Auto Insurance Myths

Parking tickets make insurance rates go up. Moving violations result in tickets that make insurance rates increase. However, parking tickets do not affect insurance rates if they are paid on time. If parking tickets remain unpaid, they may hamper the vehicle owner’s ability to renew a driver’s license or license plates. Such neglect may also result in a suspended license, which will surely raise insurance rates.

All belongings in the car are covered by insurance. If a person leaves golf clubs, electronic devices or other personal belongings in a car that gets stolen, those possessions are not covered by an auto policy. Car insurance only applies to the vehicle itself.

Speeding tickets always result in higher insurance rates. This is not always true. If a person who has never been cited for speeding gets a ticket for driving 45 km/h or less, the citation will not usually bring higher insurance rates. A second or third ticket will affect rates, and greatly exceeding the speed limit will ensure a ticket for first-time violators.

Luxury cars are more expensive to insure. In some cases, this may be true. However, there are many more factors affecting car insurance than the vehicle’s price tag. Repair costs, claims history and theft frequency are some equally important considerations. In many cases, cheaper cars are more expensive to insure than luxury models.

Home Insurance Myths

Stolen jewellery is covered by the policy. Furs, jewellery and other valuables are covered to a certain extent. However, the limit is usually $5,000. If a piece of jewellery is an heirloom or is exceptionally valuable, consider scheduling it into the policy. This means it will be specifically named along with its value.

All home insurance policies are the same. There is no standard policy, so Canadians should not expect all insurers to offer the same coverage. Prices, provisions and additional benefits vary from one company to another. The underwriting company also plays an important role in policy pricing and provisions.

Damage from a flood or earthquake is covered. Some insurers do not cover damages arising from these occurrences. For those who live in British Columbia, Quebec or other areas likely to experience earthquakes, it is important to ask a prospective insurer if this coverage is included. Unfortunately, flooding is not included in home insurance policies. Sewer backups and similar occurrences are included. However, water damage from leaks in the structure is not covered.

Home insurance policies protect home businesses. In some cases, the policy may offer limited coverage. However, the insurer must already know about the home business. Unfortunately, many people make the mistake of assuming that a home insurance policy automatically covers a home business. It is possible to add an extension to a regular homeowner’s policy, but the most optimal choice is to purchase business insurance.

Life Insurance Myths

Only adults with spouses or children need life insurance. This is not true. Although people with spouses and children need more coverage, single individuals also need insurance. There should be enough money to cover funeral costs, outstanding debts and any other estate costs. Single people may leave any additional money to a charity, friend or family member.

There is no need for non-working spouses to have life insurance. Mothers who stay at home to care for children are valuable assets, and they need life coverage. If a homemaker with children died, the working spouse would need to pay for childcare. He would also have to pay for the deceased spouse’s funeral expenses.

Employer-paid life insurance is adequate. In most cases, employer-paid policies only offer enough coverage for funeral costs and a few other expenses. To leave enough for survivors to live on and pay outstanding debts, it is necessary to purchase an additional policy.

People who smoke do not qualify for life insurance. Smokers are not usually denied coverage. However, their premiums are higher than those assigned to non-smokers. Some people also believe that a history of smoking raises premiums. If applicants have not smoked during the past year, they are given the lower non-smoker rate.

The easiest way to debunk insurance myths is to ask questions and read all policy terms thoroughly. Insurance may seem expensive, but the costs of going without it can be much higher than most people imagine. The key to keeping insurance affordable is knowing the truth and staying informed about any changes.

Sources:

• Yahoo ¹
• Kanetix ^{2 3}

Those who compare rates between insurance companies each year typically do so when their policies are about to expire. This is a valuable strategy for ensuring they continue to pay the lowest rates. But it may also make sense to switch insurers long before a policy expires, particularly if the difference in premiums is substantial. Below, we’ll explain how to determine whether this is the case, and what to do if it is.

The Process Of Changing Your Car Insurance Company

The most important thing to remember is that your policy at the new insurance company must be in effect when your policy with your previous insurer is cancelled. Otherwise, there will be a gap in coverage.

First, establish your new policy, and note the date coverage starts. Then, contact your current insurer, and ask the representative to send you a formal cancellation form. Complete the form when it arrives, instructing your insurance company to cancel your policy on the date your new policy begins. Call your current insurer on that date to verify the cancellation.

How To Determine If Switching Mid-Policy Is A Good Idea

Your decision to switch auto insurers midway through your policy will focus primarily on your current company’s cancellation fee. Nearly all insurance companies apply a fee if a policyholder ends his or her policy early. This is essentially a strategy for minimizing the migration of customers.

