Insurance Q&A: “How much is insurance for a new driver?”
If you’re new to this country or have a newly licensed teen, you may be wondering how much auto insurance is going to set you back.
The cost of insurance for a new driver can vary widely depending on several individual factors and the type of vehicle to be insured.
A quick review of how car insurance rates are determined may help you understand the basics of how your car insurance premium is calculated.
But whether you’re “new” or “old,” the same factors are taken into account when an insurer decides how much you should pay for coverage.
The Reality Is…
Generally speaking, if you are new to auto insurance, you can expect to pay more for coverage than someone who’s had consistent, uninterrupted auto insurance coverage. In fact, there are even discounts for drivers who have been consistently insured.
Car insurance premiums are based on the person (or persons) driving the car and the car itself. Newbies are usually more of a risk for an insurer because there is no previous driving history to “judge” you on.
Insurers look at your driving history, specifically your MVR and C.L.U.E. report, to determine your rate.
You are automatically considered a higher risk if you don’t have a driving history for the insurer to review…it’s kind of like getting a mortgage with no credit. Your rate will be higher, if you’re approved at all.
Additionally, there is often a surcharge for people with an “unverifiable driving history.” It can vary widely, but may be in the 10-20% range. So all other things being equal, you’ll likely pay more as a new driver.
What is the Insurer Looking At?
That said; let’s look at the factors that make up the premium you can expect to pay as a new driver. The possible combination of these factors is almost infinite, so we can’t simply give you a number, but we can tell you what the insurer will be looking at.
1. Why are you new? If you’re newly licensed as a teenager, especially a male, you can expect to pay through the nose for a new policy. Teen drivers are notoriously expensive to insure.
Expect a minimum of $100 per month ($1,200) per year. The cost to insure a first time driver who is at least 25 years old is much less expensive, but still more than what it would cost if you had previous coverage.
(How much is car insurance for a 16 year old?)
2. What coverage do you want/need? Are you shopping for liability only auto insurance, or full coverage including comprehensive and collision? As expected, the more coverage you ask for, the more expensive the policy.
(Collision vs. comprehensive coverage)
3. What type of car are you insuring? Never drove before, but just won the lottery? The cost to insure a 1990 Honda Civic will cost substantially less than coverage for a 2012 Ford Mustang GT convertible.
Tip: You do not need to purchase full coverage unless you have a loan or lease your new ride. Physical damage coverage is not mandatory by law, but you lender or leasing agency will certainly require this coverage. Remember, you don’t OWN the car until it’s paid off!
4. How’s your credit? Nowadays, most insurers rely on your insurance score to determine how much to charge you for insurance. If you’re a new driver with a perfect credit history your rate can be as much as 35% less than a new driver with a less-than-perfect credit history.
(Credit scores and car insurance rates)
For example, an 800 credit score “new driver” will likely pay less than a 500 credit score seasoned driver with a speeding ticket, but not if the 800 credit score driver is a 19 year old male.
So be sure to stay on top of your credit. It’s one of the few things you can control, even if you’ve never driven a car in your life.
New Drivers Need to Shop Around Even More!
As a new driver, it’d be in your best interest to shop around extensively. There are certainly companies out there that have more of a risk appetite for new drivers.
Be sure to gather insurance quotes online and contact a few local independent insurance agents to shop your premium.
You may also want to stay away from insurance companies that spend hundreds of millions of dollars advertising their products on TV.
Ultimately, your premium dollars are spent on attracting new clients rather than providing less expensive coverage to existing clients.
(photo: cjc4454)
This post was written on January 25, 2012
Wouldn’t it be nice if we could tell if a particular vehicle was insured just be looking at it?
At least you would know which cars not to drive next to on the freeway, and which cars not to park next to at the mall. Unfortunately, it’s not quite that easy.
While almost every state requires at least minimum mandatory limit liability coverage be purchased in order to operate a motor vehicle on a public road, there are tens of thousands of uninsured drivers on America’s roadways at any given time.
Put simply, they’re driving without car insurance and there’s no way we can tell.
You Can’t Tell
That’s right, there is no way for the average person to determine if a car has auto insurance coverage in force, unless the license plate reads I-N-S-U-R-E-D (just kidding).
There are no publicly accessible databases or websites out there that keep a running list of who does and who doesn’t carry car insurance.
