Insurance Q&A: “What is the best car insurance for young drivers?”

Young drivers often pay significantly higher auto insurance premiums than just about everybody else. This is especially true for teen drivers, and even more so with teen males.

Often, a driver is susceptible to the higher auto insurance premiums until the age of 25.

[How much is car insurance for a 16 year old?]

So if you’re young, you’ll certainly face challenges when trying to obtain quality auto insurance coverage at a reasonable price.

And while some insurance salespeople may direct you toward the cut-rate, discount stuff, more emphasis should be aimed at ensuring the youngster is “appropriately” insured at the right price.

If you want to know what the cheapest car insurance is, or simply want to know how to get cheap car insurance, don’t bother reading the rest of this post.

Continue on if your main goal is evaluating what the best insurance coverage is for younger drivers.

As always, it’s a good idea to read up on how car insurance rates are determined in order to better understand how much you may be charged and why.

What is the BEST Coverage – Finances Aside?

Assuming your primary goal is simply ensuring a young driver has “the best” (appropriate and well priced) insurance coverage, you would treat a young driver no different than a driver of any age.

Being young certainly doesn’t exclude you from getting into accidents and causing bodily injury and property damage to others. In fact, the odds are much higher such events will occur…thus, the higher insurance premiums.

It is also important to understand that any individual who is found to be negligent in causing bodily injury and property damage to others can be “on the hook” for court awarded damages in excess of their policy limits.

This means that if you go with lower-end liability coverage and seriously injure someone and “total” his or her Ferrari, your insurer will ONLY PAY up to the policy limits.

The rest of the damages awarded to the Ferrari driver (hospital bills and replacing the Ferrari) could be your problem. If you’re broke and have no fear of being sued, this may not concern you.

[How much car insurance do I need?]

But if you are a younger driver with a statistically higher chance of causing an accident (and something to lose), you may want to consider purchasing the highest liability limits available that fit within your budget.

Tip: The decision to purchase full coverage, including collision insurance and comprehensive insurance, is dependent on the value of the vehicle to be insured and whether or not you own, lease or have a loan on the vehicle.

(Collision vs. comprehensive auto insurance coverage)

Final Word for Young Drivers

It is always recommended that you purchase the highest liability limits you can afford, young driver or old. Be sure to consider insurance at the top of the list as far as budget goes.

Skimping on your car insurance coverage to save a few bucks can have devastating financial ramifications in the event you are found to be negligent in a serious auto accident.

Compare insurance quotes online before making a decision. Even a young driver will see a wide range of pricing, so if you don’t shop around, you could find yourself losing out on coverage to stay within budget.

There are literally thousands of insurers competing for your business. Do your research and don’t choose an insurer based solely on their multi-million dollar advertising budget.

Find one that best suits your needs, and remember to shop again once you get a little older, instead of staying “loyal” to one insurer your entire life!

Read more: The difference between full coverage and liability only car insurance.

Welcome out from under your rock if you’re just hearing about “The General Auto Insurance” for the first time.

Assuming you aren’t a rock dweller, you’ve probably seen a few million of their silly television commercials and may be wondering what exactly they’re all about.

You may be especially interested in their claim of $39 per month auto insurance coverage. More on that in a minute.

Who is The General?

Spoiler alert! The General is actually an insurance agency, not just a cartoon character with a great handlebar mustache. What this means is that they are licensed in certain states to solicit and sell insurance to individuals at the retail level.

Similar to an independent insurance agent on almost any street corner in the country, The General sells insurance products on behalf of a few different companies.

The General is a subsidiary of (which means they are owned by) PGC Holdings Corporation (PGC), and they offer insurance online or by phone from Permanent General Assurance Corporation,Permanent General Assurance Corporation of Ohio and The General Automobile Insurance Company Inc.

This set-up is not unlike Progressive and GEICO, which are both insurance companies and also insurance agencies, allowing them to make money by selling other insurers’ products, most notably, homeowners insurance.

If you have a Progressive or GEICO homeowners insurance policy, it is actually underwritten by a different company…Progressive and GEICO simply earn a commission for passing you on to the home insurance companies.

So we can think of The General as the advertising vessel for the aforementioned auto insurance companies, which clearly don’t sound as cool. Let’s face it; it’s a lot easier to market car insurance via The General than from Permanent General Assurance Corporation of Ohio.

What Does The General Specialize In?

