Most people do not understand insurance companies. Which is why they are surprised with how things work with auto insurance companies and why car insurance companies do what they do. The reason is that the concept of insuring risk is a complicated idea not everyone grasps. When you go to the Mall and buy an ipod, a bed or a car, you pay the price get the product or the service, depending on what you bought and go home. What would happen if you had to buy another one because you lost your first one. What would you think if you were asked to pay more for the same product on the same day. You might not be very happy, you might be really mad. Fortunately that does not happen with ipods, cars and footballs but it does happen with insurance policies.

How is that the case? If you buy an auto insurance policy today and have an accident that is your fault and costs the insurance company a big settlement, next time you try to renew the policy the company will either not agree to renew the policy or charge you extra. You might be lucky and nothing changes, but that is highly unlikely. The most likely outcome is a large increase in your auto insurance premium. That will very likely make you mad, unfortunately that will not help you with your insurance. Understanding the standpoint of the insurance company will be much more helpful.

Why do auto insurance companies do this? First of all it is useful to understand how insurances companies calculate your premium in the first place. They calculate how much of a risk you pose to their company. If you don’t have a bad driving record, your credit score is fine, you live in a safe neighborhood and you are not a young driver it is likely you got a good price for your insurance. But if you had a bad accident that cost the insurance company a fortune they have to reassess your risk to their auto insurance company. If you have claimed large sums from you insurance dealer expect a significant rise in your premium. I remember when I had fully comprehensive insurance on my first car. I claimed for every scratch and bump I received. I lived in Spain, so I got a lot of scratches and bumps from drivers that did not leave a not. When I tried to renew my auto insurance it had increased in price by over double. I was also added to a black list and most insurance companies would offer the same premium price.

It is even worse if you did not carry enough insurance when you had an accident. Countries and states require by law certain levels of auto insurance coverage. If you do not meet those minimums you might have to pay a fine or even face criminal charges.

It is worth having good car insurance. It is even more worthwhile driving safely and carefully both for physical and financial health.

There is little doubt that having auto insurance is vital for all drivers. The question is what can you do to keep the price of your car insurance affordable. The average price for insurance in the States is around 840$, however if you are a teen driver, or have a bad driving history or credit history you could find it difficult to get affordable insurance. How can you solve this problem? First you must understand how car insurance companies work. Then you can work with them to lower your car insurance. This article will look into one type of coverage you can work on to save you money on your car insurance.

How do car insurance companies work?

They work with risk. They calculate the chances of bad things happening. How do they do this? They collect, record and use mountains of data to calculate the probability of something happening. For instance they collect facts like how many drunk drivers are involved in accidents compared to sober drivers. They then compare how many drunk drivers are involved in various accidents. Not surprisingly they discover that more accidents have drunk drivers involved and that drivers who are caught drunk once tend to make a habit of it. You don’t have to be a rocket science to realize insuring drunk drivers is not a great idea, they tend to get involved in accidents. So if you do decide to insure them you work out how more expensive they are likely to be and increase their premium accordingly.

Once you understand that insurance companies use measureable variable to work out the risk they are taking when insuring you can fine tune your auto insurance to make it more affordable. One example is collision cover. Collision cover provides insurance coverage when you are involved in accident and it is your fault. This is considered by insurance companies as a high risk auto coverage item. Why? Well there is no incentive to drive safely if your cover in this area is high. Doesn’t matter what you are doing or how you are driving you can get the auto insurance to pay the bill. Imagine if you had that responsibility. Of course insurance companies do cover their back a little by putting caveats in the cover like cases of DUI where there is not coverage. However the point stands that it is an expensive kind of insurance to provide.

How can you keep the cost of auto insurance down?

Share the cost with the auto company. If you get collision coverage put a high deductible on the coverage. This means you agree to pay the firs xxx amount of dollars of the damages caused in case you claim collision cover. You can also save yourself cash by limiting your risk and raising your deductibles on other insurance coverage items.

Deciding if auto insurance liability is worth it is difficult for some. Drivers may feel that if they are good, safe drivers paying hundreds of dollars every year to pay for accidents they will not have is a waste of money. There is no doubting that auto insurance is not cheap. The average expenditure of drivers on insurance every year in the United States is around 820 dollars. Multiply that by 10 years and add the interest you could have got for that cash in the bank and you could buy yourself a new car for the price of insuring one for 10 years. And that is an average price, in some areas and states like D.C and Florida the yearly insurance bill averages around 1,150 dollars.