Often times, we find out the hard way that a person is driving uninsured. It may go down like this:
1. Someone causes an accident and damages your car.
2. You try to exchange insurance company information.
3. The shyster who hit you says they don’t have insurance, but wants to pay you in cash for any damages.
4. You agree, and then never hear from the person again after calling the fake number they gave you.
The Cops CAN Tell
Many states are now switching over to electronic insurance reporting systems. This means that every insurer in the state keeps a live record of who does and does not have car insurance based on vehicle identification numbers (VINs) for all vehicles registered within the state.
So a police officer can check your tags while driving behind you and instantly determine if you have car insurance.
You better believe that you’ll be on the side of the road receiving a ticket in no time flat if you don’t have coverage (or don’t have proof of insurance).
But only the police have access to this sort of information. We, the general public, should not expect to gain access to this sort of information anytime soon, aka, never. Technically, it’s none of our business.
How Do We Stay Protected?
There are a few options made available by insurers to protect against the uninsured or underinsured drivers on our streets and highways.
Namely, underinsured motorist coverage, uninsured motorist coverage and personal injury protection, all of which can be purchased as part of your existing auto coverage.
These coverage types are designed to ensure you are not left to pay for bodily injury and property damage you suffer at the hands of some uninsured yo-yo.
Get insurance quotes online or contact a local independent insurance agent to review your coverage and shop your insurance premium.
Often, if you shop around you’ll be able to afford to add these valuable coverage types or increase your current liability limits and STILL save money.
Read more: What to do if you get in a car accident.
This post was written on January 24, 2012
You’ve got to hand it to Geico. They take a completely boring product, insurance, and make it interesting.
Of course, they do so by throwing non-sequiturs at you in the form of talking cavemen, flying pigs, musical money stacks, and geckos with accents.
When it comes down to it, they never really say a word about insurance or related coverage options.
Perhaps this is why their commercials are so brilliant. Every other insurance company bores us with policy details that simply put us to sleep, though many are beginning to take Geico’s lead as well.
And Geico certainly has the lead. The insurer spent the most on advertising in 2009 (most recent data available) by a mile, and likely has held onto that lead, if your television is any indication.
The Geico Gecko’s Humble Beginnings
That brings us to Geico’s most lovable TV mascot, the “Geico Gecko.”
The little green critter apparently came about because the name Geico was often mispronounced as “gecko,” and because animals have proven to create a strong relationship between customers and companies. See Spuds MacKenzie for more on that.
So Geico’s advertising company, Martin Agency, started brainstorming and came up with a “quick doodle.”
Interestingly, it came about during the Screen Actor Guild’s strike when human actors were essentially barred from being in commercials.
So a lot of things had to come together to make it a possible.
That doodle proved to be a goldmine for Geico, as it been a prominent part of their ad campaign for about 25 years now.
In fact, it’s still their main mascot, and likely will be for the foreseeable future.
Is the Geico Gecko English or Australian?
The next logical question is where the Geico Gecko is from. After all, Geico has posed the very question in one of its commercials, only to leave viewers wondering.
Well, anyone that knows a good English accent knows it’s definitely not Australian. See Paul Hogan (Crocodile Dundee) for more on that.
It’s definitely an English accent, though it has varied over the years. The voice behind the Geico Gecko was originally performed by English radio presenter David Kelly, and was later handled by English actor Jake Wood of EastEnders fame.
The most recent English accent heard in Geico commercials is a cockney accent, which is a working class accent common in the East End of London, England.
So there you have it. It’s definitely not Australian, and 100% English. For anyone familiar with accents, it’s pretty obvious.
Clearly Geico just decided to make it a cliffhanger in their commercials to get more people to their website with the hope that they would request an insurance quote. Once again, a brilliant idea.
By the way, the Geico Gecko is the most recognized insurance mascot, beating out Flo from Progressive and Mayhem from Allstate.
For the record, the acronym for GEICO is Government Employees Insurance Company. And the company has been around since 1936.
This post was written on January 19, 2012
Insurance Q&A: “What is a waiver of premium provision?”
We purchase insurance with the idea that it’ll be there when we need it. But an obvious downside is that it doesn’t work if you don’t pay for it.
So what happens if you become ill or disabled and cannot work, and therefore cannot pay your premiums?
You guessed it; your insurance company will cancel your policy. Can you blame them? McDonalds probably won’t give you a burger if you don’t pay for it, so why should insurance be any different?
Part of being a savvy insurance consumer is being educated on what types of coverage are available to ensure you do not suffer financial setbacks as a result of an unplanned event.