The General specializes in non-standard auto insurance. This type of insurer offers coverage to those of us who do not “fit” the standard or preferred markets for various reasons, including some of the following:

1. Newly licensed drivers – Without a driving history to judge you on, some insurers aren’t willing to take a risk on you.

2. Unfavorable MVR – You are likely a non-standard auto insurance candidate if you have racked up a few tickets within a certain time frame (usually between 3-5 years). Having just one DUI will likely force you to seek coverage in the non-standard market.

3. Unfavorable C.L.U.E. Report – Similar to your MVR tracking your driving violations, your C.L.U.E. report tracks all of your insurance claims. Non-standard insurers specialize in offering coverage to those of us with multiple claims within the 3-5 year time frame.

4. Lapsed Coverage – You will probably need to find a non-standard insurer if you are unable to maintain coverage consistently. Perhaps your coverage has lapsed for non-payment more than once in the past six months.

Can I Get Good Car Insurance Coverage from The General?

You can certainly expect to pay more for your coverage with any non-standard insurer, and The General is no exception. This DOES NOT mean you cannot get all of the coverage you need. The same basic coverage is available from almost any other insurer. How much you pay is the only difference. You will have the option to purchase any of the following coverage types:

1. Bodily Injury and Property Damage Liability – this is the state mandatory coverage, also referred to as liability only.

(When to opt for liability only car insurance.)

2. Physical Damage Coverage – this includes collision coverage and other than collision coverage, also known as comprehensive coverage.

You may require this if you have a loan on your ride, if you’re leasing it, or it’s simply valuable enough to insure against damage that’s not caused by another driver.

(Collision vs. comprehensive coverage)

3. Uninsured and Undersinsured Motorist Coverage – This is the coverage that protects you against drivers who either have no insurance, insufficient liability limits, or hit-and-run scenarios.

4. Personal Injury Protection and Medical Payments – These are “no fault” coverage types that provide monetary compensation for injured people, regardless of whose “fault” an accident was.

(What is the difference between PIP and Med Pay?)

What About the $39 Auto Insurance Coverage The General Promises?

While The General could not legally advertise this number unless it was within the realm of possibility, you may be better off assuming you will pay more than that each month.

This line of thinking will keep you from getting frustrated or disappointed when you find out YOUR policy costs more.

Just like every other type of advertising you see on television, you’re being told about the absolute cheapest policy their organization has, but only one-in-a-million people qualify for that rate.

Hey, if it gets you to their website, they consider it a “win.”

(See how much insurers pay for advertising. The numbers will blow your mind!)

But it’s best to obtain insurance quotes online from numerous different insurance companies to ensure you get the best deal available. There are thousands of insurers out there competing for your insurance premium dollar…and every one of them has different rates.

The General may be a good place to start for your auto insurance needs if you find yourself in the non-standard market, but make sure it’s not the only place you go.

Spending just five more minutes obtaining multiple quotes could save you some serious dollars in the long run.

Insurance Q&A: “How much do insurance agents make?”

Just like any other commission based sales job in the world, the sky is the limit as far as income goes for an insurance agent. However, it’s not that cut-and-dry.

There are a number of ways to get into the industry as a sales agent and a lot of products to potentially master and sell. How much you get paid depends on where you start.

It’s also worth noting that, just like any other sales job, you should not expect to earn very much money until you have built a solid client base. This can take anywhere from 2-5 years depending on how hard you beat the pavement.

Expect 10 “No’s” for every single “Yes.” This means you will likely “pitch” to 100 people to sell 10 insurance policies, which should be at least half of the sales you’ll need to make to earn some decent money every single month. If you’re not already scared, keep reading.

How Property and Casualty Insurance Agents Are Paid

Typically, an insurance agent is paid a commission, or percentage, of the total insurance premium the insurer charges for a given policy. Property and Casualty (auto, home and business) insurance agents typically earn anywhere between 7% and 20% commission on each policy sold. If you forced us to come up with a solid number, we’d say 12% is what you can expect on average.

Example: $1,000 auto insurance policy at 12% commission would net you $120.00

Each year, assuming your client is still happy and continues to insure with you, you will earn a “renewal” commission. Renewals are where the money’s at, as you do not have to advertise or spend time quoting the policy for it to renew.

If the client makes the renewal payment, you get paid again…it may even happen when you’re sleeping. Renewal policy commissions are often slightly less than the initial commission you get paid for the “new business.” New business may be 15% and renewals only 10%.