The first step is to call your insurer, and ask about the cancellation fee that would be applied to your account. It will likely be prorated based on the number of months remaining until your policy’s expiration.

The next step is to calculate how much money you will save if you switch insurance companies immediately. Divide your annual premium by twelve, then determine the amount you’ll need to pay for the remainder of the term.

Do the same calculation for the new policy. Divide the annual premium by twelve, and use the number of months left on your current policy to determine the amount you’ll pay over the same period.

Next, subtract the second number from the first number, and compare the result to the cancellation fee. If the result is larger than the fee, make the switch immediately. Otherwise, stick with your current company until your policy expires.

Working Through The Numbers

We’ll use an example to demonstrate the process described in the previous section. Suppose you are currently paying $2,100 a year for coverage, and your policy is scheduled to expire in four months. Further suppose you have found an insurance company willing to extend the same coverages for $1,740 a year. After calling your current company, you learn that you’ll need to pay a $100 cancellation fee for ending your policy early. Here’s the math:

Your current annual premium of $2,100 means you pay $175 a month. Hence, you’ll pay $700 for the remaining four months left on your policy.

Your new annual premium of $1,740 means you’ll pay $145 a month. Over your current policy’s remaining four months, you’ll pay $580.

The difference is $120. This figure reflects the amount you’ll save by changing insurance companies immediately. Given that the cancellation fee is only $100, you should switch.

Beyond The Math: Other Factors To Consider

The numbers from the calculation above reveal only one side of the equation (albeit, an important side). It is also important to take other considerations into account. For example, is your current insurance provider responsive to your questions? When you submit a claim, do they send a check quickly?

Also, consider the discounts you currently enjoy, and compare them to those you’ll enjoy at your new insurance company. Will you save as much money each year?

Think about other insurance products you have with your current company. Would switching your auto insurance coverage to another company create more hassle?

Lastly, is your new insurance provider financially stable? It does little good to pay low rates if your insurer is unable to meet your claims.

As mentioned earlier, it pays to shop around and compare quotes from several insurers each time your policy is about to expire. But it is also a good idea to do so midway through your policy’s term. That way, you can determine whether an immediate switch is warranted.

• Self-Parking Cars
As many of us know, parallel parking is one of life’s most difficult tasks. While some of us might risk holding up traffic to try and attempt the difficult maneuver, most of us would rather walk a mile in order to avoid whipping our cars in and out of tight parallel parking spots. In recognizing motorist’s needs in this area, car makers have developed intelligent cars that can take on this task with ease. Self-parking cars feature computer-controlled sensors which enable the car to park itself based on the car’s proximity to other vehicles. Once the driver lines up the car’s bumper to the bumper of the car in front of the open parking space, the computer controls the wheel – reversing into the parking manure while the driver controls the car’s speed.

In 2006, the Lexus LS 460 was the first self-parking car to be featured at the Detroit North American International Auto Show. Five American manufacturers including Ford, Lexus, Lincoln, Mercury and Toyota offer self-parking or parking assist on several 2010 models.

• Back-Up/Rear View Camera
As the popularity of big-bodied SUV’s continues to grow in the US, more and more drivers found that they were having problems navigating their cars out of parking spaces or experienced visual impairments when backing up their vehicle. In order to solve this problem, car manufacturers designed intelligent features to help with this problem – and the back-up camera was born. Back up or rear view technology use small cameras mounted on the back of the vehicle to give drivers full visibility of what’s behind the vehicle. Some car makers, such as Infiniti, provide a 360-degree view of the vehicle using four separate cameras. In many cases, this feature comes pre-installed in the center console or as a feature hidden within the rear view mirror. Rear view cameras can also be purchased in kit form.

• Blind-Spot Detection Systems (BSD)
Depending on the design of your vehicle, you may have trouble merging or switching lanes due to blind spots along the sides of your vehicle. In order to remedy this visual problem that is responsible for a number of collisions each year, car makers have develop computerized sensors that work to notify the driver of other vehicles on the road. Some blind-spot detection systems (BSD) produce an audible warning when a driver is about to side-swipe another car or create vibrations in the steering wheel or car seat if the car gets too close to another vehicle while the system is engaged. Ford, Volvo, Lincoln, Infiniti and Mercedes-Benz all feature models with BSD systems.

• Intelligent Braking and Pre-crash Features
We’ve all been guilty of it. Tuning the radio, looking for lost change underneath the seat or trying to dig our phones from our handbags – when suddenly we look up to see a pair of red brake lights! If you’ve found yourself having to slam on the brakes one too many times to avoid a collision, then you might want to think about investing in a car with an intelligent braking system or pre-crash detector.

