When To Switch Car Insurance.

If you’re like most people, once you get your auto insurance you stick with the company until they increase your premium, or give you grief over filing a claim. But you can actually save some money switching your car insurance in some circumstance.

You can save money when you switch insurance providers at the right time.

Here of five of those circumstances where you might find cheaper car insurance if you switch your car insurance provider.

1. Your credit score has changed you first purchased the policy.

If your credit score is significantly lower or higher than when you originally purchased your insurance policy, then you probably should start shopping around when it’s time to renew. The reason is that many national car insurance companies use your credit score as part of their formula for determining your premium. People with higher credit scores tend to get lower insurance premiums. Conversely, those with low credit scores tend to pay more.

So it makes obvious sense to shop for a better rate when your score has improved, but why shop around if your score has gone down? I mean, aren’t you at a disadvantage and probably pay more?

Yes, but not always.

Some insurance companies weigh your credit score less than your driving history. So, if you have a lousy credit score but an accident free history, you may get a lower premium on your auto insurance if you shop around and find a company that weighs the score less heavily.

If you fit the low credit score category, then you should try to improve your credit score, and contact your state department of insurance for help in finding an insurer who favors driving records over credit histories.

2. You just started working from home.

Many insurance companies charge higher premiums for driving more miles. It just makes sense – the more you drive, the greater the chance of being involved in an accident, and the greater the likelihood you will file a claim.

But if you’ve started working from home, or drastically cut your commute distance it may make sense to either notify your insurer or start looking for a company that will give you a discount on your auto insurance for driving less.

The range of what is considered for the low-mileage driving discount depends on the state.

3. You’re in the middle of a long-term car lease or loan.

With car loans reaching the 60 and 72 month range, people can end up owing more than the car is worth and insuring the car for more than it’s worth. Long lease financing favors lower monthly payments, but the car depreciates faster than the principal is paid on the loan, and the can leave you owing money if your car is totaled since the insurance company will only pay for the market value of the car.

One solution to this problem is GAP insurance, which covers the gap in what the insurance company would pay and how much you still owe on the car loan. Many insurers offer a discount on GAP insurance if you switch your auto insurance to them.

Of course, a better solution would be to take out a shorter term loan and not end up upside down in the first place, but not everyone has the income to manage that.

4. You buy a home, or obtain a company car.

Homeowner’s need homeowner’s insurance, and many insurers offer a multi-policy discount if you buy both homeowner’s and auto insurance from them.

If you recently were given a company car as part of a promotion or new job, then you may even be able to get a multiple-car discount.

5. Your children reach driving age.

Once junior is old enough to start driving, and gets his license you’ll need to notify your insurance company. There won’t be any discount for adding junior to your policy, but some companies are more competitive than others when it comes to insuring younger drivers.

Photo by daniel.sound.

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Is Gap Insurance A Good Idea?

As the name suggests, Gap insurance is meant to fill a gap in already existing insurance coverage. The “Gap” in Gap Insurance stands for “guaranteed auto protection” and it is most typically offered on leased vehicles, for situations where the vehicle may be worth less than the total amount owed on the lease if the car is totaled, but gap insurance exists for many other types of loans as well. Without gap insurance, you would be on the hook for the difference between what the auto insurance pays for the totaled vehicle and what is still owed on the lease.

Signs like this are common in the U.K., but there is another kind of GAP car buyers need to be aware of.

Is gap insurance worth it?

Well, that depends on your financial situation. Let’s consider a simple example:

You buy a new car that costs $20,000. You have no money for a down payment and finance the entire cost of the purchase – remember, this is a simple example so I’m ignoring all the other taxes and fees involved. A new car loses as much as 20% of its value the minute you drive it off the lot, so within seconds of leaving the dealership your shiny new car is worth $16,000.

With me so far? Good.

Now, on your way home something terrible happens. You get into an accident and the car is totaled. You now owe the bank $4,000. That’s the difference between the amount you owe the bank ($20,000) and the depreciated value of the car at the time of the accident ($16,000).

Gap insurance would pay the $4,000 difference on top of the $16,000 replacement cost.

