Insurance Q&A: “Do insurance companies check driving records?”
Well, some do…and some don’t. The answer depends on the risk profile of the insurance company you most closely match up with.
But it’s a safe bet your driving record will be ordered as part of the underwriting and pricing review for your insurance policy.
The companies that don’t regularly order driving records probably won’t tell you, as they hope you’ll fess up about the tickets and accidents you’ve had – that way they won’t have to pony up the money to pay for the reports, which can cost between $1 and $7 each.
It may not sound like much, but if a company is paying for thousands of reports on a daily basis, with no guarantee of issuing a policy, it can add up quickly!
And while you might be able to fib about your driving history to lock in a lower rate, if the company decides to review your records after the policy is issued, they may raise your premium mid-term or go as far as to drop you or not renew your policy.
What do the driving records reveal about you?
A Motor Vehicle Record (MVR) details your tickets and accidents, while a C.L.U.E report documents your claims history. Insurers also review Motor Vehicle History reports. Typically, your driving history is reviewed as far back as five years for standard and preferred insurers and three years for non-standard companies.
How do insurance companies use your driving records?
Underwriting:
For underwriting purposes, you driving record, comprised of your MVR and/or C.L.U.E. report, may be checked to determine if you are an eligible candidate for their program. For example, standard and preferred insurance companies may not offer a policy to a driver who exceeds their acceptable underwriting guidelines.
On the other hand, non-standard insurers may allow any number of tickets and/or accidents for a driver (or household), but will charge accordingly. Their “appetite” is much broader than that of the standard and preferred carriers. These insurers are much more comfortable with below average driving records.
Pricing:
The other purpose of the driving record review is to determine how much money to charge you for insurance. It’s a big part of how car insurance rates are determined. Put simply, the more tickets, accidents and claims you have on your record, the more you can expect to pay.
It should make perfect sense, but it also helps to understand how insurance companies make money to better understand the pricing of your insurance policy.
What if I can’t obtain insurance because of a poor driving record?
If you are deemed uninsurable by even the most lenient of insurance companies as a result of your driving records, you can still obtain insurance via an assigned risk program.
Assigned risk programs are usually state run insurance programs that will insure any driver. These programs are necessary mostly because car insurance is mandatory in nearly all states.
After all, it wouldn’t make sense for a state to force you to have insurance, but not provide an option for you to purchase it.
In order to qualify for such a program, you must typically demonstrate that you have attempted to get insurance in the regular marketplace, but have been turned down by at least two non-standard companies.
This type of insurance is not designed for those who cannot AFFORD a policy from a non-standard company, but rather for those who have been denied coverage. And yes, you can expect to pay a very high premium for this type of car insurance.
Similar to credit reports, driving records aren’t error free by any stretch, so be sure to ask for the results to verify you are charged accordingly.
Tip: Be sure to shop around, as your current company may be charging you for a ticket received as far back as five years ago, while others only look back three years.
(photo: specialkrb)
This post was written on June 28, 2010
American consumers submitted 38.8 million online quote requests and purchased a record 2.8 million auto insurance policies online last year, according to a recent study conducted by comScore.
Both requests and purchases were up more than 20 percent versus the previous year as consumers looked for new ways to save on auto insurance during the ongoing recession.
Many industry insiders also believe insurance, like many other services, is becoming commoditized.
In other words, the average consumer no longer perceives any difference between insurance companies or products, and makes their buying decision based on ease of purchase and price.
Is that an accurate representation of what auto insurance has become?
It depends on who you ask. Companies who already do business solely online will tell you insurance is just a pricing game…the lower the premium, the better the policy.
Companies who sell exclusively face to face with captive agents will tell you a different story…as they scramble to get online.
State Farm has gone so far as to create a website called whyagent.com, aimed at convincing you to go with an agent while also offering an online quote, which likely gets routed to a local agent in your area based on the address you provide.
Unfortunately, State Farm only has one policy to offer their insured, which leaves them vulnerable to the client who surfs the web to “shop their rate.” They clearly recognize the value of using the internet to snag more customers, but cannot do much in the way of offering pricing options…other than reduce coverage.
Can’t you get the best of both worlds?
Sure. In order to get the ease of use and the rate comparisons, you can continue to shop online, but if you prefer an actual human being, you can search for a local independent agent who offers online quotes.
An independent agent will be able to shop your rate with several insurers at one time to ensure you get the best deal. That’s a far cry from the limits of a captive agent and the impersonal touch of direct insurers.
What should you look out for?
Shopping and/or purchasing insurance online can be an easy way to obtain insurance and be relatively certain you have a fair rate. It’s certainly a better choice than purchasing from a captive agent (Farmers, Allstate, State Farm), who can all only offer you one policy at one price.