So does it make sense to pay such high premiums for something that might not even happen. This kind of thinking has bred lines of thought like: “Insurance is for pessimists”. Is that so? There is not black or white answer to that although the overwhelming majority of businesses, countries and individuals support insurance in principle. The idea is to manage risk. If you take on an insurance and you don’t need to use it, well you “lost” some money. However if your house burns down, or more to the point you have a terrible accident that kills someone or causes serious injuries and you don’t have insurance, well you’re screwed. The philosophy is that it is worthwhile paying regular and affordable payments if that protects you from serious accidents or problems you would not be able to cover financially on your own.

To illustrate this point, most countries make it compulsive to have some level of insurance cover if you drive a car. This is because of the high risk of causing serious damage while driving. The government wants to make sure that innocent pedestrians, drivers and property owners that are affected by a car accident will be protected and compensated. So the answer is yes, car insurance is worth it and you should invest in it.

Of course there is a smart and a foolish way of investing in auto insurance. It is not smart to have a higher coverage for damages to your car than the worth of your car as the insurance company will only cover the market value of your car.

It is also a bad idea to have a high coverage on medical expenses if you have a separate medical insurance policy. In fact in the case of medical insurance, if you already have coverage it is a good idea to have a lower coverage and a high deductible.

Liability insurance is a type of coverage you don’t want to be stingy with. Blame culture has spread throughout the world, fueled by humongous liability cases in the U.S and other western countries. An apparently small accident or mistake could lead you to bankruptcy if you don’t have suitable insurance coverage.

Source: U.S. Department of Labor, Bureau of Labor Statistics; National Association of Realtors

We all want cheaper auto insurance? The price of insurance is so high in some places, especially for high risk group like young men and bad drivers that the yearly insurance costs nearly as much as the car. The solution? Well, you should start by getting older, that is not difficult, you could also learn to drive better. Another option is to get higher deductibles and you will see the cost of your insurance drop significantly. But let’s start from the beginning. What is a deductible?

A deductible is a way auto insurances and other types of insurance share the risk of insuring you and your property. When you take on a deductible on your insurance coverage you are agreeing to pay for the initial xxx$ of a claim. If you agree to a 100$ deductible on your collission coverage and you have an accident that costs 1000$ to set right. You will pay the first 100$ and the insurance company will honor the rest.

Why?

Deductibles share the risk of the insurance coverage. The philosophy is that people who have to pay for some of the damages they cause/suffer will be more careful, drive safely and maybe even think twice before making a frivolous claim. Of course the higher the deductible the cheaper the insurance.

Having a reasonable deductible can be a good idea for another reason also. It is not a good idea to claim for every small incident because it will affect your no claims bonus. This is a bonus that lowers your premiums every year as long as you don’t make a claim. This bonus can reduce your premium to up to 50% so it is a good idea to only claim when it is for a large amount of money you could not afford to pay or justifies losing the no claim bonus.

When to use deductibles?

So we have proven that deductibles on your insurance coverage can be a good idea. But when should you use them? All the time? On only some types of coverage?

That is a good question. I am glad you asked. There are specific types of coverage for which deductibles work great. Physical damage coverage covers any type of damage caused to you or your car, whether it is your fault or not. This is quite predictably an expensive insurance that can be lowered considerably if you take on a high deductible. You might want to take on a large deductible on medical expenses coverage, especially if you already have another kind of medical insurance.

So as you can see it is all a case of managing risk. If you are already covered for a certain type why double up. If you are not likely to claim for anything under a certain amount because you would lose a no claim bonus, why not arrange a deductible for that amount and get a further deduction on your premium.

If you have ever been involved in a car accident and 1 in 8 of us will this year, you will understand the stress and effort involved in dealing with a car accident. Think of what is involved. Coping with injuries, whether your own or of your loved ones, then having to deal with any material damages is bad enough. Not to mention dealing with insurance companies. It can all feel rather overwhelming. This becomes even more overwhelming if you have to deal with professional insurance adjusters. Adjusters are employed by the insurance companies and have the job of settling claims. Of course they are biased toward the insurance company and have the job of minimizing expenditure on the part of the auto insurance company.

Some look at the situation and feel they cannot deal with the claim on their own and feel they need  a lawyer. As we will see, hiring a lawyer might necessary or even desirable in some circumstances. However you can settle your own car insurance without any help in most cases if you follow some simple but practical steps.

Step 1. Visit your insurance agent. This agent is the man or woman that sold you the insurance in the first place. Going to your agent is a good idea even though he is not involved directly in your claim because he has good incentive of helping you out. Why? The way insurance sales commissions are worked out incentivize long standing relationships between salespeople and clients. This is how it works: When you buy an insurance the salesperson gets a lump commission, but that’s not the end of the story. The same salesperson continues to receive a commission (albeit smaller) for as long as you are a client for the auto insurance company. So your friendly insurance salesperson has good reasons to keep you happy. Even though he probably won’t be able to take your claim to the top of the pile or guarantee it will be successful he can tell you who can help you further.

