Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
How can I minimize the amount I pay for auto insurance?
There are two sides to the insurance premium question. The first side is the dollars going to the insurance company. The other side is the dollars coming from the insurance company when you have a claim. The most expensive insurance policy is one that does not adequately protect you when you have a claim. If you have low liability limits and do several hundred thousand s of dollars in damage you might find your assets and income making up the difference when you have a claim and that could be devastating.
When you look at the premium for a recent model car you will discover that the pricing is fairly evenly split between liability coverage and physical damage coverage. In a very general way this means that in an accident you can expect your car to receive as much damage as the other car.
Different cars have different repair costs. These costs are determined by taking the results of actual claims and tracking the costs. Some cars have technology that makes them expensive to repair. Others have design features that make them expensive to repair. The safety features on some cars reduce the cost of repair.
A client was making a search for a car based upon the total cost of operation. It was very interesting as we compared different makes and models. We were using the same approximate year so the comparison was just on the manufacturer and the different models being considered. The prices varied more than I would have anticipated. It seemed that the more “curb appeal” the car had, the more likely it was to be a repair shop nightmare.
As a car ages its potential repair costs start to come close to its actual cash value. While the price for the physical damage insurance also starts to reduce there might well be a time when you consider the potential loss of your car to be negligible and then you should remove physical damage coverage. I have been startled by people who maintain physical damage on cars approaching 20 years of service. There is a sentimental attachment that is extremely important.
Liability premiums also vary somewhat with the horsepower and weight of the vehicle. Sporty, high powered cars can do a lot of damage and statistically are more frequently involved in accidents than low powered plain models. I am often asked about whether or not a specific model is being treated as a sports car. The customer wants to argue the merits of the car. The fact is that the car has been rated on its own claims history and the rate is determined, not by logic, but by experience.
It helps to understand the rating system for liability insurance. The year make and model are the starting point as some vehicles are more frequently involved in accidents than others. The second is the driving record and claims history of the principle operator and other drivers in the household. The companies weigh these driving records quite closely. The third factor, in California, is the number of miles the vehicle is used. Obviously every mile has a component of risk exposure so a vehicle being used 40,000 miles a year has a greater exposure to claim than one only being operated 400 miles a year.
The next factor is where you live. Rural areas have fewer accidents than urban and some urban areas are worse than others. These factors are considered in determining a rate.
Don’t forget that the most expensive insurance is the policy that doesn’t meet your needs when you have a claim.
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There are two sides to the insurance premium question. The first side is the dollars going to the insurance company. The other side is the dollars coming from the insurance company when you have a claim. The most expensive insurance policy is one that does not adequately protect you when you have a claim. If you have low liability limits and do several hundred thousand s of dollars in damage you might find your assets and income making up the difference when you have a claim and that could be devastating.
When you look at the premium for a recent model car you will discover that the pricing is fairly evenly split between liability coverage and physical damage coverage. In a very general way this means that in an accident you can expect your car to receive as much damage as the other car.
Different cars have different repair costs. These costs are determined by taking the results of actual claims and tracking the costs. Some cars have technology that makes them expensive to repair. Others have design features that make them expensive to repair. The safety features on some cars reduce the cost of repair.
A client was making a search for a car based upon the total cost of operation. It was very interesting as we compared different makes and models. We were using the same approximate year so the comparison was just on the manufacturer and the different models being considered. The prices varied more than I would have anticipated. It seemed that the more “curb appeal” the car had, the more likely it was to be a repair shop nightmare.
As a car ages its potential repair costs start to come close to its actual cash value. While the price for the physical damage insurance also starts to reduce there might well be a time when you consider the potential loss of your car to be negligible and then you should remove physical damage coverage. I have been startled by people who maintain physical damage on cars approaching 20 years of service. There is a sentimental attachment that is extremely important.
Liability premiums also vary somewhat with the horsepower and weight of the vehicle. Sporty, high powered cars can do a lot of damage and statistically are more frequently involved in accidents than low powered plain models. I am often asked about whether or not a specific model is being treated as a sports car. The customer wants to argue the merits of the car. The fact is that the car has been rated on its own claims history and the rate is determined, not by logic, but by experience.
It helps to understand the rating system for liability insurance. The year make and model are the starting point as some vehicles are more frequently involved in accidents than others. The second is the driving record and claims history of the principle operator and other drivers in the household. The companies weigh these driving records quite closely. The third factor, in California, is the number of miles the vehicle is used. Obviously every mile has a component of risk exposure so a vehicle being used 40,000 miles a year has a greater exposure to claim than one only being operated 400 miles a year.
The next factor is where you live. Rural areas have fewer accidents than urban and some urban areas are worse than others. These factors are considered in determining a rate.
Don’t forget that the most expensive insurance is the policy that doesn’t meet your needs when you have a claim.