cost you more.

GAP insurance is of many types. Each provider has different policies and the prices of the policy are different based on the car and the dealer/broker.

It’s important to note that some insurance packages, such as finance insurance is there to help you get funds for buying a car. Besides, you can consider a lease insurance policy that helps you handle the fees and costs incurred as a result of damage to a leased car. Another type of insurance plan was created in order to fund your new car purchase. At times, your insurance provider adds to your insurance package.

Long story short, you may want to make sure that you know what a GAP insurance policy has to offer before you get it. You can ask the broker for more information.