Car Insurance Misconceptions vs. Reality

 

Buying car insurance that’s right for you can be a challenging task, especially with so many options available. You’ll have to navigate through persisting myths as well, but we can clear some of these up for you.

 

Misconception: A red vehicle costs more to insure

 

Reality: If you’re looking for auto insurance for a red car, don’t worry about having to pay more for coverage because of color. Car insurance providers do not factor in color, nor do they ask for that information. Most will, however, take into account such things like model, make, year, and engine size of your car. How many miles you drive each year, where you drive, your past accident history, and even your credit history may be used to determine coverage pricing.

 

Misconception: Car insurance will pay off my loan if my car is totaled

 

Reality: Some consumers have outstanding loan balances that are greater than the value of their vehicle; these customers may want to consider purchasing “gap” insurance (coverage that, for an additional charge, will pay the difference between your loan value and the cost to replace your car).

 

Misconception: Car insurance is “one size fits all”

 

Reality: Auto insurance can, and should be, customized to each customer’s individual needs.

 

Misconception: More expensive cars cost more to insure

 

Reality: The cost of a vehicle does influence the price of insurance but just as important are things like how costly replacement parts are, how many repair specialists there are for a vehicle, etc.

 

Misconception: Rates automatically go up after a traffic ticket

 

Reality: Getting a traffic ticket doesn’t automatically mean significant premium increases. However, not all tickets are created equal, either. The following are some premium-busting tickets you’ll want to avoid:

• DUI Reckless driving
• Careless driving
• Speeding
• Failure to stop
• Failure to yield to pedestrian
• Driving in a carpool lane

Misconception: If a friend borrows the car, he or she is responsible for damages

 

Reality: If you ever decide to let a friend borrow your car, make sure he or she is an experienced driver with a solid driving record. If they do get in a car accident, it may be your insurance that has to cover the damages.

Here's How Much People Are Really Paying for Health Insurance

Plenty of data-hounds have been crunching numbers on health insurance premiums lately, based on the prices insurance companies quote on healthcare.gov and state marketplaces. Online brokerage EHealth (EHTH) has today published something new: a look at the prices people are actually paying to buy policies through its site.

 

Rather than just look at the rates insurers are offering, EHealth’s price index shows the average monthly premium of all the plans its customers purchased over the previous two weeks. Here’s a screenshot showing the index since October:

 

 

 

These are premiums for individual policies across the U.S. People buying on EHealth can’t get federal subsidies, so customers are bearing the full cost of the premiums.

 

The curve shows that people who signed up early bought the most expensive policies, paying more than $350 per month in October and early November. They probably represent pent-up demand from people with preexisting conditions who—before Oct. 1—couldn’t get insurance or could buy policies only at sky-high prices. For people with preexisting conditions who know they’re going to need medical care, it makes sense to buy more generous policies with higher premiums.

 

The price of the average policy purchased on EHealth declined through the fall and leveled off at the start of January. It has consistently been a few dollars above $270 for a month.

 

Will the average price drop further as we get closer to the March 31 open enrollment deadline? That’s when young people and other healthy procrastinators are expected to buy coverage in the largest numbers. A healthier group that expects fewer medical costs in the year ahead might seek out plans that trade lower premiums for higher deductibles.

Rising Flood Insurance Rates Take Effect Amid Government Shutdown

Land-owners in low-lying flood zones were dealt a huge blow on. Oct. 1, as current law is letting National Flood Insurance rates rise as high as 25-percent a year over the next five years, unless the government moves on the law it passed last year. Despite the lapse of the new rates, a bipartisan group of U.S. Senators and Reps, including members of Louisiana's delegation, has pledged to continue to fight for lower flood insurance rates.

Flood insurance for Louisiana homeowners (and many other areas in the Gulf states) is simply a fact of life. But as the increase of incident continues to rise, the costs associated with repairing and reimbursing for flood damage has gone up. So says the numbers compiled by the Government, and indirectly led to the Biggert-Waters Flood Insurance Reform Act, passed last year.