This is where the “waiver of premium provision” will come into play on a life, health or long term care insurance policy.
No Cost Insurance?
Not so fast. This is not a free insurance policy. The waiver of premium provision is a rider that can be attached to an existing policy for an additional cost, which may vary based on your age, risk level, policy type, and more.
The rider suspends your insurance premium payments in the event you become ill or disabled and cannot work (and pays premiums).
So it’s sort of like insurance for your insurance. That’s right. You pay extra money while you’re healthy, but will be in good shape in the event something throws you off track.
Not a bad idea. After all, the last thing you need if sick or disabled is a cancelled life, health or disability policy.
How It Works
What does the provision look like in action? Well, it’s not automatic. You have to provide evidence to the insurer that you aren’t physically able to work.
This is almost always accomplished by consulting a physician who can verify that you are in fact disabled or too ill to make ends meet.
Evidence that the “event” took place during the specified policy period is also a requirement. Proving this is the doctor’s duty as well.
After the facts are established, insurers may demand a 90-day waiting period before they actually waive premium payments.
Keep in mind that this rider is not designed to stop premium payments for minor events. If you’re not “out of the game” for at least 90 days, expect your insurance bills to keep coming.
The good news is the waiver is usually retroactive, meaning once the timeline requirements are met (90 days pass), you can expect to receive the money you paid during the waiting period.
Read more: Why you need health insurance.
(photo: Gruenemann)
This post was written on January 17, 2012
Insurance Q&A: “What is a named insured?”
You may come across this term when you are shopping for insurance coverage.
While there shouldn’t be any trouble figuring out who a particular named insured will be for an insurance policy, it’s important to understand why an individual (or entity) is a named insured and what rights/obligations come with being designated as such.
So, Who is the Named Insured?
The “named insured” on any insurance policy is the individual(s) or entity that is listed by name on the declarations page.
It is important to note that on a personal lines insurance policy, homeowner’s insurance for example, a spouse is automatically considered a named insured even if he or she is not listed, as long as they live together.
There are a few rights and obligations of being a named insured on a particular policy:
1. A named insured is required by policy conditions to immediately report any losses to the insurance company. Ultimately, if you are not listed by name on a particular insurance policy (or the spouse of someone who is), you will not be filing insurance claims for financial compensation in the event of a loss.
2. A named insured may assign a policy to another party (subject to the insurer’s approval). An example may be when a particular property is sold; the named insured can request the policy be transferred to the new owner. This is a LONG SHOT, as the new party would be subject to the insurer’s underwriting guidelines. This was more common many years ago when insurance policies were much less complex from a pricing standpoint.
3. Only a named insured can request a mortgagee clause be added to a property policy. For the record, the individual or entity referenced in the mortgagee clause would be notified if the property policy cancelled. This is when lender forced property coverage would come into play.
What About the First Named Insured?
This one’s easy. The first named insured on any policy is the person whose name is listed first on the declarations page. There may be more than one “named insured” on a policy, but someone has to be the first! Why does this matter?
There are a few situations in which being the first named insured will come into play during a particular policy term:
1. An insurance company is only obligated to send a policy cancellation notice to the first named insured. The only exception to this rule, discussed above, is when a mortgagee is added to a policy.
2. Loss reimbursement checks (claim payments) are made out to the first named insured. Note: Larger property claim payments, in which there is a mortgagee, above $10,000 for example, must also be signed by a representative from the lender or lien holder. Why? The lending institution, which technically owns your home, is certainly going to want to be involved in the claim payment process. They don’t want you cashing a $15,000 check for a roof damage claim and not actually making the repairs to the property!
3. The first named insured must be the one to formally request a policy be cancelled.
Who Else is Automatically “Insured?”
You do not necessarily have to be “named” by name on a policy in order to be covered as an insured.
You would have to read your policy “Definitions” to determine who will technically be “insured.”
The best example of an insured (by definition and not “name”) would be relatives or children who reside in your household on a homeowners or renters insurance policy.
Their individual names will not be listed anywhere in the policy, but they are certainly covered from a liability standpoint.
What About Additional Insured?
Most of the examples above deal with personal lines insurance policies such as homeowners, auto and renters policies. Things get pretty complicated in a hurry when we’re talking commercial insurance.
An additional insured is an individual or entity other than the named insured that benefits from the coverage offered by the policy.
For the record, adding additional insured is usually FREE depending on what type of business you operate.
(photo: quinn.anya)
This post was written on January 15, 2012
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