buying The great myth about car insurance costs

02:50  09 march  2018
02:50  09 march  2018 Source:   CBS News

Low-mileage drivers are at lower risk for accidents, but they usually pay just as much for insurance, study says

  Low-mileage drivers are at lower risk for accidents, but they usually pay just as much for insurance, study says When it comes to how much you pay for car insurance, being married and having good credit often matters more than how much or how well you drive, according to a new study. The research, released this week by the Consumer Federation of America, found that major auto insurers provide little or no discounts to low-mileage drivers, even though they tend to have a lower accident risk. The study The research, released this week by the Consumer Federation of America, found that major auto insurers provide little or no discounts to low-mileage drivers, even though they tend to have a lower accident risk.

a close up of a car: Viele Dollar Geldscheine und ein Wagen© Getty Images/iStockphoto Viele Dollar Geldscheine und ein Wagen It doesn't matter whether you're a salesperson who drives thousands of miles each year or the proverbial "little old lady" who only drives to church on Sunday: Your car insurance premiums are likely to be similar – and cost more each year.

That's the counterintuitive, but probably accurate, picture drawn by two surveys of auto insurance rates -- one by the Consumer Federation of America (CFA), the other by Internet auto insurance search engine The Zebra.



"The nation's largest auto insurers generally offered little or no premium reduction to low-mileage drivers even though insurance research indicates that how much you drive is among the most important factors in predicting accidents," said CFA Director of Insurance J. Robert Hunter. After all, he said, "You can't crash if you're not driving!"

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The CFA report looked at insurance quotes in 12 US cities from five major insurers – Allstate (ALL), Farmers, Geico, Progressive (PGR) and State Farm. The average savings in premium was a mere 1.6 percent for every 5,000 mile-reduction in miles traveled, or less than $3 a month.

That doesn't amount to much when you consider that if you're insured by Allstate, your average cost to drive in Boston is nearly $3,900 a year, the CFA survey found.

Insurers were quick to criticize the CFA survey. "This is the latest in a long series of studies based on flawed research," said David Snyder, who runs the policy and research unit at the Property Casualty Insurers Association of America (PCIAA).

Snyder also claimed the CFA analysis ignores many other factors insurers take into consideration, such as traffic congestion, which he said "are more important in predicting loss."

Does Car Insurance Cover Theft?

  Does Car Insurance Cover Theft? What Happens When Your Car Is Broken Into? So you walk out to your car in the morning, and your car is still there, but the window is broken. Maybe you own a vehicle with a manual transmissions and the thieves couldn’t drive stick, so they went after your belongings, instead. Once again, things get tricky. It depends what those things were, where they were located in the car, and how they were used by the owner.If you had valuables in the car, such as cell phones, CDs, a purse, etc., these items are covered under homeowners’ insurance.

The Zebra survey came to the same conclusion as the CFA: How much you drive has only a modest impact on your car insurance rates. The group's analysis is based on a timeframe ranging from September to December 2017 that looked not only at auto insurance quotes, but also at data compiled from insurance company rating platforms and their public rate filings.

"Average mileage has a minimal effect on auto insurance premiums," said The Zebra's Executive Chairman Adam Lyons. "Nationally, drivers would see a 6 percent savings if they formerly drove 15,000 miles a year and then opted to cut in half their annual mileage."

a teddy bear: 5 of the safest cars you can buy© Provided by CBS Interactive Inc. 5 of the safest cars you can buy

According to the Federal Highway Administration, the average motorist aged 20 to 55 drives about 15,000 miles a year, and it's unlikely that most would be able to cut that in half, particularly if they use their car for work.

These Are The Cheapest And Most Expensive Cars From 2006 To 2016 To Insure

  These Are The Cheapest And Most Expensive Cars From 2006 To 2016 To Insure Buying a car that’s 10 years old isn’t a huge risk anymore. What’s cheap and what’s expensive to insure? Insurance resource company recently released a list of cars from 2006 to 2016 that it found to be the least and most expensive to insure. It compiled this list by comparing rates through using an identical driver profile for all the cars “at six major insurance carriers in multiple ZIP codes in each state and the District of Columbia.

Lyons pointed out that the national average car insurance premium is now $1,427 a year, 20 percent higher than in 2011. "That's expensive," he added.

But there was one notable – and pleasant – exception, and it was found in the largest auto insurance market in the country -- California. Savings there would amount to 25 percent of the total cost of a policy, or about $400 a year, according to The Zebra.

Los Angeles motorists could save almost 9 percent a year for every 5,000 miles not driven, according to CFA. This compares to a savings of less than 1 percent for drivers in Charlotte, North Carolina.

It's clear why California stands out in this respect. According to Hunter, under California law, insurers are required to weight annual mileage as the second-most important factor in determining premiums, just after a motorist's driving record, which includes accidents and speeding tickets.

The state has ruled out using a person's credit rating, education or marital status when an insurer figures out how much to charge for an auto policy. Insurers would like to use this data because they have evidence to show that married and educated people with good credit make safer drivers. Hunter believes this practice leads to discrimination against poor people and minorities.

What Is Gap Insurance (And Why You May Need It)?

  What Is Gap Insurance (And Why You May Need It)? It helps protect motorists who are "upside down" on a lease or car loan.If you’re buying or leasing a new car or truck these days, you’ll likely be offered – perhaps required to purchase – so-called gap insurance. This type of policy covers the difference between what a given vehicle is worth and what the owner or lessee still owes on it, should it be stolen or become totaled in an accident. For the record, “gap” stands not for the above imparity, but for Guaranteed Auto Protection.

North Carolinians may not benefit from lessening their annual driving mileage, but do pay among the nation's lowest insurance rates. The average driver in the Tarheel state pays $865 annually for coverage, about half of the $1,713 shelled out by a Californian, according to The Zebra.

"Lower population density certainly helps," said Lyons, "but rates there are still up nearly 23 percent since 2011."

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Still, Californians are better off than drivers in Michigan, which has the nation's highest rates at more than $2,600 per year.

Spokesperson Michael Barry of the Insurance Information Institute, which represents auto insurers, said the way to make sure your annual mileage is reflected in your rates is to volunteer for one of the usage-based insurance products offered by insurers. These products include Progressive's "Snapshot" and State Farm's "Drive Safe and Save" mobile app.

Remember that these products not only monitor your mileage, but also the way you drive, including acceleration, hard braking, night driving and other factors that could lead to an increase in accidents. Some drivers who use them complain that it's unclear what kind of discount they get and for what, since it's mainly up to the insurer to make the determination.

States Where Poor Credit Has the Biggest Impact on Car Insurance Rates .
A study finds low credit scores can cost you thousands a year in car insurance, especially in Michigan.A nationwide report by NerdWallet finds that auto insurers widely use consumers' credit histories to determine rates, and those with low credit scores pay an average of $1,270 extra per year in car insurance. Insurers see those with low credit scores as more likely to file claims, the report states.


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