"After 45 years, flood risks continue and the costs and consequences of flooding are increasing dramatically," says the FEMA fact sheet on the 2012 legislation. "[So] In 2012, Congress passed [Biggert-Waters Act] which calls on FEMA to make a number of changes to the way the NFIP is managed...Key provisions of the legislation will require the NFIP to raise rates to reflect true flood risk, make the program more financially stable, and change how FIRM updates impact policyholders."

 

These updates have come up often over the last year, as Louisiana and other federal legislators have fought to reign in those rates, mostly with success. But now the fight over flood insurance rates stalled right along with the budget bill that wrought the current government shutdown, meaning that many homeowners could see their rates continue to rise by as much as 25-percent per year, until the newly calculated risk is met.

Louisiana finds both Sen. Mary Landrieu and Sen. David Vitter looking to recalculate the risk, and more importantly, the out of pocket expense for homeowners of the region.

"Our message is very clear today: The government may be in the process of shutting down, but my colleagues and I have our eyes on finding a solution for the five-million Americans—and almost 500,000 Louisianians—who have flood insurance policies that are facing significant rate increases today," said Sen. Landrieu at a press conference held this week. "Our flood insurance program is not functioning the way it should and is putting a great number of people at risk."

Landrieu pointed out that this problem was manufactured by Congress—and partly by the FEMA elevated flood zones–and that is needs to be fixed by Congress.

"My colleagues and I are working very hard and across party lines to find a solution. Whatever solution we find and agree to, we want to make it retroactive to help homeowners who are facing rate increases today. They should not be punished because Congress has not fixed this problem."

Knowing What Affects Your Rate

Several factors affect the price you pay for auto insurance — your age, driving record, type of vehicle, etc. — but did you know where you live also affects your premium?

It's true: Your location directly impacts your insurance rate. In fact, most insurance companies, including Progressive, consider where you live when they price policies.

Generally, city dwellers pay more for auto insurance than rural dwellers. Why? Because auto premiums are largely determined by factors related to the frequency and amount of a claim payout. Logically, cities have much denser populations than the country, so the risk for an accident is much higher in urban areas than it is in rural areas. Because of this, you most likely will pay more if you live in the city than if you live in the country.

Let's look at some of the locational factors that may come into play when determining how much you pay for auto insurance.

Frequency of Loss

As mentioned already, living in an area with a higher population increases the risk of an accident. Since cities have more people, they generally have more accidents, too. Therefore, if accidents happen more often in a specified area, the price for insurance will be higher since the chance for a claim is higher.

Density

Alongside frequency of loss comes density. The more people in a given area, the higher the risk of human error that can cause accidents. Fewer people travel country roads, so the accident risk factor is lower in rural areas. Hence, those who live in the country most likely will pay less for insurance than those in the city.

Safety Services

The availability of safety services influences locational considerations, too. Safety services include:

· Response times for police, fire departments and ambulances

· Road maintenance in inclement weather

· Enforcement patterns, such as how well laws are implemented by municipalities and law enforcement

· How roads are designed

· Number of intersections in a given area

 

Areas that have fast response times, aggressive enforcement of laws, well-designed roads and intersections, and other positive safety services will be considered safer areas than those whose safety services aren't as available.

Weather

If you live in an area where snow or other inclement weather is a common occurrence, your insurance premium may be higher. Treacherous road conditions can raise your chances of being involved in an accident while driving, which means the risk for a claim is higher.

Theft/Vandalism Rates

In areas that suffer from high crime rates, the risk of a vehicle theft or vandalism is greater. If break-ins occur frequently in your neighborhood, you can expect that you'll be paying more for insurance.

Litigation Climate

Another factor is the litigation climate in your area. Is there a higher propensity to sue after an accident? Insurance companies may look at this — and they may even examine the number of lawyers per square mile — to help gauge the litigation risk in your area.

Though many factors are considered when pricing insurance policies, location is an important one that can directly impact what you pay for auto insurance.