In this example, gap insurance would definitely be worth it unless you had $4,000 in savings to pay for the difference on your own.

Is gap insurance a good idea?

In general, gap is a good idea if:

• You have less than 20% to make a down payment.

• You “roll” negative equity from a previous car loan into a new car loan.

• You finance for 60 months or more.

• You finance a vehicle that depreciates very quickly, such as a luxury, highly optioned or one of many domestic vehicles.

• You lease a vehicle.

Most of these cases revolve around financing too much, owing too much and not saving enough. Sadly, the type of people who find themselves in such a situation often have few real options but to purchase gap insurance.

Is gap insurance a scam, a rip-off or even necessary?

Strictly speaking, no. It is not a scam or a rip-off, though some car dealerships who offer it may be. It is also not strictly necessary as you can avoid needing it by doing any, or preferably all , of the following:

• Always pay at least 20% of the purchase price as a down payment

• Don’t buy more than you can afford.

• Have an emergency savings account with enough cash to cover any expenses not paid by your auto insurance.

• Don’t lease a vehicle.

• Always buy slightly used vehicles and never buy new.

By following the above, you will position yourself so that gap insurance would be a needless expense and you might even growth your net worth while you’re at it!

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Auto Insurance Rates Decline in 2009.

According to InsuranceRates.com, New York state (where I live) auto insurance rates have declined more than 20% in 2009. Insurance rates in your state have likely also declined.

A resident of New York who pays the 6-month median rate of $970.25 and who earns $42,414 a year (the New York median annual income) pays approximately 4.58% of his gross income for auto insurance. What does all this mean? Simply that New York state’s “affordability factor” ranks it as the 5th most expensive state for auto insurance – a fact that should not come as a surprise to any new Yorker’s out there.

What was surprising to me was that Massachusetts is the most affordable state, with a factor of only 1.96% and Louisiana of all places is the most expensive at 6.70%.

Here’s a breakdown of NY rates by age group:

Apparently experience counts for something when it comes to Auto insurance rates in New York – the under 19 crowd pays more than twice as much (on average) as the 60 – 74 age group.

If you’re interested in how your own state rates, or you’re interested in getting some auto insurance quotes , head over to http://www.insurancerates.com and click the “Shop Rates” button.

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Best Insurance Sites On The Web.

This list is compliments of Kiplinger’s personal finance magazine “Best Of” edition. Today, we’re focusing on the best insurance related web sites.

Best site for health insurance quotes.

eHealthInsurance.com.

eHealthInsurance.com offers quotes for most major health insurers as well as the ability to compare coverage, and find plans that include your current doctor. If you are without employer provided health insurance, it’s essential that you at least check out this site.

Best site for health coverage information.

CoverageForAll.org.

CoverageForAll.org provides strategies and resources to make it easier for low-income people and people with existing medical conditions find more affordable health coverage.

Best site for life insurance quotes.

AccuQuote.com.
AccuQuote.com allows you to search hundreds of top rated providers and provides half a dozen quotes for you to pick from. I used AccuQuote.com when I was looking for a life insurance provider for my wife and myself. The process was very easy. AccuQuote.com provides a manager to work with you one-on-one and see you through the entire process from selecting a provider to having any required blood tests performed. In our case, the blood tests were done in the comfort of our own home by a sort of visiting nurse paid for by the Insurer. The AccuQuote case manager them ensures that the blood results are filed correctly with the Insurer and gracefully bows out once the contract is signed and you become a customer of the Insurer.

Best site for Medicare Part D.

medicare.gov/mpdpf.

This is an excellent tool for comparing Medicare Part D prescription drug policies. You can check out premiums and co-pays for Part D plans.

Best site for Medicare Advantage.

MedicareNewsWatch.com.

This site’s CostShare report provides analysis of the best Medicare Advantage plans in your area.

Best site for Auto Insurance.

InsWeb.com.

InsWeb, like AccuQuote for life insurance, allows you to search hundreds of auto insurance providers based on your personal criteria and provides several quotes from top rated insurers.

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