Understanding Insurance Can Help Consumers Find Debt Relief

Understanding Insurance Can Help Consumers Find Debt Relief

Photo from Picasa

Photo from Picasa

Savings and car insurance

Knowing how an industry works can help consumers save and, in turn, find debt relief sooner. The insurance industry is one area where there are substantial savings to be found if people understand how to work the system to their advantage. Here are some tips on how insurance companies work when it comes to vehicles.

The fact about bad credit

The fact is if a consumer has bad credit, they are going to pay more for car insurance. Studies have proven that there is a direct correlation between credit scores and the probability a consumer will file a claim. Insurers also use the information to see if applicants are paying their bills on time or if they have a wide variety of accounts open. Consumer’s credit information is compiled to formulate an “insurance risk score.” People who find themselves with low credit scores, may want to clean them up prior to getting a new auto insurance policy. This can save money on premiums.

Type of car

Another insurance industry secret is that the model of car being covered plays into the premium amount. This is a tightly-held insurers secret and this information most likely won’t be found online anywhere. The reality is though that insurers have a rating system for just about everything and it begins with the cost of the vehicle, safety rating of the model and theft data. The rating system is from 1 to 27 and the higher the number, the higher the premium consumers are charged to insure the car.

The way to get around this issue is to call insurers and ask for differences in premiums for a few varying car options. Although specific information on how cars are rated is secret, consumers still can find lists online of the “highest risk cars to insure.” A simple search for this information can prove helpful.

Pay upfront for insurance costs

Another way consumers can save is to pay upfront for their insurance costs. If people chose to pay in installments the industry uses what is called “fractional premiums.” A fractional premium is one that factors in charges for breaking up payments. Paying the full premium up front will save money in the long run. Using an online comparison tool can help visualize the differences in payments between a 6-month premium and six 1-month premiums. Consumers can see how much money they can save and put it towards bills, debt relief or savings, rather than added insurance premium fees.

Bad driving will cost

In the insurance industry the standard is to increase a premium by 40% for the first at-fault incident. For example, if a company’s initial base rate is $500, after an at-fault accident the consumer’s rate will go up by $200. This isn’t a rule though and it may go up more, depending on the individual company’s decision. To mitigate the cost, consumers should look for companies that offer “first accident forgiveness”, where people aren’t held liable and their rates won’t increase.

A car’s value to the insurance company

Insurance companies don’t use the Kelley Blue Book or National Association of Automobile Dealer’s value ratings. Each company has its own proprietary scale of how they value cars and it involves the car’s mileage, pre-accident condition and geographical region it’s in.

To handle this issue, consumers can get “gap insurance.” Gap insurance is the difference between what the company will cover and what consumers owe. This can be highly advantageous to have because if the wreck is substantial, it can save consumers thousands of dollars.

Insurance and savings

There is money to be saved when searching for auto insurance. Though it may take some research, it is worth it if consumers can find extra money for debt relief, savings and bill payments.

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