It makes no difference what the activity, when you’re learning something, you make mistakes. On the football field, it makes no difference if you crash into other players. You’re all players together and no innocent members of the public are at risk. But if you apply the same approach to driving, there can be a lot of innocent victims. So insurance companies group all inexperienced drivers together. The younger the driver, the higher the premium. But, as time passes, and you build up a track record of safe driving, the rate comes down. There’s a general policy to review your safety record on a regular basis between 17 and 29. In general, all drivers under the age of 25 pay the highest rates but, assuming no accidents, the rates will slowly scale down. Single males are judged the most dangerous. The statistics show young female drivers are significantly safer.
The rates come down faster if you marry and have children. Now as the owners of vehicles likely to be carrying your family, you are assumed to have a safer approach to driving. Even if you don’t marry, you still earn a lower rate if you’re the owner of the vehicle. It’s assumed you’ll drive your own vehicle more carefully. This leads to a more general point. If parents insure their children, they pay the penalty if there are accidents or convictions. Premium rates are likely to triple or cover may be refused if underage children are caught driving while intoxicated. The same can apply if they are caught for underage drinking even while not driving. The parents are likely to face nonstandard rates or surcharges. Perhaps curiously, DWI/DUI convictions can also affect other home-based policies like those covering a jetboat or snowmobile. These higher rates will stay in place until the child leaves the home and will no longer be a driver of the family cars. This makes it better to encourage younger drivers to take out a policy in their own names. The sooner they learn the cause and effect of financial responsibility the better.
Remember that, in many states, there’s an open records law and many convictions by young people are not considered confidential. The states will disclose anything relevant to an insurance company on request. So whether the application for insurance is made by the parents or the children, the fact of convictions is likely already known. If you find it difficult to find coverage, many states also operate a program to support high-risk drivers. If you are being refused, apply to the local office of the Insurance Commissioner and you’ll be assigned to a local insurer. Because this is a “forced” insurance, the insurer will usually charge a top rate but some cover is better than no cover. If you manage to go several years without a claim, you should shop around. Get online auto insurance quotes from as many different insurers as possible. As soon as you start receiving quotes and the rates are falling to more reasonable levels, your rehabilitation is complete and you can apply for regular cover. As with all services where there’s competition, auto insurance for younger drivers is available at lower premium rates if you look around and talk to as many agents as possible.
The insurance industry is run by honest and trustworthy people who only want to help the community get through its troubles with the least trouble. So, when you make a claim, the first question is whether it’s economic to repair your vehicle. The maximum amount you can claim under the policy is the fair market value of your vehicle. This is the price a buyer would be prepared to pay for your vehicle in the open market. Who is this buyer? This is a person who is interested in buying a vehicle, but he or she is not desperate. So the assumption is this buyer is shopping around and can afford to wait while negotiating the best price on a number of possible purchases. This means you are always looking to value your vehicle “as is”. This is not a hypothetical value. If it’s poorly maintained and the paintwork could do with touching up, you will get a low valuation. Equally, a beautifully maintained example of the make and model will command a high price. Note, loading up the car with customized features is not going to help the resale value. There’s more to breakdown and go out of fashion. Only have the most popular extras fitted. There are a number of reference guides like the Kelley Blue Book that offer prices and advice.
You’ll be pleased to know the average vehicle loses 65% of its value over the first five years of ownership. This means it’s nearly always uneconomic to repair older vehicles. The cost of labor is high and spares can be equally expensive. So unless you were very careful in choosing the vehicle and have maintained it well, even apparently minor damage can mean you lose the vehicle for a smaller cash sum than you were expecting. If you have doubts, do some research based on the reference guides and then talk it through with the claims adjuster.
What happens to the vehicle when it’s totaled? Well, the insurance company has bought it and can do whatever it likes with it. In most cases, the car will be sold on to a scrap yard where it’s broken for spares. Most insurers label the Vehicle Identification Number in the National Motor Vehicle Information System. That way, if you are tempted to buy a used car, you can check the VIN and make sure it’s never been totaled. Why take the trouble?
There are new reports out of the southern states where there’s been significant flooding over the last year. It seems a lot of vehicles that were totaled because of flood damage have been reappearing on the roads. After all, the main damage is going to be to the electronics, brakes and the airbags. Simple cleaning of the interior can suggest everything is in apple-pie order. So never buy secondhand without first checking the NMVIS whether the VIN has been tagged. Otherwise there’s a real risk your beautiful vehicle will rot from the inside out while the online auto insurance quotes assume it’s in good condition. This is one of those times when the auto insurance industry actually does something useful. The NMVIS is a fee-for-service organization with the range being $2 to $7 per report. It doesn’t cost much to be safe.
There’s never really anything new in the world of marketing. The same ideas that sold three bottles of wine for the price of two in ancient Rome still work today. We all like to think we’re getting good value for money. The most usual approach is to offer volume for a discount. The more you buy, the less you pay. In the insurance world, we see bundles on offer. Pay less if you buy both an auto and home insurance policy. There will be further discounts if you insure multiple vehicles or several different “homes”, e.g. when your teens go off to college and need cover for their possessions. This is simple commercial sense. Unless your family is particularly unlucky, you are paying an increasingly large amount of premium income to the insurer which turns into more profit when you make no large claim. That earns a discount to reward you for your loyalty.
Well, here comes a new experiment from the motor industry. General Motors is flexing its muscles now it’s recovering from the Chapter 11 reorganization. During the last ten years, its reputation has taken a beating and sales of its brands has been declining year-on-year. The last financial year, 2010, was the first time it showed a profit since 2004. It has also shown a slight increase in sales volumes — the first increase after ten years of losing market share. To boost sales this year, it’s offering one year’s free insurance if you buy one of the eligible models. Before you all get too excited, this only applies to the good folk who live in Oregon and Washington, and the offer expires come September. But we can assume more of these offers will be made if sales in the models shows significant increase. So why is this potentially a good thing for you?
Not everyone manages to drive for years without getting into an accident. Once you have a claims record, rates tend to rise. The rates will also be high if you fall into a high-risk group, e.g. you are a teen or have the misfortune to pick up a conviction for DWI/DUI. This offer of auto insurance is “as of right”. If you buy the vehicle, you are insured. Although there are questions asked by the insurer, this is not to refuse you cover. All insurers like to know who you are. GM is also promoting the plan as “good” for other drivers. We have an increasingly large number of uninsured drivers on the road. GM says this is “free” insurance and the number of uninsured drivers will fall. Well, that’s less than honest because most everyone who can afford to buy a new vehicle can afford to insure it. Most of the uninsured drivers cannot afford the high premium rates, even for basic liability cover. That said, this is a convenient way of buying a new vehicle. It’s one-stop shopping. At the end of the year, the insurer will send you a renewal notice. Whether you renew is up to you. It’s at that time you should get online auto insurance quotes from as many companies as possible. That way, you’ll find out whether the renewal offer is a good deal or not.