Do You Need to Be Rich to Save on Auto Insurance?

America is a society built on merits. It is believed that your rewards will mainly be based on merit. If you work hard and do the right things you will get the rewards. Is this the case in car insurance? If so, companies must be basing your premiums mainly on your driving and claim records. Good drivers with no traffic violation tickets and recent claims should be given the largest discounts.

Do Good Drivers Get the Cheapest Car Insurance Rates?

They do get decent savings there is no denying it. However, a simple quote analysis can show that an average driver with a speeding ticket and a small claim can get cheaper rates than a driver with spotless records for over five years. There are so many other factors considered that you need to do well on several areas to get the best premiums.

What Other Factors Are Influential on Your Premiums?

Your credit score, zip code and background plays as important role as your driving records with most auto insurers and in most states. For example, you can be charged twice as much if you live in a city center where low income households are dominant compared to nice suburban neighborhoods.

Your zip code can be so influential that moving only two blocks away into a different zip code zone can save you a lot of money. This raises a particular question. Are some zip codes singled out by financial services companies that your policies and loans would be more expensive if you live there? Insurers would argue that accidents and auto crimes are higher in certain areas and that is why the rates higher in those zip codes.

However, there is a concern that their pricing reflects other socioeconomic factors than just accident statistics when it comes to rating neighborhoods. Unfortunately, what goes in their zip code profiling is secretly guarded by each firm. If we were to put it plain and simple, they have the tools to discriminate if they choose to do so and they are allowed by most state insurance laws.

The second factor that favors the rich is credit scores. If you are a single mother who is just scraping by you may not have a great credit history and you will lose out on your vehicle insurance savings. The premium difference between having a good and poor credit can be as much as twenty five percent. This is more than the good driver discounts offered by many companies.

Sure, maintaining a good credit score should have its merits. However, should it outweigh more obvious merits when it comes to automobile insurance? Should it qualify you for more discounts than having great driving records?

And it doesn’t end there as there are other factors that can push you down in the favored driver list of most carriers. Having a highly respected job, homeownership, graduating from university and even paying the premium upfront are some of the things that qualify you for discounts. If you are poorer, you are likely to have a blue color job, be renting and want to pay with installments. As a result you miss out on large savings. It is a softer way of saying you will pay a lot more.

What Can You Do About High Premiums?

What you need to keep in mind is that every company is different in the way they look at an applicant and calculate premiums. While company A may be caring a lot more about things like credit score, zip code and home ownership and less about driving records, company B can be completely opposite. You need to find the company that favors your particulars more than the others.

So, how do you go about it? If you know a good independent broker you should talk to him/her about finding the best deals for your circumstances. They should know where to look. Alternatively, you could go on websites like Cheap Auto Insurance .net and get a few quotes online yourself. This process takes about ten minutes for each quote. It may turn out to be the most financially rewarding half an hour you spent lately.

The fact is that companies have their own reasons and agenda. Their practices can be bordering on discrimination and favoritizm. However, you are free to choose whichever company you like and you have many alternatives. We live in an open market economy where consumers are free to choose.

This actually has been the defence used by many states when the practices of insurers brought to their attention. They concluded that consumers can go somewhere else if they don’t like a particular company or the way they are treated. They are not forced to accept a quote or buy a policy from a particular company although it is legally required to insure a vehicle before you can drive.

Article written by

Joe regularly writes about financial services industry on various blogs and forums. He loves blogging and runs several websites.

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