However, be sure to at least speak with an insurance agent about how much insurance you need before you make a purchase. At the end of the day, you need to make sure you’re properly covered, and the best way to do so is to work with an agent.
Is the trend likely to continue?
comScore noted that 35 percent of respondents who had not purchased insurance online would be likely to do so in the future, and that trend only looks to be rising.
But be sure to supplement your online shopping with the knowledge of a local independent agent if you’re not sure what liability limits you should have, or if you need things like physical damage coverage, PIP, gap coverage or med pay.
Make that call even faster if you don’t know what those coverage types are!
This post was written on June 22, 2010
State Farm apparently has too much money to spend on advertising…which should make their policyholders pretty upset.
After all, if they are the largest personal lines insurer in the United States, why don’t they offer the lowest rates? Isn’t that how the concept of bulk sales works?
But I digress. State Farm, which is focused on the increasing trend of individuals buying insurance from direct insurers like Progressive and Geico, has launched a campaign to remind us all why we need an insurance agent.
I visited the whyagent.com website to see why I needed an agent, and was disappointed to find they don’t really offer any solid reasons, rather than make a weak attempt at comedy.
State Farm’s overall point appears to be that we need an agent so we have a live, local person to answer our questions and “take care” of our insurance needs.
Of course, that’s really only half the story. The other half of the story won’t be addressed by State Farm because it won’t help them sell any insurance. Just having “an agent” might not do you any good.
The fact is, using an independent insurance agent, rather than a captive State Farm agent, is the best route to ensure you get the best deal on your insurance (independent agent vs captive agent).
A captive agent only has one pricing option for your policy. No choices…other than take it or leave it.
The only way to get a “better deal” from a captive agent is to reduce coverage.
If you buy a State Farm insurance policy and they raise their rates, your agent can’t do anything for you, other than tell you that “rates are going up everywhere,” which is an outright lie. Insurance rates have been dropping for nearly six years.
On the other hand, an independent insurance agent can “be there for you” and shop your rates with several different insurance companies to ensure you get the best rate, without sacrificing coverage to snag a better deal.
If the insurer you choose raises their rate, an independent insurance agent can simply shop your rate again and move your policy to a company who isn’t raising rates to take more of your money.
Remember, State Farm, like any other national corporation with a multi-million dollar television advertising budget, is selling an image. I can’t blame them, it’s proven to work.
But what most consumers aren’t aware of is the fact that many captive insurance agents had ZERO insurance experience prior to becoming agents.
In fact, that is one of the main recruiting strategies for captive insurers. They can give you a turnkey insurance agency. That’s a pretty scary thought.
Conversely, independent agents almost always have multiple years of insurance industry experience because they cannot get contracts with insurance companies without proving they know what they’re doing.
Do yourself a favor. If you’re currently insured through one of the large insurance companies that advertise on television every waking second, at least consider contacting an independent agent to obtain a quote or two.
You might be shocked to see how much you are overpaying for your insurance.
This post was written on June 14, 2010
Although car insurance rates are cheaper for women than men, new technologies seem to be making teen girls a greater risk behind the wheel, according the Allstate 2009 State of Teen Driving survey.
Of the 1,063 teens who participated, 51% of girls said they were likely to use a cell a phone to talk, text, or e-mail while driving, compared to just 38% of male respondents.
And 84% of girls said they were likely to adjust music selections or volume while driving, versus 69% of boys.
Technology aside, 48% of girls said they were likely to speed more than 10 mph over the limit, compared to 36% of boys.
Additionally, 16% of girls described their driving as “aggressive,” nearly double the 9% rate seen in 2005.
Girls are also less likely to speak up if they feel the person behind the wheel is driving unsafely.
Of course, women typically have fewer accidents than men, so their car insurance rates are lower. And there’s a good chance the boys in the survey are fibbing more than the girls.
But it appears as if the gap is narrowing, so don’t be surprised if you’re stuck paying an arm and a leg to insure your 16-year old daughter.
To keep car insurance rates in check (car insurance is expensive for teens), the best thing your teen can do is maintain a healthy credit score, get good grades in school, obey traffic laws, and drive defensively.
By doing so, your teen will have a better chance of being eligible for discounts offered by car insurance companies, such as the good student discount and the good driver discount.
They’ll also be a whole lot safer out there on the road!
Search for car insurance quotes online or get in contact with your car insurance company or independent agent to determine if your teen qualifies for such discounts.
This post was written on June 9, 2010
Insurance can be a tricky business to understand. There are thousands of insurance companies in the United States, and many are vying for your homeowner’s insurance policy.
