Car Insurance: Pensioners Pay the Most

Posted & filed under Senior Citizen Drivers.

Recent research conducted by a consumer rights protection group has revealed disproportionately higher insurance premiums paid by America’s oldest citizens. While there are legalities that allow insurance companies to charge slightly more once a person crosses a certain age threshold, this does not quite account for the massive difference in the cost of insurance for people over 75.

Average Cost Can Double in a Year

The study found that the average cost for an insurance policy for a person 74 years of age was roughly $626 per year, averaged across the country. Controlling for all other factors such as driving history, credit record and type of vehicle, the same policy shot up to $1,157 per year the minute that person turned 75.

While this looks like a clear cut case of discrimination, and of red tape causing misery, there might be some more systemic causes underlying this extreme gap between insurance premiums paid by people under 75 and those over.

The consumer rights group conducted a study, using online comparison sites, of 98 different insurance companies.  Of those, only five offered insurance for people over 80, and all of those would only offer insurance at a higher rate. Across the country, only 60% of insurers claim to offer any coverage at all to people 81 years old or older.

Of course, there is one fatal flaw in all of this, and that is assuming that people over 75 are using insurance comparison websites to get their insurance.  While a small minority of over-75s might be internet-capable and able to use an insurance comparison website, most are not. According to another (slightly older) study, only around 35% of Americans over 65 are online.  And yet most senior citizens need vehicle insurance.

The Grandparent Trap

One of the main reasons named by the consumer rights group study for higher premiums amongst older people is automatic renewals.  Each year we get a letter telling us how much our insurance has gone up by, and it’s always much easier to just accept it than go around hunting for a new insurance provider every year.

While someone in their twenties might get such a letter, spend the evening online comparing quotes and quickly change insurers, a person over 70 might not even think to go through such a process.  They might not even be aware that such a thing can be done, and so will often stick with the insurance company they’ve used for decades.  This is because the process of manually contacting individual agents is time and energy consuming, and insurance is not quite the same as it was 30 years ago.

So if you have elderly parents or grandparents, take some time to have a look through their insurance.  Even if you don’t know much, you can quickly hop online and look at some car insurance quotes for them, or even teach them how to apply for car insurance quotes – you might be able to save them a few hundred dollars.

Hybrid Drivers Don’t Automatically Get Cheaper Insurance

Posted & filed under Car Insurance.

If you’ve just decided to ignore the numbers, the competition, common sense and general style guidelines, and buy yourself a brand new Toyota Prius, you might be surprised when your insurance company doesn’t fall all over itself trying to offer you a lower premium.

It is true that some insurance companies have offered incentives or small discounts to people who buy selected hybrid vehicles. However, these are normally marketing drives based purely on manufacturer-insurer cooperation, and an attempt to rack up carbon tax credits, than a genuine effort to save the planet and your money.

But Why Not?

As much as I enjoy seeing Prius drivers finding out anything unpleasant about their cars, it’s worth explaining exactly why they aren’t attracting lower premiums, outside of special promotions.  In order to do this, you need to know that the insurance-worthiness of any car is judged along three different categories.  These categories were first added by State Farm Insurance, but are now used widely.

They are each indexes based on actual claims data for damages versus the premiums paid for that vehicle.

Collision Damage Index – The Prius gets a “D”, which is higher than average in terms of premiums.

Collision Theft Index – Here the Prius gets a “D” as well, making its premiums generally higher than the amount you get back if it is stolen

Liability Rating Index – This relates to third party liability, and here the Prius scores a “B” – slightly lower, but giving it an average rating that is resolutely… average.

So it might be saving the planet (but actually it isn’t saving it as much as your average 10-year old diesel car), but insurers don’t care about how much you save the planet.  Their Marketing departments care that you think they care, but if it hurts their bottom line they have no incentive to give you a preferential rate, simply because your car uses marginally less gas than most regular drive vehicles.

It costs comparatively more to repair it than other cars of its price range and category – cars that earn them the same money in premiums, but cost less if they crash.  So you see, if you really want to find a car that is cheaper to insure, and is saving the planet, then you should have a look at our list of cheapest cars to insure in America, and pick out a nice diesel model.

Teenage boys may laugh at you, and you will struggle to drive around in San Francisco, but you’ll be paying less for insurance and gas than anyone else.

YouTube Tuesday – Back to Basics

Posted & filed under Car Insurance, YouTube Tuesday.

While we’ve covered most of the basics of car insurance on this site over the years, it’s nice to find an easy to watch video that explains everything logically, in the order in which it should be explained.

This introduction to auto insurance, ‘Auto Insurance 101’ by LIFE Foundation, puts everything you need to know about buying your first auto insurance policy into a few easy to follow bullet points.  It explains what liability cover is very well, and also goes into a lot of detail about the difference between regular medical insurance cover and Personal Injury Protection cover:

The part at 01:23, however, is the most important message I want you to get out of this little video.  It’s very easy to gloss over things like cover ratios when you’re reading an insurance policy through for the first time.  However, it’s important that you understand how things work.  I’ll reiterate her example:

Say you have an accident, and you rear-end the BMW in the video (but a nicer-looking one). You cause minor whiplash to the three occupants, which adds up to $75,000 in medical expenses, plus $13,000 in damage to property.