Step 2. Organize yourself. Keep copies of all important and relevant paperwork. Make sure you have the contact details and policy details of all the vehicles and drivers involved. Record and keep copies of the details of witnesses, police officers and any other person that might be needed for your claim. Get a copy of the police accident report. Draw a diagram and take photographs of the accident scene. Prepare yourself for every interview and portray a confident but polite approach. You have a fair claim and you know you deserve to be satisfied.

Step 3. Contact the experts. Most countries and states have Government Insurance Departments that provide high quality information on your rights and responsibilities. They can provide a wealth of information you could put to good use.

Step 4. If you are having serious trouble with your adjuster, don’t despair, keep the confident but polite approach. In some cases a specialist lawyer will be the way forward to deal with a company that will not give you the service you need.

Lists are wonderful things. I am a new convert to the altar of checklists and white board lists. I always thought they were just a waste of time for the anal retentive and control freaks of this world. Well, they are a bit of that too, but nevertheless you can’t argue with the efficiency of following a well honed plan against the risk of winging it, and seeing what happens. This is especially the case in emergencies. Soldiers and firefighters don’t spend endless hours going through drills just because they are bored and enjoy role playing. Well, there is a bit of that too, but the key point is that when an emergency hits you can’t rely on yourself to make the most logical decisions, it is better to let training and preparation do their job.

Do you think you will never need to be prepared. You think you are a great driver and just don’t get in accidents. Think again, according to America’s Safety council one out of every eight of us will be involved in an accident every year. The odds are stacked against us matey so we better start planning for an accident scenario.

This checklist is by no means comprehensive but does list some of the basic steps you must follow to make the most of a bad situation and control damages after an accident.

Step 1. Stop your vehicle as soon as it is safe to do so.

Step 2. Move the car off the road, if you can, to minimize the risk of further accidents. This step might vary in some countries and states. In Nicaragua for example (and in other countries and states) moving your car after an accident is illegal. Check out your local laws and if you can get the car out of the way. If you can’t move your car, put your hazard lights on and set our emergency triangles before and after the accident zone.

Step 3. Turn the ignition off and make sure all other cars involved follow your example. Keep an eye out for petrol leaks and other flammable products that could cause a fire or explosion.

Step 4. Check for injuries on yourself and others. Prioritize the urgency of the injuries and help as much as you can and are trained for.

Step 5. Call the police and other emergency services.

Step 6. Interchange your contact details with all those involved in the accident and any potential witnesses. Fill in a claim report and make sure you get a copy from the police officer’s accident report.

Step 7. Take pictures of the accident, draw a diagram.

Step 8. Cooperate with the police and get as much information from them as you can.

Step 9. Leave the scene of the accident by car if it is safe or call for a tow truck. Once you are away from the scene of the accident call your insurance company and/or the other parties’ insurance companies.

Have you ever had a car accident? If you have been driving for some years it would be rather remarkable if you have never had some kind of accident. Whatever the case may be, if you have never had an accident, take it from the rest of us, it is a real pain and a complete waste of time. Whether it is a minor scrape or they had to call in CSI to pick up the pieces of your poor little car, accidents are a time consuming beast. This inconvenience only adds to the long list of expenses and general nuisance we must endure  after being involved in an accident. It is not only filling in the claim report, you must include waiting for the police, never ending conversations with your insurance agent, long letters and mountains of paperwork.

You were happily driving down the road when a blind driver smashed into your side after completely ignoring a stop sign and red light. You now have to do all the basics. Check everyone is alright, prioritize injuries, call the police and ambulance service, etc… Apart from the potential loss of life and personal damages, accidents are a prodigious waste of your time.

Of course wasting time is not only a nuisance it also costs money. Depending on your work you might have to either ask your boss for time off or take time off your own business to deal with the minutiae and mind-numbing boredom of insurance bureaucracy.  This will either cost you in loss of wages if you are employed by someone else or a loss in profit for your own business. Can car insurance provide cover for that? Of course it can. This is how it works.

There are three ways you can claim for loss of wages. Interestingly it is not a case of one or the other. If you have planned well you could get yourself a nice bonus from your little accident, and so you should.

Route 1. The obvious source of compensation for loss of wages is the insurance of the driver in the wrong. You were minding your own business driving to work or to pick up the kids when you were plowed down. Why should you pay for the loss in earnings. Make sure you include the claim for loss of wages in your claim to the insurance company.

Route 2. You might have included a loss of wages clause in your own insurance. If you have you don’t need to worry about the other drivers insurance, let your own insurance company sweat the details with them. You paid for that cover with your own insurance and now is the time to reap the benefits of your foresight.