As you can see, a few years into the process of building your “book” of business, the renewals from previous years virtually make your income exponential. There are few products you can sell where you get paid each year, whether you worked with the customer or not.

Example: Last year’s auto policy from the example above renews ($120.00) and you sell a new auto policy on the same day the following year, earning another $120.00 – your income for that day is now $240.00. Not a bad day’s work.

The average insurance agency, if run well, should have a target of retaining 90% of the previous year’s business.

You might lose 10% of the previous year’s business from unhappy clients who didn’t feel their insurance claim was handled well, so they shopped around and found cheaper insurance…or maybe their third cousin became an agent and they simply switched their insurance policy to him or her.

How Life & Health Insurance Agents Are Paid

Life and Health insurance agents get paid a little differently. There is still a commission, but quite a bit more is paid upfront compared to property and casualty insurance. There are also renewal commissions, but these are paid at a much lower percentage (although maybe not less overall money than a property and casualty policy, as the premium is often substantially higher).

Example: You sell a $10,000 whole life insurance policy and receive 55% commission for the first year, which is $5,500. The renewal commission may be as low as 3%, which still nets you $300 per year.

Some life insurance companies may pay as much as the entire first year’s premium as a commission, and then not offer renewal money. The combinations of new and renewal commission for life and health insurance can vary greatly depending on the company.

Do You Want to Own an Insurance Agency or Work for One?

How much money you earn as an insurance sales agent can also vary greatly based on whether you start your own agency or work your way up at an existing agency. Of course, there are pros and cons to both options.

In the long run, if you’re getting into insurance sales so you can afford a yacht, being the agency owner is your goal.

It’s the same as any other industry. You make more money as an employer (if you’re good enough) than as an employee, but it requires more work.

Insurance Agency Owner

Expect to make much less in the short run if you open your own insurance agency, as every dime of your income from sales will be put back into keeping the bills paid and the doors open for the first couple of years. BUT, and this is a huge “but,” you’ll make significantly more money in the long run as an agency owner…if you can manage to stay in business.

Many insurance agencies are handed down to family members or simply purchased by someone who has enough money to buy one and doesn’t want to take the time to build the business from scratch.

Agent in Someone Else’s Insurance Agency

If you are new to the industry, you will likely start as a Customer Service Representative (CSR). If you are good enough at the job, and decide you like insurance enough, you may be able to “move up” to an agent, working on behalf of your employer.

The upside to this method is that you earn money immediately upon selling an insurance policy. You do not have to pay the phone bill, rent, utilities, insurance (yes, insurance agents need insurance), etc. That’s the owner’s problem.

You might expect to have your expenses paid, and in a large enough insurance agency, a processor to do your paperwork…which is a good portion of the job.

The downside is that you will be splitting your commission earnings with the owner of the agency you work for. After all, the insurance companies who offer these products will not let “anyone off the street” represent them and sell their insurance. If you’re new to the industry, you will have to ride someone else’s coat tails until you get your footing.

Captive or Independent?

You will also have the option of being a captive agent or trying to become an independent insurance agent. Captive agents typically sell insurance for only one company, whereas an independent agent sells insurance for multiple different companies.

Captive Agents

For captive agents, think Farmers and State Farm. This option is great for people who don’t know the first thing about insurance. Pass a “sales aptitude” test and you’re off to the races with these types of insurers.

Many captive agents switch over to becoming independent agents after enough time in the industry, as captive insurers typically have a limited “appetite” from an underwriting standpoint. You will turn many clients away if State Farm does not want to insure the individual because they are “too risky.”

After becoming a successful captive agent and building your confidence, you may decide that you want the ability to insure anyone who walks through the door. This means you want to be an independent agent.

Independent Agents

It’s much harder to become an independent agent, as you actually have to prove you know what you’re talking about to represent the various insurance companies.

You’ll very likely need to demonstrate that you have previously sold a lot of insurance to qualify for a contract to sell insurance products independently. The commissions are higher here, but you need to satisfy multiple insurer’s requirements from a policy standpoint.

You may represent 10 companies, and each of them could expect you to sell a minimum of five policies per month, or they will terminate your contract and not allow you to sell their product anymore.

So going independent will likely require a few years of experience in the industry, starting by working with an existing independent agency or buying one.

To sum it up, there are a number of different ways you can make money as an insurance agent, and what you put in is what you’ll get out, much like any other sales job. Don’t expect it to be easy.