(Note that none of that damage to property is your own car – since you only have liability insurance, you will not be able to claim for your own damages if the accident was your fault)

You have 25/50/10 cover.  This means that if there was only one driver in the car you hit, they would only pay out a maximum of $25,000 in medical expenses.  However, if there are two or more people in the car, this goes up to $50,000, but no more than $25,000 per person.

The damages total $88,000, of which your insurance is only obligated to pay $60,000 (the 50/10 part of the above ratio). This means you could be out of pocket by $28,000 – not an enviable position to be in.

Insurance Against Parking Tickets?

Posted & filed under Advice & How-to.

 

Doctors have malpractice insurance, which insures them against claims made by somebody they made a mistake while operating on. The cost of this insurance is carried by all of the doctors who contribute to it.  The underlying social contract is simple – if all doctors admit that they are likely to suffer a malpractice suit at some point, and they all pay a little each month, each individual doctor will, on average, pay less than they would if they had to face the lawsuits on their own.

In Paris, jumping the turnstiles on the Metro is something of a tradition – except it incurs a $60 fine. A group called The Atlantic has managed to recruit enough turnstile jumpers to pay into an insurance fund every month, and in return they get any of their turnstile-jumping fines paid off for them. So why can we not apply this logic to speeding fines and parking tickets, or fines received for talking on your phone while driving?

There is no law in the United States that prevents people from creating an insurance fund to protect against fines, so long as the fund does not itself promote the breaking of any laws. Speeding fines and parking tickets happen to almost everyone, and can be a massive drain on your month’s finances. Speeding fines also have a nasty habit of coming at the worst possible time, when you’ve already had a number of extra expenses that month.

So we propose the following two “misdemeanor” private insurance funds:

1)     Speeding Ticket Insurance

Some people just love to speed, and are going to do it regardless of the rules.  For the rest of us, we tend to stick to the speed limit, but every time we’re in a hurry we end up getting a ticket in the mail from some camera we didn’t even know was there, or getting pulled over.  To be approved for this insurance you would need to have a record that is mostly clean of speeding violations.

It would probably only cost a few dollars a month to insure yourself against speeding fines, if enough people in your state were doing it.

2)     Parking Ticket Insurance

Paying for parking is extremely expensive, but getting a parking ticket is usually much more so.   You don’t visit an area regularly, and it’s a busy city center, there’s a good chance you simply won’t be able to find a parking spot for love or money in the middle of the day, and are probably going to get a ticket wherever you park.

What if there was a fund that you paid into that was cheaper than renting a parking spot, but would cover the penalty for getting yourself a parking ticket. It might encourage illegal parking amongst its members, and could likely go bankrupt if too many members were too liberal in their parking habits, but it could be a viable alternative to paying for parking.

5 Insurance Loopholes That Will Save You Money on Car Insurance

Posted & filed under Advice & How-to.

Short of slipping through some legal loopholes, most of us aren’t aware that we can get away with paying a lot less for our insurance, just by setting it up a little bit differently. You don’t have to do anything illegal, or even slightly un-ethical.  It’s just a case of knowing the rules well, and knowing where you can exploit them.

Bear in mind that some of these tricks will work better in certain states, so always check up the laws in your own state first.

1 – The Multicar Discount

Putting two cars on one policy usually works out cheaper – you can save as much as 50% on the second car, especially if it is a reasonably-priced modern car. It’s easy to be swayed by great offers on insurance when you buy a second car, but check out with your other company what kind of deal they can give you before you sign insurance papers on the dealership floor. This leads to number 2:

2 – Get it on Your Parents’ Insurance

If you’re under 25, it can usually work out a lot cheaper to add your own car onto your parents insurance, with you as the registered driver, and just pay them every month for the insurance.  The plus side of this is that you can get a huge discount on your insurance.  The downside is that you unfortunately won’t build up any kind of insurance record of your own, which can make it more expensive down the road.

3 – Buy a Security Device

In some states, insurance companies will offer you a discount if you have a security device like a steering lock installed.  Always check that the savings on your insurance policy will pay for the device in a decent amount of time, otherwise it isn’t really worth the extra expense.

4 – Use a Diverse Insurance Company

If you’re planning on needing more than one type of insurance, such as home owner’s insurance and electronic device insurance, it can often pay to go with an insurance company that has well-developed products in all of those lines. It might make sense to go with different companies if they have good deals, but it’s very rare that three different companies will offer you three deals that are better than what one large insurer can do.

5 – Improve Your Credit Score

This last one is much easier said than done, but it can make a huge difference.  As far as insurance companies are concerned, a person who is bad with a credit card is likely to be a reckless driver. If you diligently apply yourself to paying off your credit cards and keeping up payments on all of your bills, you will be able to apply for a lower rate in a year or two’s time.