Thursday, May 30

Car Insurance Basics: Why Switching Insurance Companies is Harder than Ever

car insurance for ex prisoners

UPDATED 10/13/2020

Car Insurance is a topic many adults are familiar with. To the many young and innocent drivers of America, it might be just a strange bit of maintenance they pay their parents $100 a month for. However, it’s a lot more complicated than that.

What Is Car Insurance?

Car insurance’s most basic definition is financial protection if you or another driver cause an accident that damages some else’s person, car, or other property. Each state has minimum requirements for the coverage you need on the vehicle. Mandatory coverage often includes liability or bodily injuries, property damage, medical payments, personal injury, and uninsured motorist. Which of these you actually need is part of car insurance coverage law in your state.

One of the car insurance coverage basics is that vehicle damage coverage is not mandatory, but car repairs can be pricey so it is often recommended. Collision coverage reimburses you for damages from collisions while comprehensive covers you from other damages like hitting a deer or a mailbox. This will also cover you for things like your garage door closing on your car or being stolen from your garage. Many other car repairs can be prevented by keeping your car in your garage and keeping up with periodic maintenance like oil changes. You even save money if you learn how to do it yourself. However, broken windows or cracked windshields require a separate glass coverage as well.

Other parts of total coverage car insurance are gap insurance to cover the gap between your car’s worth and the loan you have on it since a new car depreciate so quickly. You may also need or want insurance coverage for renting after an accident, roadside assistance, etc. Each of these types of coverage will affect the overall yearly price of your insurance, AKA, your premium.

Finding a basic car insurance quote can be a relatively straight forward process. Most car insurance policy quotes reflect the age and condition of the car, experience of the driver, and a variable that is determined by the purchaser. There are options to purchase bare bones coverage and options to purchase a gold-plated version that could cover the replacement cost of your vehicle.

When looking for motor vehicle insurance quotes it’s important to set a budget. Due to the variable involved in deciding what level of coverage you need, you do have some options when it comes to price. Essentially, if you have a $1000 car, it makes more sense to search for the lowest required insurance available. If you are driving a brand new $30,000 SUV, you’ll want coverage that will help you purchase a replacement vehicle if the worst happens.

Insurance will cover you and your vehicles no matter what activity you’re undertaking in them. With the exception being if you use your vehicle for delivery services, like a pizza driver, or if you work as a driver for a ride-sharing service. You’ll have to seek out yet another additional insurance for that. Classic cars, collector vehicles, and antique cars may require other forms of insurance as well. There are many other reasons your car might not be able to get insured, if you need help, look for lawyers specialized in insurance and auto claims.

Many young Americans need help finding car insurance and need paying car insurance bills. Insurance is often expensive, especially for young drivers since insurance companies often have higher rates for them due to their inexperience behind the wheel. Even the best full coverage car insurance rates can leave younger drivers, esspiecally young male drivers who are the demographic most likely to get into a accident adn therfore most in need of insurance, in need of help. While many younger people don’t want to take their cars out of the garage uninsured, much of the U.S. requires you to be able to drive to access to stores, work, etc. Public transport just isn’t viable outside of large cities.

So, Why Not Switch?

Even as many Americans are overpaying for their car insurance premiums, studies are showing that few of them are doing anything to find a better deal.

According to an USA Today article, a NerdWallet study recently revealed that American drivers overpay by $368 on average for their auto insurance. Comparison shopping for a better deal could save these drivers as much as 32% on their premiums, the study also revealed.

Yet despite this, the majority of drivers are choosing to stay loyal to their current insurance providers, even if these providers generally reward them with steadily-rising rates.

One reason many people stick with their providers is their perception of the process of switching to a new one, USA Today reports.

The NerdWallet study showed that a mere 12% of drivers found the process of getting a car insurance quote to be pleasant. The majority of respondents found getting quotes from different providers “time-consuming” and “unpleasant.”

“You get what you pay for for any service, you cant really compare two highly different insurance companies and say that someone has overpaid,” says Doug Johnson, President & CEO of Johnson and Fletcher Insurance. “When claims are not responded to, or go unfairly that often is not considered during the choice of premium. You’re paying for coverage and customer service combined, as well as claim handling.”

According to USA Today, the reason many insurance providers overcharge their most loyal customers comes down to a method called price optimization.

With price optimization, an insurance provider can use data about a consumer to set their insurance rate high enough that inertia will prevent them from trying to find a better deal, the USA Today article reported.

The practice of price optimization is largely condemned by organizations like the Consumer Federation of America and the Center for Economic Justice — but regardless, 45% of the country’s largest insurance companies and 26% of all insurance companies in the U.S. practice price optimization.

Trying to get auto insurance if you don’t have an ideal record is hard enough. However, affordable auto insurance companies are very far apart when it comes to folks recently released from prison. Car insurance is all about risk, and costs are priced based on perceived risk of a person as a driver. Affordable car insurance for new drivers who’ve recently been in prison can be higher than average drivers, but it goes up even more if incarceration is disclosed. There is no reason to discuss it, so don’t if you can avoid doing so. An accurate insurance payment should be based on your current driving skill and risk, not what happened a few years ago socially. A better insurance company might understand the difference, but most immediately throw a red flag of additional risk knowing about someone’s prior incarceration. So, don’t bring the matter up and don’t disclose. Insurance companies have no right to the information, only your occupation, car type, driving record and contact info (home location). Note, however, if your driving record has related criminal driving issues, they will find it on a search. In these cases, the higher cost may be unavoidable even in the best cases.

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