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)

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.

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.

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)

Yes, we’re referring to popular new programs such as Progressive Snapshot.

Usage based insurance (UBI) is quickly being adopted by large auto insurance companies as a means to select drivers they prefer to insure, while providing these customers with lower premiums, according to a recent Weekly Credit Outlook from Moody’s .

How Usage Based Insurance Works

Insurers are using devices, known as telematics, which are installed in a vehicle to track various aspects of operation. The telematics report information such as mileage, time of day the car is in-use and how often the car’s brakes are applied vigorously.

This information helps insurers determine which of us presents the least likely statistical chance of having an accident and filing an insurance claim. And the lower your chance of filing a claim, the lower your overall insurance premium.

You’re not the only one saving money here. Your insurance company also saves big bucks by selecting drivers who don’t end up costing them money. It’s a win-win situation.

Keep in mind that this is not Mileage Based Insurance. MBI is a program where you guess how many miles you will drive in a given policy period. This type of insurance can be dangerous for an insured that guesses incorrectly and is forced to pay HUGE penalties for “going over.”

Which Insurers Offer UBI?

You may notice the insurers offering this product have one thing in common. Deep pockets. The cost to launch a product of this nature is keeping smaller insurers out of the market so far.

But they may be forced to get on board or potentially suffer financial consequences that outweigh the cost to implement UBI.

1. Progressive Insurance
2. Liberty Mutual
3. Nationwide
4. Travelers
5. The Hartford (announced they will offer UBI in the near future)
6. GMAC
7. Allstate
8. State Farm

Most of these insurers also make the list of companies with the biggest advertising budgets. Noticeably missing is GEICO.

TTAI wouldn’t be surprised if there were a Gecko-shaped telematics device in the works as this post is being written.

What’s the Future of UBI?

Over time, you should expect to see more and more car insurers adopting this technology. Those who don’t run the risk of being overlooked by consumers.

The companies that can’t (or don’t want) to go this route will be forced to insure “less attractive” drivers, as those that fall into this category will likely opt not to have their driving habits tracked – knowing their insurance premiums may actually increase as a result of being monitored.

After all, the “riskier” driver will certainly opt for an insurer who doesn’t track their vehicle usage and driving habits.

Is UBI Always the Cheapest Coverage?

While usage based insurance is a great idea for those who exactly fit the risk profile of the insurers who offer it, it is not always going to be the best deal around.

It is recommended you aggressively shop your insurance premium with an independent insurance agent who can compare several companies at one time.

They’ll help you find a company that doesn’t inflate their premiums in order to spend hundreds of millions of dollars in advertising each year.

A few of the insurers on the UBI list continue to have some of the highest car insurance rates out there – regardless of your vehicle usage or driving history.

Insurance companies make more money when they retain customers over the long term because the acquisition cost (to advertise and issue policies) is one of the largest expenses they incur.

Once you become a customer, if you don’t file any insurance claims, you’re a cash cow to the insurer. Every time your policy renews, they make more money…without having to do much additional work.

But does loyalty pay? Maybe, maybe not. For the past several years, insurers have been consistently lowering insurance premiums to attract new clients. But just like cable television and mobile phone plans, typically only the new customers get the deal.

You may have noticed that your insurer actually runs several different companies. “Insurance Mutual, Insurance Company of TX, Insurance Fire Company,” just to name a few. Insurers often start “new companies” to offer new insurance products in a particular state.

They aren’t allowed to offer two different pricing models for the same product in the same state, so they get us on the hook, and then simply start a new company to sell a cheaper product.
After seeing commercials about how low their rates are, you may check back with your insurer to see why your rate hasn’t dropped.

If you’re lucky, you may be able to get a new policy from the “new,” cheaper company. But while you’re at it, you may also want to compare insurance quotes from several other insurers to ensure you snag the best rate possible.

What “Market” Cycle Did You Start In?

As alluded to above, insurers have been in a battle to lower rates to attract new customers for the past several years because the insurance market has been “soft.” Just like other financial market cycles of boom and bust, insurance has a “hard” and “soft” market cycle.

If you purchased your policy at the beginning of a “soft” market, your insurer has likely decreased their rates (for new customers) for several years now. Of course, they don’t necessarily offer you the cheaper insurance the new guy gets.

In contrast, a “hard” market refers to a period of time where insurers generally increase their premiums to build their balance sheets after years of “giving it away.”

