This isn?t old news, but the type of car you buy effects your auto insurance rates. The more expensive or high-performance your car is, the higher your premiums will be. Why? It?s because the cost to repair a luxury or sports car is often significantly more than it is to repair an economy car. It?s a matter of mathematics. Less expensive automobiles are not as costly to repair if they?re involved in an accident. For some higher-end cars and trucks, just to replace a side-view mirror could cost a few hundred dollars.
How Rates are Set
Car insurance companies refer to the Insurance Services Office (ISO) when establishing coverage costs. The ISO is a reporting group for the insurance industry that publishes a statistical manual that rates vehicles based on the manufacturers suggested selling price, its loss history (if the car is not brand new), and in some cases the vehicles safety liability and theft level. The ISO establishes a number between 3 and 27 for each vehicle. The number assigned symbolizes the comprehensive and collision cost/coverage of that vehicle. The higher the number, the more costly it is to cover that vehicle.
Now let?s look at a few examples. If you have a car that is considered an economy car, yet the specific make and model you have has a high theft rate (i.e. it is stolen more often than other cars on the road), the number the ISO establishes for the car might be high. For sports cars, the ISO number is normally high because the faster the car, the more prone it is to traffic accidents; and in many cases, the cost to repair high-performance vehicles is significantly more than other vehicles. Sport utility vehicles (SUVs) are also weighed as high-liability vehicles. That?s because studies have shown that SUVs cause more damage in an auto accident than a standard economy or sedan model. In this case, some auto insurance providers increase the liability premiums for high-performance cars and SUVs.
Before You Buy, Research
If you want to keep your insurance from skyrocketing, it?s a good idea to do some research before you hit the dealerships. For starters, ask your existing car insurance company for an estimate on a few makes and models you?re thinking about test driving. The quotes you get back will give you an idea of how much it will cost to insure those makes and models. Having those quotes in hand will also help you keep your spending under control by reminding you that you also need to consider insurance rates when estimating how much you can afford on a new car.
Your age, where you live, and your driving record all play a factor in the cost of your auto insurance. Of course, the ultimate factor is the type of car you drive. The difference between insuring a four-door economy car will be significantly less than insuring a high-priced sports car. So, if you?re shopping for a new car, remember to keep your future auto insurance premiums in mind. It will help you make a more informed and affordable choice.
Showing posts with label Car Insurance Rates. Show all posts
Showing posts with label Car Insurance Rates. Show all posts
DYNAMIC LIFE AND AUTO INSURANCE : How Car Insurance Rates Affected by Bankruptcy
In the current economic climate, people who may never have considered bankruptcy as an option may find it a difficult, but necessary next step.
It's no longer something that happens when you've "failed" or simply overspent. A recent New York Times article reports bankruptcy filings increased 34% from October 2007 to October 2008. Families considered solidly middle-class are now seeking Chapter 13 bankruptcy protection to ensure they do not lose their homes and other assets when financial woes impact the household.
What is Chapter 13 bankruptcy?
Chapter 13 allows consumers to arrange repayment plans that will protect their assets in a way that Chapter 7 bankruptcy does not. Also known as Individual Debt Adjustment, Chapter 13 lets an individual with regular income keep property and pay debts back, usually over three to five years. During this time the individual is protected from creditors, who can't start or continue collection efforts on past due bills. In contrast, consumers generally lose most assets with a Chapter 7 bankruptcy, other than those considered exempt—a definition which varies from state-to-state, and is often based upon income.
For consumers who wish to protect the equity in their homes or cars with a loan or lease balance, Chapter 13 bankruptcy is a good option. But, it comes with a cost, as creditors and insurance companies may not offer their most favorable rates in the future.
Will my car insurance rates go up if I file for bankruptcy protection?
The short answer is—it's likely, but how much depends on your credit rating before the bankruptcy. If you have insurance and continue making your payments, you're less likely to see a rate increase at renewal, but some companies will check your credit once a year. A lower credit rating may lead to a rate increase.
Any type of bankruptcy filing will hurt your credit rating and will remain on your record for up to 10 years. During that time, car insurance companies that use credit as part of their risk assessment may increase your rate or may decline to offer you the lowest rates available. If you're shopping for a new policy post-bankruptcy, you may find that some companies will not offer you a quote, if bankruptcy is used as a risk factor.
Is this fair? Well, using credit history as one factor in insurance pricing is a lot like looking at an individual's driving history: a large number of accidents or violations means that driver may not be responsible and presents a greater risk to the company. A bankruptcy is a bit like a financial accident or violation. It strongly indicates, in much the same way as a traffic violation, that the individual had some difficulty with their finances—and some insurance companies have determined that insurance risk increases as financial stability decreases.
