Policyholders would probably not know everything about their cover. Especially younger drivers learn new things every day. Understanding essential car insurance facts, terminology, workings of policies and procedures of insurers can be complicated. The more you know the better you will prepare yourself against possible risks involved with owning and driving a car.
There may be things you are not aware that are covered by your policy. Or there may be things that aren’t covered by a standard policy but most people assume otherwise. Also, there are lesser-known auto insurance facts, hidden details and unshared insider knowledge. Ten of those are brought to your attention below. Hopefully, they may help you in arranging better policies, choosing the right insurer and finding cheaper vehicle insurance premiums.
- Your Belongings Aren’t Covered Even If Your Car Is Fully Insured
Did you know that your automobile insurance doesn’t cover your person belongings in the car? Even a full coverage policy will not compensate you for your damaged or stolen possessions. You will be paid for the damaged or stolen auto. Nonetheless, the private items within aren’t considered part of the vehicle and not included in its valuation.
You probably have a cell phone, laptop and other valuable items with you while you drive. Normally, home content or renters insurance policies cover those personal items you carry with you as well. You have to make sure that you have coverage under your home insurance for those items you take with you.
You should always keep purchase receipts of those items to prove that you owned the items you claim for. Also, leaving valuable items in vehicles is an invitation for a break-in. It will only take few seconds for thieves to smash the car window and grab them, causing damage to your car in the process too.
- Your Car Insurance Covers Taxes and Fees, too
When your vehicle is totaled you will need to buy a new one and pay taxes and registration in the process. This taxes and registration fees may be covered by your auto insurance company depending on where you live and whose insurer pays the losses. The taxes and fees may be paid in advance at the time of claim settlement in some states while they may be reimbursed later in other states. Some states only require the insurer to reimburse them if a new vehicle is purchased within a certain time after the accident. Third party’s (at fault drivers’) insurance companies may not be required to pay you for the cost of tax and registration.
You should spend some time to understand your policy coverage. Actually, you should always compare car insurance quotes at each renewal and look at each alternative policy coverage and prices. These little details can quickly add up when you have a claim that it is essential you buy a decent policy.
- Do You Have Coverage for Your Pet’s Injuries?
Your liabilities coverage pays for the injuries you caused to third parties. You may either have a Personal Injury Protection for yourself and your family or your family health insurance may cover traffic related injuries as well. These days many people drive with their pets and they may have no idea if their injuries are covered. Some auto insurers will pay up to $1,000 (or another set amount) for veterinarian bills for your or a family member’s injured pet.
Not all insurers offer this coverage and it may not be available in all states. You should always check for this coverage if you regularly drive with your pets or you have pets. Otherwise, you may need to look into buying a pet insurance policy to cover their injuries.
- Your Credit Score Affects Your Insurance Rates
One of the lesser known reality of auto insurance is that credit score affects your premium in most states. It is widely accepted that credit history gives clues about the chances of a policyholder making claims. Today, most states allow insurers to look at credit score when they are giving quotes. You may have to pay as much as 25% more car insurance for bad credit.
The way insurers use credit history is a bit different from the way banks and lenders use it to assess credit risk. Insurers use a credit-based insurance score in conjunction with many other well-known variables like age, gender, driving history and claims. Each company uses their proprietary method when they take credit score into account and therefore it can affect the premiums more or less depending on the company.
If you want to get cheap car insurance you really need to look after your financial affairs and keep your score high. This also helps you get cheaper interest rates and increase your chances of being approved for a mortgage, loan or credit card. Another one of little known car insurance facts relating to credit score is that it doesn’t affect your overall score when insurers look at your credit records. So, there is no reason to worry about getting a few quotes.
- Brand Loyalty Can Cost Policyholders
Having set and forget policyholder mentality can make you lose out on great coverage and discounted premiums. Today, the numbers of factors considered in premium calculations have turned the process into a puzzle. Insurers use complicated software programs to take every little detail provided in the quote form into account. As a result, it is difficult to guess which company will offer lower rates for a particular applicant. And we see dramatic car insurance price fluctuations from one carrier to another.
Policyholders should comparison shop at least once a year to determine they are getting good rates, instead of letting policies renew automatically. The easiest way of finding out if you are paying too much is to get a few cheap auto insurance quotes online. It is quick and you can do whenever you have a few minutes spare time. You can reach to large number of insurers by using a comparison website like this one.
There is no real reason to worry that lower prices will lead to less coverage and/or poor service. Today, there are many reputable vehicle insurers providing well-rounded coverage, affordable premiums and great customer service. We have plenty articles on how auto insurance works, choosing the right insurer, arranging sufficient coverage and finding the lowest premium for your circumstances, if you want to research further.