How Long Since You Last Shopped?

Insurance companies make adjustments to their car insurance rates regularly – based on their financial results from previous years. Some insurers make several changes each year.

Keep in mind there are hundreds of companies fighting for your insurance premium dollars. Couple that with their rates changing regularly and you will realize the need to shop your insurance regularly, even if you’re happy as a clam with your current insurer.

If you work with an independent agent, you can simply ask him/her to shop your premium with other insurers they represent. You might find that there is a better deal available to you with the same agent.

On the other hand, if you use a captive agent, you will need to contact different companies on your own. A captive agent only represents one insurer. Call them and ask to lower your premium and their only option will likely be to reduce your coverage, increase your deductibles, or perform their discount double check.

Either way, you will want to contact other insurers to be certain you aren’t sacrificing anything to get a lower premium.

Older Car? Drop Physical Damage Coverage

Assuming your car is not a collector’s item, which may increase in value over time, you may want to lower your deductibles or even drop your physical damage coverage altogether.

Why? The actual cash value of your older vehicle may be so low that you are simply throwing away money by insuring it against physical damage coverage.

For example, you may pay $300 per year for physical damage coverage to insure a car that is only valued at $2,000. So, you are paying 15% of the vehicles total value to insure it (every year). That might not make sense financially.

On the flip side, you may only pay $500 per year for physical damage coverage when your newer vehicle is worth $20,000. This means you are paying 2.5% of your vehicle’s value to insure it against physical damage.

Unfortunately, there is no “magic” percentage where you are recommended to drop this coverage. Everyone’s budget is different, so you may be willing to take your chances to recoup some money in the event you suffer a total loss.

Be sure to address this matter every couple of years with your insurer to ensure you are not wasting money on insurance coverage that won’t really benefit you in the long run.

Remember, car insurance is not a “set it and forget it” program. Those who do the research and remain “active” with regard to their insurance needs often save more money in the long run.

Allstate Insurance recently launched its so-called “Claim Satisfaction Guarantee,” which is currently available in 31 states.

In short, Allstate policyholders who are dissatisfied with their insurance claims experience are able to receive up to a six-month insurance premium credit on their auto insurance policy.

How It Works

Perhaps your insurance adjuster didn’t call you back fast enough…you may receive a six-month premium credit. Perhaps you were put on hold too long or a customer service representative was rude to you on the phone…you too may receive a six-month premium credit.

Here are the “steps” of the Allstate Claim Satisfaction Guarantee program:

1. You’re an Allstate customer.
2. You have a car accident and file a claim with Allstate.
3. They pay your claim, but you’re not happy.
4. You send a letter explaining why.
5. Allstate gives you up to a six-month credit on your premium.

*Customers who qualify for this program must notify Allstate in writing within 180 days of their incident to express that they are dissatisfied with any aspect of their claim experience in order to receive the credit.

Tip: Allstate offers a six-month credit for the premium charged for the vehicle listed on the policy. If the vehicle in question was not listed on the policy at the time of the accident, you will receive a credit equal to the premium for the vehicle with the lowest premium amount listed on the policy.

Basically, you will not get an entire six-month premium credit if you have more than one car on your policy. If you have two cars that each cost $500 per policy term ($1,000 total per term), the most you will receive in the form of a credit is the $500 for one vehicle.

Additionally, you are only able to receive one “credit” per policy term. Regardless of how many cars you have on your auto policy, you only get one credit.

Too Good to be True?

The offer from Allstate is pretty cut-and-dry. There are some terms and conditions, but rest assured that TTAI has read through all of the available information for you. We don’t see any glaring “holes” in the program.

(List of Allstate auto insurance discounts.)

Of course, if Allstate has been overcharging you hundreds of dollars annually for several years, you do not necessarily win here.

It is highly recommended you obtain insurance quotes online and/or through an independent insurance agent to ensure you are not overpaying for your coverage…regardless of how many bells and whistles are thrown at you.

Allstate is a public corporation. Their highest loyalty is to their stockholders in the form of increased share value. Don’t let their multi-million dollar advertising budget convince you otherwise. If Allstate thought for one second this new program would cost them more money that it brought in (in the form of continued sales), it wouldn’t have happened.

It would be nice to see a homeowner’s insurance version of this guarantee, as Allstate has had some legal trouble in more than one state with regard to their practices of late.

Read more: Allstate Safe Driving Bonus Check Review