It hangs above your head like a beacon. A bright red, silver or black (insert car here) pinned to the wall of your cubicle, the inspiration to get through another day of mindless paper pushing and angry phone calls. It's the car of your dreams and, like many an American office worker, the reward you promise yourself after years of toiling. You've banked enough cash to cover the down payment, budgeted for the monthly payments and calculated your fuel costs for the year. But, did you remember to figure in the cost of insuring your little four-wheeled friend?
Automobile insurance is required by law in all 50 states, and depending upon your driving record, the type of vehicle and even where you live, rates can vary greatly. To help you better understand the myriad of choices before you, we've put together a little summary of factors that can affect your rates.
Getting the Best Rate: Don't Discount the Discount
There are a number of factors insurers take into account when calculating your premium. However, you can significantly reduce that premium with discounts. The most common discounts offered by insurance companies include multi-car (more than one car on a policy), good driver (no speeding tickets, DUI or accidents), anti-theft (cars equipped with anti-theft devices) and safety (anti-lock brakes, air bags, etc.). In addition to these basic discounts, many large companies such as GEICO offer unique policies like discounted rates for military personnel.
Another smart way to lower your rates is to combine your homeowners or renters policy with your automobile coverage. Known as an umbrella policy, this plan protects the policy holder's assets by providing coverage beyond the liability limits of the primary insurance policy.
Finally, you can create your own discounts by adjusting your policy. There are several components that make up your car insurance including deductible, comprehensive and collision amounts. Each component can be adjusted to lower or raise your premium. But be careful not to underinsure your vehicle – it could cost you in the long run with huge out-of-pocket expenses in the event of an expensive accident.
Age Before Beauty? In This Case, Age Wins Out.
MTV might have you convinced that by age 30 you're over-the-hill, but the car insurance industry celebrates your mature wrinkles. Insurance premiums for a 16-year old male driving a Mustang GT, for example, are going to be appreciably higher than for a 37-year old married male with a proven driving record. And, unless your name is Justin Bieber, odds are those rates will be out of reach to most teens not subsidized by their parents. "Factors determining the cost of insurance are related to the driver, the vehicle and their location" says Bill Costa, Assistant Vice President for Underwriting at GEICO Insurance. "Age and driving record are two primary characteristics which reflect the risk associated with the driver and which can affect most coverage on a policy."
"The location and where the vehicle is driven are also predictive of risk. For example, rural areas may see a lower rate because they have fewer accidents than congested cities or suburbs." Logic dictates, therefore, that a 16-year old Mustang driver living in central Kansas will probably have a lower premium than his counterpart living in the heart of Los Angeles.
What Will My Teenage Driver Do to My Rates?
Teen drivers, more precisely teen boys, are expensive to insure, especially if they own their own car but it's covered under your family policy. The universe has a funny way of giving and taking. On the blessed day when your little bundle of joy arrived in this world, the Universe handed you a big chunk of change in the form of tax deduction. Well, now your little deduction has a driver's license in hand, and Universe wants its money back. Teen drivers, more precisely teen boys, are expensive to insure, especially if they own their own car but it's covered under your family policy.
Our best advice is to steer clear of sports cars, turbocharged cars or any car that looks like it might be trouble in the hands of a hyperactive teen. You know your child better than anyone, so if you think there is a strong possibility that once behind the wheel your offspring may get into trouble, we strongly suggest you protect yourself by getting an umbrella policy as mentioned above. In the event that junior gets sued, an umbrella policy will help protect assets like your home and life savings.
Does it Matter What Kind of Car I Buy?
Unfortunately, all cars are not created equal and insurance rates bear this out. The insurance industry categorizes vehicles using a set of characteristics that in turn allows them to create a "symbol" reflecting the expected repair cost for each car. Clearly, it will cost more to insure a Mercedes than a Mercury, because repairs and replacement parts for the E350 far exceed those of Sable. "In addition," Bill Costa adds, "the vehicle characteristics may influence liability coverages covering damage or injury caused by the insured. A large SUV, for example, would be expected to cause more damage than a compact vehicle." Other factors that influence rates include the age of the vehicle (an older car may require less comprehensive and collision coverage), the type of vehicle (Corvette vs. Malibu Sedan) and the number of vehicles on the policy.
Leasing can also affect the cost of insurance as many lease contracts require a set level of comprehensive and collision, usually a 100/300/50 plan, which requires $100,000 per person/$300,000 per incident and property liability coverage of $50,000.
Separating Fact from Fiction
While there are a number of factors that play a role in determining your insurance rates, there are others that have no affect whatsoever. Let's clear the air on what is and is not true.
- A flashy color such as red or black can raise your premiums: False. Your car's color has no bearing on the cost of insurance.
- A V8 will cost more to insure than V6 or in-line four: True. In this case, size does matter, especially if that V8 is sitting under the hood of a performance car. The same may hold true for turbocharged and supercharged cars. And don't bother trying to hide the fact that your Mustang has a V8 and not V6; all that information is contained in the Vehicle Identification Number (VIN for short.)
- An inexpensive family sedan will always cost less to insure than something more exotic: False. Due to the preponderance of their sales, cars such as the Toyota Camry and Honda Civic are highly desirable among car thieves and black market parts suppliers, a fact that may increase their risk assessment and lead to higher premiums.
- Getting a speeding ticket will cause my rates to skyrocket: False. In many states, going to traffic school will prevent points from being added to your record, although you'll still have to pay the fine. Stipulations for good driver discounts vary by state, so be sure to inquire with your insurer how the law pertains to your situation.
- I have a DUI. Does that mean I can't get insurance? True and False. Most insurers won't or, due to state law, can't cover a driver with a DUI. There are smaller insurance carriers and state funded insurers who will write you a policy, but it will cost you a small fortune. In most cases, insurance companies require as long as 10 years after the DUI offense before they will consider underwriting a new policy.
- Insurance rates vary depending on how much and how far you drive: True. The more you drive, the greater the probability that you'll have some type of fender bender. If you use your car for business and are writing off the miles on your tax returns, you must disclose that information to the insurer. Increased use of the vehicle with clients in the car increases the risk of liability should you have an accident. The insurer will need to adjust your policy to cover the risk. Not disclosing this kind of information can result in your policy being terminated or worse, nullifying a claim.
Using these guidelines, you can determine how to get the best possible rate on your new car. To get a quote visit GEICO, the preferred insurance provider for Autotrader.com.
