In this post, we follow up on Part 1 of our post, How Do Insurers Decide Your Rates? In Part 2, we will continue to explore the factors that affect the price you pay for your Wisconsin auto coverage and dive deeper into the ways you can maximize your savings.
Driving and Claims History
Insurers have no way of knowing if you will file claims against your insurance policy, but they can make reasonable assumptions about your future claims activity based on your prior driving and claims history. A driver with a record full of speeding fines, for example, may appear careless. The insurer may assume a driver with a history of recent accident claims has poor judgment when driving. Depending on the company’s underwriting requirements, this could result in higher premiums or disqualify a driver from coverage altogether.
Note that information about your driving and claims history is available to your insurer even if you do not offer it voluntarily. Not only can they pull your state driving record, but they can also see information in your CLUE Report (Comprehensive Loss Underwriting Exchange Report), which is generated by a consumer reporting agency that collects data about your insurance claims activity. Prior insurers likely reported your claims to CLUE, even if your claims were denied or never formally filed.
What does your FICO score have to do with your car insurance? As it turns out, quite a lot. Each insurer weighs the credit score factor differently. Purchasing coverage through an insurer that emphasizes the need for strong credit could be a mistake if you have some derogatory marks on your report. Even if your scores fall in the “good” range, you could end up paying hundreds of dollars less per year on premiums than someone with credit scores in the “excellent” range.
This explains why a driver with an excellent driving history and poor credit could end up paying more for coverage than a driver with excellent credit and a spotty driving record. That is why comparison shopping with an independent agent is so important. It gives you access to a wide range of insurers, allowing you to choose the one that shows the most favorability toward your individual circumstances.
Limits and Deductibles
As with most things, when it comes to your car insurance, you get what you pay for. A bare-bones insurance policy with poor coverage that barely meets minimum state requirements is likely to cost less than a policy that actually protects you against financial calamity. Although higher limits may come with a larger premium, the difference is negligible compared to how much money your insurance could save you in the event of an accident or vehicle-related lawsuit. When it comes to your coverage limits, this is not the place to cut back to save money.
Your deductibles, however, play a different role in your insurance coverage. A deductible is an amount you agree to contribute toward the cost of your claims. A low deductible means lower out-of-pocket losses after an accident, but it usually translates to higher premiums. Switching to a high deductible can help you save on the cost of your policy without sacrificing the value of your coverage.
Many insurers offer discounts to drivers who meet certain criteria. These can vary from company to company, but the savings can add up to 10, 15, or as much as 20 percent or more in some cases. For example, a discount may be available if you only drive your vehicle a few thousand miles per year or if you enroll in a defensive driving course. Savings are also sometimes offered to policy-holders who remain claims-free, pay premiums in full, or who have student drivers with good grades in high school or college. Talk to an agent to learn more about auto insurance discounts and which ones may be available to you.