This site is best viewed using Mozilla Firefox browser.

Insurance

2003-07-01 13:54:00

Controlling auto insurance costs

:  I have two automobiles.  My wife and I each drive and we also have a 17 year old licensed son in high school.  My cars get older and less valuable every year, but my car insurance still seems to go up each year.  Why is this and what other measures can I take to keep the costs lower?

Question:  I have two automobiles.  My wife and I each drive and we also have a 17 year old licensed son in high school.  My cars get older and less valuable every year, but my car insurance still seems to go up each year.  Why is this and what other measures can I take to keep the costs lower?Answer:   You not only have a very typical situation, but also a couple of very reasonable questions and concerns.  Let's first discuss the coverage sections of an auto insurance policy.  The Liability section protects you in the event you are at fault in an accident.  The policy will pay for Bodily Injury and Property Damage to the other injured driver or other property damage caused by you up to the limits provided by the policy.  The State of Kansas only requires limits of $25,000 for Bodily Injury and only $10,000 for Property Damage (it's a good idea to check your coverages to see if you have adequate protection).  The next section, which is somewhat related to the Liability section, is called the 'Uninsured and Underinsured Motorist section'.  This will provide benefits to you in the event the other driver is at fault in an accident and he/she does not have adequate coverage, or NO coverage.  The limits are generally the same as your Liability limits.Kansas also requires that every auto insurance policy provide at least the basic medical coverage under what's referred to as 'personal injury protection'.  This will provide limited benefits for you and certain passengers in your cars no matter who is at fault in an accident.In order to pay for damage to your own cars in the event of an accident or occurrence, it is best to include two other coverages on your policy.   The 'collision' benefit pays for the repair or value of your vehicle in the event of an accident if it is your fault or if the other driver is at fault, but has no insurance.  It will also pay in the event your car is lawfully parked and is involved in a hit and run situation causing damage to your vehicle.  The other important coverage to include is 'comprehensive' which is often referred to as 'other than collision'.  As you might have guessed, this pays for repairs or the value of the car in the event it is damaged by an occurrence other than collision.   This could be damage caused by hail, wind, flood, theft, glass breakage, vandalism or many other types of losses.  There are exclusions in all policies that eliminate payments for such things as normal wear & tear, mechanical breakdown, war, and a few others.         In regard to your questions concerning the car getting older and rates going up,  the only policy sections which are concerned with the age of the car is Collision and Comprehensive.  These coverages pay for physical damage to the car itself. Lets assume that  you bought a new car in 2001.  If the cost of repairing the car from any type of damage did not increase (in other words, if the labor, mechanic rates and the cost of replacement parts would not increase from year to year), the insurance rates for the Collision and Comprehensive should not increase.  Two things must be considered.  Although the value of the car decreases each year, the inflationary costs of labor and parts generally increase; therefore, the cost of repairing damage to your vehicle will probably increase even though the value of the car may decrease.  Most damaged cars result in being fixed or repaired instead of being 'totaled out'.  This is generally the case involving the Comprehensive coverage (hail, vandalism, wind, etc).  Oftentimes, a client calls about this rate increase expressing the same concerns only to discover that a change occurred resulting in an increase to the Liability section instead of the Collision or Comprehensive sections.  Adding an underage driver is generally the likely culprit for the rate increase.  When experiencing an increase, compare each rating section with the previous billing.The second part of your question asks 'what can be done to lower the rates'.  Most all companies base the rates on the following: age, marital status and driving history of each driver and which car they each drive; the area of the state where the car is mainly driven, annual mileage, and its usage; the age, new cost and damage susceptibility of the vehicle being insured; and most recently, a big factor in rating has been the person's credit bureau 'insurance credit score'.  The last rating factor (credit score) has been the most controversial to most insureds.  Due to a lot of history and claim documentation, it has been proven that those with low credit scores seem to have more claims than those with the higher scores.  Based on the above rating factors, the things to do to keep the rates down include:•  Maintain an excellent driving record for all household drivers, with no moving violations or chargeable accidents.  A chargeable accident is one involving any payment on your behalf by your insurance company.  It doesn't matter if you were ticketed or not.  Keep your insurance always in force as many are now driving on a suspended license due to no insurance.•  The seventeen-year old driver would pay the least if an older vehicle was driven by him/her that only required liability insurance.  Many companies give 10% discounts for Driver Ed and up to 25% discounts for Good Students through college(Grade B or better).  The expensive costs are most often for the Collision coverage for the new automobile.•  Late payments, credit card accounts (# of ), repossessions, and bankruptcy can cause havoc to the insurance credit score.  Try to maintain excellent credit for the best rates.•  Factors such as your age, where you live, children's ages, and marital status are fixed situations and its best to concentrate on driving habits and credit to lower the rates.•  Defensive driving courses are offered in many localities and often result in 10% reductions.•  Have a discussion with the 17 year-old and explain that in your zip code area, it's illegal to drive until after he/she has a job and high-school diploma.If the last cost saving item works for you, you could hold seminars on what you said and how you were able to convince your child.  While new legislation and changes in property and casualty insurance have created a lot of additional paperwork for agents, they will still be happy to discuss these rate-lowering methods if you will contact them.