Each company’s policy will offer basic coverage types and a host of different endorsements, which are additions and exclusions of coverage.
Because there are so many different types, it can be difficult to understand exactly what is and isn’t covered by your homeowner’s policy.
But the last thing you’d want to do with your largest investment is stick your head in the sand and assume your policy covers everything that can go wrong.
The best way to know exactly what’s covered is to review your policy with your insurance agent.
Below is a list of the top 10 losses (many water-related) your homeowner’s policy may not insure against depending on which state you live in, what type of policy you purchased, and what endorsements have been added.
Note that endorsements don’t only add coverage, but can restrict it as well.
1. Flood
No homeowner’s insurance policy covers you against a flood. Flood losses are insured exclusively by the government through FEMA and the National Flood Insurance Program, or NFIP. Insurance companies and agents can sell these policies for the NFIP, but are not the entities actually insuring the damage. If you have not specifically purchased a flood insurance policy, you are not covered. Many lenders will require you to have a flood policy if your home is subject to a flood based on maps created by the government agency. Check out more flood insurance FAQs.
2. Continuous or Repeated leakage from plumbing, heating, or air conditioning
This coverage is not included in every homeowner’s policy. In fact, it must be added as an endorsement to your policy in many states. If your sink has a slow leak for three months and rots your wood cabinets, you will not be reimbursed for the cost of repairs unless your policy specifically covers this peril.
3. Sudden and Accidental discharge or overflow of water or steam from a plumbing, heating, or air conditioning system
Again, depending on which type of policy you purchased, this may not be covered. The good news is, unless you went for the bare bones policy, this is typically included.
4. Backup of sewers/drains
You don’t want to discover the hard way that you had no coverage for this unfortunate event. Take note, many policies only cover the damages if the backup occurs within a sewer or drain on your property, versus in a pipe or sewer down the street from your home.
5. Freezing of plumbing or heating system
Almost all but the lowest level of homeowner’s insurance policies will protect you against damages from this type of loss. However, almost every policy includes a condition requiring the owner to take certain necessary precautions to avoid such an event. For example, if you live in an area of the U.S. where temperatures can dip below freezing for longer periods of time, you must maintain adequate heat in your home to avoid the pipes freezing. If you left your home for a two-week vacation and turned the heat off, causing your pipes to freeze, you would have to pay for it out of your own pocket.
6. Mold, Fungi or Other Microbes
Mold damage is covered, but the coverage is typically restricted to mold on property that has been damaged by accidental or sudden discharge of water (if that is a covered cause of loss on your policy: see #3). An additional restriction usually requires the damage to be reported within thirty days of the covered loss if it is hidden or otherwise concealed, within a wall for example.
7. Cost of Testing, Remediation, and Living Expenses due to Mold, Fungi or Other Microbes
Insurance companies typically view this process as a different peril than #6 above. While many policies do not insure this cause of financial loss, they do offer an endorsement that may provide coverage in the amount of your policy limits. Living expenses refers to the cost of living somewhere other than your home while the testing and remediation are being completed.
8. Damage to Foundation/Slab
If you did not specifically discuss this coverage with your agent, you may not have it. Depending on where you live in the U.S., this may not affect your terribly. In areas with poor soil that can expand and contract regularly, foundation damage may be a big concern to you. Purchasing this coverage is not a “fix all.” Typically, only damage caused by a covered water leak (see #2, 3 and 4 above) is covered. Damage resulting from a flood would only be covered by a flood insurance policy obtained through FEMA or the NFIP.
9. Damage resulting from Construction Defects
While this is not covered by your homeowner’s policy, there is a silver lining to this cloud. Damage resulting from construction defects would be covered by the commercial general liability policy insuring the company that built your home. There is no guarantee you would be able to collect from the company, but that is where you would start the process of attempting to get reimbursed for damages.
10. Earthquake
Depending where you live in the U.S., you may scoff at the perceived need for this coverage on your policy. In California, you’d be crazy not to have it. Be reminded Midwesterners, the largest fault line in the continent is the New Madrid Fault Line, which stretches south from Illinois to Arkansas. If there is a quake and it destroys your home, no coverage could mean a potential bankruptcy filing.
It can be tough to make time in your life to evaluate your insurance needs. However, this list demonstrates the necessity to do so. Saving money is important, but not at the risk of losing your biggest investment.
It’s also worth pointing out that adding the coverage discussed above will almost assuredly cost less than a daily Starbucks or your new iPhone.
Contact your local independent insurance agent or insurance company if you have specific questions about your coverage.
(photo: U.S. Geological Survey)
This post was written on June 7, 2010