Some practical issues
If you're currently paying for your auto insurance using a credit card or checking account that may be restricted or closed by a bankruptcy filing, you may need to call your insurance company to change your method of payment. Remember, if you change from automatic withdrawal to direct billing, there may be additional installment or service fees, and you may risk late payment fees in some states, if a payment is late. But, the important thing is to keep your policy active, as a lapse in coverage could result in even higher rates when you re-start your coverage.
Our position
There is a significant difference between the two kinds of bankruptcy. We believe that insurance companies can and should evaluate their risk criteria based on insurance risk scores and determine ways to help consumers retain their insurance coverage. But, we hope that companies will evaluate Chapter 13 bankruptcy filings more favorably than other types of bankruptcies—and not penalize consumers who take the important step of choosing to repay their debts.
If you've been in good standing with your company in the past, making payments on time, your company should have no reason to believe that your current financial situation will impact your ability to continue to pay your premium. It's very important to communicate with your company. Ultimately, they are going to be looking at your situation as a whole—not just your financial risk, but your driving record.
All being well, and if your claims and driving history is still good, your auto insurance company shouldn't have any reason to cancel your policy. Your financial situation is only part of your risk factor, after all.
It's no longer something that happens when you've "failed" or simply overspent. A recent New York Times article reports bankruptcy filings increased 34% from October 2007 to October 2008. Families considered solidly middle-class are now seeking Chapter 13 bankruptcy protection to ensure they do not lose their homes and other assets when financial woes impact the household.
What is Chapter 13 bankruptcy?
Chapter 13 allows consumers to arrange repayment plans that will protect their assets in a way that Chapter 7 bankruptcy does not. Also known as Individual Debt Adjustment, Chapter 13 lets an individual with regular income keep property and pay debts back, usually over three to five years. During this time the individual is protected from creditors, who can't start or continue collection efforts on past due bills. In contrast, consumers generally lose most assets with a Chapter 7 bankruptcy, other than those considered exempt—a definition which varies from state-to-state, and is often based upon income.
For consumers who wish to protect the equity in their homes or cars with a loan or lease balance, Chapter 13 bankruptcy is a good option. But, it comes with a cost, as creditors and insurance companies may not offer their most favorable rates in the future.
Will my car insurance rates go up if I file for bankruptcy protection?
The short answer is—it's likely, but how much depends on your credit rating before the bankruptcy. If you have insurance and continue making your payments, you're less likely to see a rate increase at renewal, but some companies will check your credit once a year. A lower credit rating may lead to a rate increase.
Any type of bankruptcy filing will hurt your credit rating and will remain on your record for up to 10 years. During that time, car insurance companies that use credit as part of their risk assessment may increase your rate or may decline to offer you the lowest rates available. If you're shopping for a new policy post-bankruptcy, you may find that some companies will not offer you a quote, if bankruptcy is used as a risk factor.
Is this fair? Well, using credit history as one factor in insurance pricing is a lot like looking at an individual's driving history: a large number of accidents or violations means that driver may not be responsible and presents a greater risk to the company. A bankruptcy is a bit like a financial accident or violation. It strongly indicates, in much the same way as a traffic violation, that the individual had some difficulty with their finances—and some insurance companies have determined that insurance risk increases as financial stability decreases.
Some practical issues
If you're currently paying for your auto insurance using a credit card or checking account that may be restricted or closed by a bankruptcy filing, you may need to call your insurance company to change your method of payment. Remember, if you change from automatic withdrawal to direct billing, there may be additional installment or service fees, and you may risk late payment fees in some states, if a payment is late. But, the important thing is to keep your policy active, as a lapse in coverage could result in even higher rates when you re-start your coverage.
Our position
There is a significant difference between the two kinds of bankruptcy. We believe that insurance companies can and should evaluate their risk criteria based on insurance risk scores and determine ways to help consumers retain their insurance coverage. But, we hope that companies will evaluate Chapter 13 bankruptcy filings more favorably than other types of bankruptcies—and not penalize consumers who take the important step of choosing to repay their debts.
If you've been in good standing with your company in the past, making payments on time, your company should have no reason to believe that your current financial situation will impact your ability to continue to pay your premium. It's very important to communicate with your company. Ultimately, they are going to be looking at your situation as a whole—not just your financial risk, but your driving record.
All being well, and if your claims and driving history is still good, your auto insurance company shouldn't have any reason to cancel your policy. Your financial situation is only part of your risk factor, after all.
Subscribe to:
Posts (Atom)
Posts