Generally, intelligent braking systems automatically engage the brakes if the car’s computerized sensors detect that the vehicle is too close to another car, object or person. If your car determines the vehicle will crash or senses an oncoming impact, pre-crash detectors will engage a host of safety features meant to keep the occupants of the vehicle safe. For instance, in some car models, pre-crash sensors will raise the hood to help absorb the impact of the crash, tighten the seat seats in the vehicle to hold you and the other passengers in place and automatically close the windows and sunroof.

Intelligent braking systems are currently available on several Audi, Lexus, BMW, Volvo and Chrysler models. According to the Insurance Institute for Highway Safety (HIS), it is estimated that these types of crash-avoidance systems have helped to prevent close to 1.2 million crashes since their development.

• Bluetooth Technology
If you are one of those people who just can’t travel without your suite of tech gadgets, you may want to invest in Bluetooth technology for your vehicle. Bluetooth technology enables wireless communication between electronic devices such as cell phones, computers and mp3 players, regardless of brand. As long as the device is in the car with you, you can control the device through your car’s console and utilize the car’s speakers for sound. While newer car models come equipped with integrated Bluetooth features, older cars can purchase aftermarket Bluetooth car kits for around $50.

Minimum Coverage Is Not Always Sufficient

Just because you have the amount of coverage that is mandated in your province does not mean it will cover you in an accident. The medical bills that you end up having to pay could be more than a minimum policy will pay to you. The amount of bodily injury coverage may not be enough to cover the amount you are liable for if you are in an accident.

Higher Deductibles Aren’t Cheaper In Case Of An Accident

A higher deductible will keep your premium down, but it won’t help you much if you are ever in an accident. Make sure that you are keeping your deductible in line with what you could afford to cover in the event that you ever had to make a claim. It could be the difference between having a car and getting to work, or not having a job on Monday.

Dropping Coverage Isn’t Always Cheaper Either

If you are thinking about dropping coverage in the hopes of saving money, you should make sure you can afford to pay any repairs on your own. For example, if you drop collision coverage, you won’t have any recourse if you cause an accident and your repair bills are going to be all on you. Unless you want a new car, you are going to want to have collision insurance, especially if you still owe money on the car.

Always Shop Around

You shouldn’t just assume you are getting the best policy. Just because you like your agent, or you feel like its too much work to shop around, does not mean you shouldn’t be doing so. You can save yourself some serious money if you are willing to take a few minutes and see what is out there. It is possible to compare quotes from many different companies with just one click. Take advantage of that easy opportunity to save money.

There are many mistakes that people make when shopping for insurance. Never assume that the cheapest policy is the best one or the one that is going to serve you best should you ever be in an accident. Never assume that you will never need your insurance policy, or assume that you are getting the best deal. Shop around and check to make sure you are getting sufficient coverage for the lowest price.

As you compare quotes between insurers, it’s important to remember that low-priced car insurance often requires compromise. The key is to determine whether the sacrifices you’ll be forced to make are worthwhile. We’ll explore this issue in more detail below.

Dropping Non-Mandatory Coverages (Endorsements)

One of the quickest ways to lower your rates is to drop collision and comprehensive coverages. Both are expensive. Together, they can add up to nearly 40 percent of your total premium. Other endorsements, such as damage to non-owned automobiles and loss of use coverage, tend to be less costly, but will still increase your rates.

The problem with dropping these endorsements is that you’ll need to pay for repairs and rental cars out of your own pocket should the need arise. For example, suppose your car is vandalized. Damage would normally be covered by the comprehensive portion of your policy. Were you to drop comprehensive coverage prior to the vandalism, you would have to pay for repairs yourself. Bear this in mind.

Qualifying For A Low-Mileage Discount

Most insurers will reduce their policyholders’ rates if they drive fewer miles than normal. The reasoning is that these policyholders are less likely to be involved in circumstances that generate claims.

If you normally drive very little – for example, you work from home, and can avoid a daily commute to the workplace – take advantage of this discount. However, actively reducing the number of miles you drive may pose a greater cost than the savings you’ll enjoy. Driving less may be less convenient, depending on your circumstances.

Consolidating All Policies Under One Company

Another discount is given to policyholders who bring multiple insurance policies under a single company. For example, if your auto, property, and health insurance coverages are held at three insurers, consolidating them is likely to lower your rates.

A possible issue is that the insurer under which you bundle your policies may not offer the lowest rates for one or more insurance products. For instance, you may enjoy a significant discount on your auto insurance, but not on your property, health, and life policies. The only way to make an objective decision is to compare quotes between insurers to determine which offers the lowest rate.

