12 Secrets Your Car Insurer Won't Tell You

MSNBC ^ | 4/19/2007 | MSN Money staff

[Dallas59]

Knowing how the industry works can save you a lot of money and grief. Here are the secrets behind the premiums, and how you can save after an accident.

Getting a good deal on auto insurance is hard enough. Keeping your premiums from rising? That can feel like playing a game where the rule maker refuses to tell you the rules.

Here are a dozen ways the industry works, with tips to help you save:

If you have good credit, you'll pay less. Almost all insurers -- including the top five -- pull your credit report. Why? Studies have shown a direct correlation between your credit score and the likelihood that you will file a claim. Insurers also know that if you pay your bills in a timely fashion and have had the same credit accounts for a long time, you're more stable than someone who pays late and frequently opens and closes accounts. They use this information to create your "insurance risk score," which is one factor that determines your auto-insurance rate.

Tip: Your insurance-risk score is not available to you, but it may be similar to your credit score. If you have unusual credit activity, wait a month for it to return to normal before buying auto insurance. If your credit history is shaky, clean it up as soon as you can.

[Dallas59]

Sorry...it's from MSNBC

[Names Ash Housewares]

Insurance fraud and uninsured illegal aliens I am sure are big contributers to costs.

[Abathar]

"Sorry...it's from MSNBC"

Even a blind pig finds an acorn every once in a while....

[pnh102]

... you're more stable than someone who pays late and frequently opens and closes accounts ...

I hate to be the one who says "their ought to be a law..." but their ought to be a law that forbids companies from lowering your credit score when you close a credit account with a zero balance.

[Southerngl]

Most of this is common sense, but they title is misleading. Most insurers want you to know this stuff, it’s not some big secret that they are keeping from you. Jeez, talk about hysterical journalism!

[sweetiepiezer]

Sorry...it’s from MSNBC
__________________________________________

Even a broken clock is right twice a day.

[D-fendr]

Blame FICO, it’s the scoring method all three credit bureaus use.

The less credit you have and use, the lower your score. Close a credit account and your score goes down. And tons of other non-intuitive score results can happen as well.

It’s somewhat a game with a couple of obvious options: Never use credit and don’t worry about your score; Use credit wisely to optomize your score and therefore decrease your expenses.

On major credit purchases such as mortgages, the difference can be tens of thousands of dollars.

[cinives]

Or if someone checks your credit. If your insurers, your employer, and others routinely check your credit, then those routine checks shouldn’t be held against you.

[longtermmemmory]

I remember when yellow journalism was supposed to be a BAD thing, not standard procedure.

[NorthFlaRebel]

If you have good credit, you'll pay less. Almost all insurers -- including the top five -- pull your credit report.

Watch out. A good friend of mine was shopping rates, called about a half dozen or more agents. The last one tells him he doesn't qualify for the "lowest" rate because ...... and I kid you not....... too many people had run a credit report on him recently.

[NoBullZone]

Boy, you must have a really great memory! :-)

[GOPJ]

nice post - thanks.

[randog]

You'll pay for your bad driving.

No s**t?

[GeorgiaDawg32]

your credit score is lowered because the amount of available credit is reduced, increasing your percentage of debt..in other words, if you have two credit card accounts, each for $5000, one is maxed and the other is empty, you carry a radio of 50%. If you close the one with zero balance, you now go to 100% which will clobber the score since you now have NO available credit to use..even if they were all at zero your amount of available credit is reduced which reduces your score. yes, it sucks..

[GeorgiaDawg32]

yup, people say to shop around, but in reality, you can’t do that because too many inquiries indicate you’re searching for lots of credit, even when it’s in search of insurance, a mortgage etc..

[GeorgiaDawg32]

I keep a print out copy of my credit report complete with score. If I go somewhere and would like credit and they ask for a social security number so they can run a check, I hand them the report (which contains the date I pulled it so they know it’s recent) and tell them to tell me whether or not I qualify. If they insist on pulling a report, I leave and go elsewhere. If everyone wants to pull a report, I just go home and save till I can pay cash for the purchase. It does stop unnecessary inquiries.

[rednesss]

Also if the account that you closed is one of your oldest open accounts and you close it, then your average age of credit might drop and you would lose points in the FICO scoring model.

[atomic_dog]

Of course there is the biggest secret that this article doesn’t mention. Your Uninsured Motorist Coverage does not cover a hit and run and you are liable for the full deductible. I complained to the Cal Insurance Commissioners office and it’s legal and standard practice. Bodily injury hit and run is assumed to be uninsured but property damage hit and run is assumed to be covered - go figure. If you keep a high deductible because you’re a good driver, like I do, your screwed.

[cmsgop]

Exactly! I keep a low deductible on all my insurance,Home,Car,Med.