- Stopping Payment Isn’t a Good Way to Cancel a Policy
Many policyholders make the mistake of just stopping their premium payments to current insurer when they are switching auto insurance companies. This could cause you series of problems later on. Your current insurer may report non-payment to credit agencies that affects overall credit score. This cancellation due to non-payment may be shared with other insurers as well that can affect your future quotes. In addition, they may be required to report you to DMV for cancelling the liabilities coverage. DMV may see your new policy or write to you for proof of insurance without checking if you have already bought another cover. There are auto insurance facts like this one that may seem unrelated to your policy but it can cause many headaches.
The better way of doing it is to contact your insurer and arrange the cancellation of the policy because you want to switch providers. Find out when your existing policy will be canceled so that you can set up your new policy to start from that exact moment. Talking to the existing carrier actually saves you money since you don’t need to have two covers at the same time and avoid possible problems discussed above. Furthermore, you may be due a refund of overpaid premiums. Generally, you always pay in advance for the time on risk and therefore, you are likely to get a refund even after cancellation fees.
- Auto Insurers Can Cancel/Increase Premium at any time or Refuse Renewal
Did you know that insurers can cancel car insurance policies or demand additional premium at any time if the policyholder is found to violate any of the policy terms and conditions? Some firms may choose to wait until renewal and refuse to renew the coverage. Some of the reasons for these actions are; failing to pay the premium, driver license suspension or revocation, misrepresenting the facts when the quote was requested and not informing the company about the material changes. For example, not mentioning that you had traffic convictions or made several claims in the past with another company may come out. Your insurer may decide to cancel the policy or demand additional premium after discovering such facts.
In such cases, your provider must notify their decision in writing and give you time to make alternative arrangements. Insurers are required by law to state the reason why they want to cancel or increase the premium. It is not the case with non-renewals. If you want to find out the reason for non-renewal you may need to request it in writing. You can look into your legal options or talk to the state department of insurance for help if you believe you are being treated unfairly.
Another one of those hardly known truths about car insurance relating to policy cancellations is that there is a 60 day binding period following your automobile insurance application with a new carrier. If your insurer finds a discrepancy on your application, driving or credit history and any other particulars provided they can cancel the policy within this period or demand more money. This is a legal period that allows insurers assess the risks involved with insuring the new policyholder.
- You Can Save on Premium by Paying in Full
Here is one of more helpful auto insurance facts you should know to reduce your premiums. You may not realize that you would be charged higher premium (or pay more) when you request payment by installments. Usually, insurers charge set up fees and interest when policyholders pay by installment that would increase your total premium payments. The more you divvy up the premium payment the more fees you may be charged. And your once-cheap automobile insurance can now cost noticeably more.
In addition, some companies offer about 5% premium discounts when you pay upfront. Overall, convenient looking installment plan can cost you a lot more. That is why you should always ask how much you would pay in total when you pay in installment and if you could have further discounts for paying at once. Depending on the answer you may want to try and find a way of paying the premium in full and pay less.
Paying in full reduces your paperwork and risks of cancellations due to non-payment, too. This may seem like you are being tied down for another term. However, you can switch or cancel your policy whenever you want even when you pay in full at the start. Insurance companies are used to cancellations. They will issue car insurance refunds for unused portion of premiums in case of cancellations.
- Insure Your Car or Take It Off the Roads
You may think that you don’t need to insure the vehicle if you are not driving it. One of the strict car insurance facts is that you have to insure a car regardless of being driven or not if it is on the public roads. Your DMV will want to see a liabilities policy in place. Otherwise, they will write to you asking for explanation or proof of insurance.
You can submit an off road declaration with your DMV office if you are keeping the car off the roads in a private property and don’t intend to drive. This will relieve you from the legal requirement of buying liabilities vehicle insurance. Otherwise, DMV may follow up the earlier notices with fines. You should follow the process of taking a car off the road if you don’t want to insure it and want to avoid being hassled and fined.
- You Must Inform Your Insurer when Your Details Change
There is a duty of disclosure condition in every insurance policy that requires policyholders to inform insurers of any material changes in their details or circumstances. Material change is the change that would affect premiums charged. Remember that your premium would be based on the facts about you, other listed drivers, your address, car insured, traffic convictions and several other details. So, you should talk to your insurer or broker when there is a change in any of them.
If you are not sure what is material or not you should tell your insurer anyway and let them decide. The changes may result in additional premiums or refunds. If the risks are considered to be increased the premiums would increase as well or vice versa. Withholding information about material facts can result in policy cancelations or refusal of claims in the future. For example, an insurance company may refuse a claim following a high speed accident when the policyholder has failed to tell them about two previous speeding convictions.
Now you know more about your vehicle insurance facts. If you have any questions or wondering about a particular coverage or risk you should talk to your insurer or agent. Nobody will complain about the questions you ask. But you will suffer the consequences of misinformation and insufficient policy coverage.