The Cost Of Raising Your Deductibles

Increasing your deductibles will result in lower premiums. The reason is because higher deductibles lower the risk of loss to your insurance company. In many cases, consumers keep them too low, and end up paying more than necessary for their coverages.

The drawback to raising them is that doing so exposes you to more risk. For instance, suppose you increased the deductible on your comprehensive coverage from $250 to $1,000. If a vandal damages your vehicle, you would need to pay $750 more out of your pocket before your insurer agrees to cover the rest.

This is a good method for lowering your premiums, especially since the likelihood of experiencing a covered event is slight. But make certain that you understand the risk.

Hidden Sacrifices When Switching Insurers

One of the most reliable ways to consistently enjoy low-priced car insurance is to request quotes from multiple insurers each time your policy is about to expire. Many people find that their current providers no longer offer the lowest rates despite doing so for years. Comparison shopping brings this fact to light.

If your current insurance company offers you little value, and you have uncovered lower rates elsewhere, choosing the other provider is a good idea. But if your current company provides exemplary service, numerous discounts for which you will soon be eligible, and other benefits, reconsider. You may be sacrificing more than is immediately clear.

Our purpose in highlighting the issues above is not to dissuade you from doing everything possible to lower your car insurance premiums. Rather, we hope to help you make objective decisions based on your circumstances.

Fender Bender

The deductibles on your auto insurance policy play an important role in determining your rates. While every insurer is different, and much depends on your driving record, raising them can lower your premiums by as much as 10 percent. It clearly pays to choose them wisely. The problem is, most people give little thought to doing so, and thus burden themselves with higher rates than necessary.

In the space below, we’ll start with an overview that covers how car insurance deductibles work. We’ll then take a closer look at the benefits you’ll enjoy by raising them. You’ll learn which coverages on your policy are likely to have deductibles, and steps to take to make sure your exposure to risk is minimized.

Car Insurance Deductibles Explained

Whenever you submit a claim to your insurer, you are expected to pay the amount of your deductible before your coverage begins. Once you contribute that amount, your insurer will compensate you for the remainder.

For example, suppose you are involved in a minor accident that results in $2,000 of damage to your vehicle. Further suppose your deductible on your collision coverage is $250. In this case, you would be expected to contribute $250 toward repairs, after which your insurance company would cover the remaining $1,750.

Most insurers require their policyholders to pay deductibles on a per-claim basis. For instance, if you are involved in a subsequent accident that results in damage to your car, you’ll need to pay another $250 before your coverage pays for repairs. Review your policy carefully to familiarize yourself with the way in which claims and deductibles are handled by your insurer.

The Advantages Of Raising Your Deductibles

We mentioned earlier that you can save up to 10 percent on your premiums by increasing your deductibles. It’s important to understand the reason.

To your insurer, each policy represents a risk of insurance loss. They calculate your rates based on this risk. They evaluate numerous criteria, such as your driving record, make and model of your vehicle, and where you live. They also consider your deductibles. The higher they are, the more you agree to pay whenever you submit a claim. This lowers your insurer’s risk of loss. It also lowers the likelihood that you’ll submit a claim in the first place. As a result, if you raise them, your insurance company is likely to lower your premiums.

So, how high should you set your deductibles? This depends on your willingness to absorb more financial risk. If you believe you’ll be involved in numerous covered events (e.g. collisions, vandalism, theft, etc.), a lower amount, such as $250, may be suitable. (Keep in mind, however, your rates will rise with each subsequent claim.) If, on the other hand, you feel such events are likely to be rare, keep them high (for example, $1,000). You’ll save substantial money over the long run.

Which Coverages Have Deductibles?

Most optional coverages require deductibles. Collision and comprehensive are the most common endorsements, but deductibles may also be applied to Family Protection and damage to non-owned vehicles (e.g. rental cars). Additionally, all perils coverage is usually accompanied by a deductible; it is often the same as those carried on your collision and comprehensive coverages.

Mandatory coverages, such as third-party liability and direct compensation can also have deductibles. This depends largely on where you live.

How To Address Your Increased Financial Exposure

Suppose you have set your deductibles at $1,000. When you make a claim, you’ll be expected to pay this amount before your insurer will cover the rest. Note the sequence of events: you pay, then your insurer pays. If you lack the funds to meet your deductible at the time you make a claim, your coverage may not start.

This is the reason it is important to set aside funds to pay your deductible. Place the amount into a savings account. That way, it will be available and easily accessible if the need arises.

When you contact your insurer to raise your deductibles, take the time to request quotes from other insurance companies. You may find that another insurer can offer lower rates for the same coverages.