Edlund & Associates

This article was originally published in Insurance Journal.

From changing jobs to moving to a different house to downsizing vehicles, Americans have made decisions during the recent economic downturn that impact unexpected areas of their life – like car insurance. In fact, in the past year 53 percent of Americans have made an economic-driven change that could impact the cost of their car insurance, according to a survey by state insurance commissioners.

The National Association of Insurance Commissioners (NAIC) survey found the most common car-related, money-saving lifestyle changes consumers made in the last 12 months that could impact their insurance costs were:

• Nearly 40 percent of respondents are driving less overall and/or taking public transportation more frequently.
• Close to 20 percent of car owners traded in a vehicle for a lower-priced model or got rid of a second vehicle entirely.
• Almost 20 percent of drivers have reduced or cancelled their car insurance coverage for immediate financial relief.
• Many consumers relocated over the past year.

The survey identifies five trends and their effects on auto insurance premiums:

Relocation

Where insured’s live can impact premium, depending on crime statistics in the area. Garage versus street parking can also impact premium.

Moving to another state can affect costs as states vary in their minimum liability, and perhaps no-fault, coverage requirements – some allow injured parties to sue for damages and others are no-fault states.

Changing Vehicles

Whether purchasing a less expensive or more expensive car, looking for a hybrid to save on gas, paying off a current vehicle, or purchasing a “starter” car for a teenage driver, insured’s should expect car insurance rate changes. The make and model of a car affects a premium.

A car with a lower resale value is usually cheaper to insure because collision and comprehensive coverage’s cost less.

Paying off a current vehicle may allow an insured be select a higher deductible or eliminate collision coverage.

Adding a car to a household may make a customer eligible for a multi-car discount.

Changing Jobs

With unemployment still hovering around nine percent, many consumers have been looking for jobs. Some have had to create flexible work situations or even to relocate. Others remain unemployed and struggle to make ends meet. Each of these unique situations can have an impact on car insurance costs:

Some consumers now have a longer or shorter commute after turning to occupations they could do from home, or relocating for a job.

Others chose to stop payment or cancel car insurance. Causing an accident without adequate insurance protection could have devastating financial consequences in the event of an accident. Further, this decision will likely result in higher costs if insurance is reinstated in the future. When coverage is allowed to lapse, customers lose renewal/continuous coverage discounts, and when they choose to reinstate the policy, the insurer may consider them a higher risk.

Driving Less

Since a car insurance premium is partially based on annual mileage, driving less equals paying less. According to the NAIC survey, almost 40 percent of consumers drove fewer miles in the past year choosing instead to carpool, walk or take public transportation more frequently. Many insurance carriers offer a low mileage discount. Some companies also offer pay-as-you drive pricing in certain states.

Damaged Credit Score

Whether consumers have fallen behind on bills or made a purchase they could not afford later, financial decisions that affect credit-based insurance scores may impact insurance rates. Most states allow insurers to use certain elements of credit history as one of several factors to predict the likelihood of future losses. Having a poor credit-based insurance score can result in higher premiums or, in some cases, the inability to secure insurance through some carriers.

The NAIC survey found more than one-third of consumers did not realize their credit-based insurance score can be used to determine auto insurance premiums.

Want to save money on your Auto Insurance premiums? Here are some great ways to get discounts and spend less of your hard-earned cash:

1. Drive safely. Drivers with clean records get better rates. Even if you had tickets in the past, usually after three years these will drop off your record and won’t be considered when calculating your auto insurance premium.
2. Take a safe driver course. These count towards discounts on your insurance.
3. Shop other carriers. Ask us about checking to see if we can save you money by quoting from other insurance companies which may have more favorable premiums for you.
4. Increase your deductibles. This has a direct effect on premium rates. Consider how comfortable you are with your deductibles, and get a quote on the change in your premium.
5. Watch your credit score. Credit has a big effect on premium rates. Some of the most competitive insurance carriers may not even offer quotes if your credit rating is too low.
6. Multiple policies from the same insurance carrier will give you discounts for your customer loyalty. A common combination is Homeowners and Auto insurance. The savings can be significant.
7. Pay your premium in full. Making installments involves charges for this convenience. If you must make payments, use EFT (electronic funds transfer) instead of paying by check each time – it’s less expensive.

Want to see if you qualify for discounts? Call us for a quote or to shop for you. Contact our office at 410-871-0577 or email cedlund@mdinsurancepro.com.

Even if you haven’t had an accident, you may find that your automobile insurance premiums rise when your policy renews. Why is that?

There are many factors that determine premium rates, set by actuaries who compile statistics and make those determinations. Here are a few reasons why you may see a change in your own auto premium:

• You purchased a different vehicle. If your new car is a more expensive model than the previous one on the policy, it will be more costly to repair in the event of a claim. Collision coverage makes up a large part of the premium.
• You had moving violations. If your insurance company pulls a copy of your driving record prior to renewal, it could trigger an increase by removing the discount you had for a clean record.
• Adding a new driver to your policy. Young drivers have a higher risk factor, which causes premium increases.
• Sometimes the state of Maryland allows insurance companies to raise their rates. Of course, no individual insured has control over this, but it does happen
• Want to see if you can lower your premium? Call us to shop for you. You can reach our office at 410-871-0577 or email at cedlund@mdinsurancepro.com.