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Unit 11: Motor Insurance

Buying a New Car Notes
Because a new car as an asset is worth more money than an older model, it will cost more
to replace. Additionally, if you finance or lease your new car purchase, most lenders
require you to carry full coverage at a stated level, which makes it impossible to skimp or
strategize only on the coverage you need. You can be wise about how your new ride will
impact insurance premiums before you buy. According to a recent study by Insure.com,
the cheapest new cars to insure tend to be larger, sturdy models such as minivans, SUVs
and trucks. Don’t assume that premium boosts come only with a flashy sports car or other
high-priced model. The study indicated that the Honda Civic, for example, commands
higher insurance rates simply because it tends to be driven by younger, childless owners
who are inherently deemed riskier than parents. Further, it’s one of the most stolen
vehicle models in the United States.
Increasing Your Commute
Long commutes to work don’t just cost you in time and fuel; they’ll also boost your auto
insurance premiums. Again, the risk is much greater that you’ll get into an accident when
you’re driving during rush hour. Further, if you are in a profession that involves frequent
driving, like a pizza delivery person or salesperson, you’ll pay for the increased time that
you spend in the car because more time spent driving increases the risk of an accident.
Though actual risk is determined by the zip code you live in, city residents statistically
have more accidents, which drive their premiums higher than those who live in rural
areas. Additionally, more people living in an area means more claims, which is reflected
in the higher premium prices in such places. If you’ve recently taken up residence in New
Mexico, Alabama, Oklahoma or Florida, expect to pay higher premiums. According to the
Insurance Research Council, these states have the greatest concentrations of uninsured
motorists, which ultimately seep into insured drivers’ premiums.
Marital Status and Age
If you’re unmarried and without children, you’re considered part of a higher-risk category
than married couples with kids. If you’re 26 or younger, and male, you’ll pay even more.
Dumping Your Auto Insurance
If you ditched your auto insurance in an effort to save some money, you’ve committed a
classic case of being “penny smart and pound-foolish.” Not having any auto insurance,
even for just over 30 days, will cause your premiums to jump.
Having a Brush with the Law
Having no accidents or tickets will lower your auto insurance premiums and, as you
might imagine, having either or both could raise them. When and if you’ll see the spike is
largely determined by your locale and your insurance provider. Insurance companies use
a “merit plan” system. Most insurance companies periodically scan for recent traffic
violations, whether you are a new or existing customer. After you commit a traffic violation
and your insurer learns of it, your auto insurance rates could be higher for the next few
years.
The Bottom Line
Auto insurance rates are often based on factors out of your immediate control, including
age, occupation and accidents. Understanding what factors cause your auto insurance rates
to spike can help you to shop around for a more competitive provider before you receive
a surprise rate increase. It may also cause you to rethink some of your current driving
habits.
Source: http://www.investopedia.com/financial-edge/1012/6-things-that-spike-your-auto-insurance
.aspx

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