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Six Rules of Auto Insurance
It's a no-brainer that you have to have at least your state's minimum liability coverage in order to even register your car, and that it's important to keep your insurance policy in force, for your own protection as well as that of the other drivers on the road, but here are six general rules you need to know about auto insurance, no matter where you live, or what you drive:
- Your friend's accident is your responsibility. If you let someone else drive your car, and they have an accident, you'll still have to file a claim with your insurance company, and pay any applicable deduction, even if your friend has their own insurance. As a result, your insurance premium may go up, even if your driving record is clean. If you have other claims, "may" becomes "will."
- Personal property you leave in your car isn't covered by auto insurance. If you leave a laptop, purse, or cell phone – or anything else – in your car, and someone breaks in and steals it, your auto insurance will not cover the theft. You might be able to file a claim under your homeowner's insurance policy, but then again, you may not. Never leave valuable items unattended in your car.
- There are no rules when it comes to claims and increased insurance rates. It's true that an insurance claim may cause your rate to go up, but there is no real schedule of increases. One claim may not affect you much, but a claim that coincides with a birthday that makes you a mature driver or a recent move that changed your zip code could be extremely costly.
- Usage-based auto insurance may save you money. If you don't drive much, or have a really short commute, you may want to consider usage-based insurance. This type of policy, also called "pay as you drive" can save you up to 60% on your insurance but it may require the installation of a wireless device in your car, to track your mileage and report it to the insurance company.
- Your credit history can affect your auto insurance rates. In some states, auto insurance companies are allowed to use your credit score to determine the cost of your insurance. The insurers believe that your credit history reflects the likelihood of a claim being filed.
- You have to officially cancel your insurance policy when you change insurers. While you can cancel a policy at any time by notifying your carrier in writing, and specifying a termination date, you actually must cancel your coverage officially in order to protect your credit rating. If you simply stop making payments to one company after you've switched to another, they will continue to send bills, and then cancel you for non-payment.
It may seem unnecessary to know how to cancel a policy correctly when you're in the process of shopping for insurance, but understanding how the insurance industry works will protect you from paying premiums that are too high, as well as help preserve your credit rating. Insurance isn't just about covering your car, after all.