Route 3.  You also might have taken on an independent accident and medical insurance that includes cover for loss of wages. Make sure you claim, after all you paid for it. Whatever you do make sure that the other driver’s insurance doesn’t try to simply cover the difference between your wages and the percentage paid by your personal insurance. Your foresight has nothing to do with their responsibility to cover your loss of wages.

Can you sue your auto insurance broker because you didn’t get a good deal? It might seem like a frivolous question and it might very well be one. However I believe that it raises interesting questions that are worth analyzing. At least in the western world we live in a blame culture. Anything that goes wrong must have a culprit. If your operation goes wrong you sue your doctor, if the hot coffee burns your lips you sue Starbucks, if you trip over your own son in a shop you sue ToysRus. Why not go for insurance brokers also? I started thinking along these lines after reading an interesting case on the New York Times. The article related the story of Marty Ummel. Marty Ummel bought a 1.2 million dollar home following the advice of her broker who allegedly told her it was a great buy. Ms Ummel claims her broker misled her just to guarantee his commission of 30,000$. After a few weeks she saw how bigger and better houses than her own in the same neighborhood were sold for up to 175,00$ less.

What do you think? Does she have a case? It must be noted that the broker she is suing is a broker she hired to find her a house, he wasn’t the broker for the seller.

I like the argument that we are all responsible of our decisions especially when we spend 1.2 million dollars. However if it wasn’t Ms Ummel’s broker’s job to provide accurate valuation and advice, what exactly was his job. Obviously this issue is not restricted to Real Estate brokers.

When we enter a business or a sector we don’t understand we do well to hire the help and advice of “experts”. For instance if we are forced to go to court we hire a lawyer to speak for us. If he misrepresents us we can sue him. Why not with insurance brokers? One argument would be that house valuation is at best a moving target, there are not set parameters and is more of an art than a science. The argument being that law is a more stable representation sector and easier to assess correctly. Although trial lawyers that have to deal with juries might find an objection to that statement it is certainly true that both Real Estate and Insurance brokers have a difficult task.

Insurance brokers must provide accurate advice and help taking into account the lifestyle, habits, health and circumstances or the person or business that requires insurance. Balancing the statistics, probability theory and expectations of clients in an industry that protects what cannot be foreseen is no walk in the woods.

I believe that brokers that skim juicy commissions should be required to stand by their advice, however if that means they can’t be wrong they are going to have to pay a LOT of insurance themselves. The other lesson from this story is we do have some responsibility for our financial actions, which is why it is a good idea that you continue reading from this site to learn more about the world of auto insurance.

Insurance companies, and this includes auto insurance companies, calculate the chances of a policy holder making a claim and costing the money. How they do that is embedded in the fascinating subject of statistics. By correlating extremely large pools of data they try to find links between variables and insurance claims.

You don’t have to be an expert statistician to guess that bad drivers with a history of accidents, speeding and other fines are more likely to have more accidents in the future. Not a surprise then that insurance companies are not queuing up to add bad drivers to their portfolio.

But bad drivers still need to get to work and pick up their kids. What can they do? Or if your driving record is not completely glatt kosher, what can you do to get cheap car insurance?

First of all what is a bad driver, most bad drivers don’t know or don’t think they are bad drivers. So what is a bad driver? A bad driver is someone who regularly gets speeding tickets, does not follow traffic laws, drives while under the influence of alcohol and other drugs, does not know what a tail light is for and can’t park to save his/her life. So now that’s behind us let’s get on with the solution.

Step 1. Be realistic, you won’t get cheap car insurance, if you compare your premium with great drivers. However you can get affordable insurance, but you will have to work for it.

Step 2. Get a clear picture of your situation whatever that might be. Check your police record and your credit record.

Step 3. Improve your police record. This can be done by paying all your fines and continue doing so if you get more. You can also improve how your police record looks and improve your driving skills by taking an advanced safety driving course. Being a bad driver is not only bad news for your car insurance premium it is dangerous for you and the rest of the world. Improve your driving skills because it is the right thing to do, cheaper insurance is a nice side effect.

Step 4. Improve your credit record. Many insurance companies correlate bad credit with bad driving with high risk. For more advice on improving your credit score visit this site. Some simple measures include paying your bills, paying on time, that is always a good start. If your credit is really bad then you can try taking on a secured credit card. Use it sparingly but regularly and pay it off every month. This will provide you with positive material for your credit history.

Step 5. Get all the discounts you can get, you will need them. Because you start with a disadvantage you need to find all the discounts you can claim for. Insurance companies will give discounts for almost anything that will lower the risk you present as a client. Discounts can be provided for automatic seatbelts, ABS, airbags, low mileage, parking in a garage, car alarm and many more safety precautions. Do it, as with becoming a better driver it is a win win situation.