6 Coverages included on a good insurance policy
Here are the coverages included on a good insurance policy:
1. Collision Coverage - Damage to your vehicle if you crash it.
2. Liability Coverage - Damage to other cars, other people, & other property that you cause in an accident.
3. Comprehensive Coverage - Coverage for things like hail, a fallen tree branch, break in/theft, etc. Basically any damage that happens outside of a typical accident.
4. Medical payments - Hospital bills for your or the people in your car until liability coverage kicks in.
5. Rental car coverage - Cost of a rental car while your car is being repaired due to an accident.
6. Towing Coverage - Cost of towing your vehicle due to accident or breakdown.
Those are the main coverages, but some policies have more. As you can probably tell, most of those have nothing to do with the value of your car. You can do as much damage with a $500 jalopy as with a $50,000 BMW.
There are ways you can decrease your insurance rate over time, however. Most insurance companies give you a rate based on an Insurance Score. The formula for coming up with this score varies from company to company, but they almost all look at the following factors:
# of accidents in the past 3-5 years
# of tickets in the past 3-5 years
Credit score
# of years with the same insurance company
Misc. Factors: Age, sex, marital status, profession, # of miles driven annually, zip code
So, if you've been with the same company for a while and any of the above have changed for the better, you can call your agent and ask him/her to re-rate you. You'd be surprised how much you can save by having an accident/ticket fall off at the 3-5 year mark, or by having a better credit score. Just keep in mind that this works both ways, so if any of the above have changed for the worse, I'd recommend keeping your mouth shut. : )
Finally, consider other options besides the companies you see on TV. Allstate is a great company but their rates tend to be high. State Farm rates are OK, but their claims service ranges from pretty good to abysmal. Smaller regional companies tend to have the best combination of good rates and good service.
There are some other ways to reduce your car insurance too:
1) buy a house: if you get your home owner's insurance and car insurance through the same company, they usually offer a discount
2) get another car on your plan (i.e. SO's car): most insurance companies offer a multi-car discount.
3) buy a house: if you get your home owner's insurance and car insurance through the same company, they usually offer a discount
Or get renter's insurance. I saved the cost of renter's insurance by bundling.
It actually makes quite a bit of sense. The factors that go into a high credit score often reflect intelligent, well planned behavior. People capable of managing their finances responsibly probably think twice before acting like an idiot in the various other situations they deal with in their lives.
This is of course a statistical analysis, not a guarantee - there are always exceptions, but on the whole, it's a pretty good predictor.
As someone who has never had a credit card and owe 0$ to anyone I find it completely insane how I pay more for things.
I was always under the impression that you need build "good credit". For example, you get a credit card, put groceries and gas on it or something typical every month, and pay it off at the end of the month. I had a 750 credit score in college just by doing this for a few years.
My sister tried to open a cell phone contract with ATT and couldn't because she had no score. I am sorry, but that is insane.
Can see it for something like a phone contract... it's basically a revolving loan - every month they lend you money (in the form of calls) and you pay it back at the end of the month.
I had perfect credit, mortgage, multiple credit cards etc in my home country, moved to a new country and had all the same problems again. Including not being able to get a credit card or a mobile phone.
Credit card was solved by applying for a store card (generally have more lenient requirements), using that for a year & then applying for a credit card again.
Mobile phone was solved by giving them a $200 deposit which they held on my account for 2 years.
I've also heard of people getting CCs, in circumstances where they'd otherwise be rejected, by doing the same deal - you give the CC company a deposit equal to your credit limit and they hold that on the account for a year or two.
Unfortunately so much of today's society is based around instant gratification (I include trivial stuff like buying online in that), and that requires a certain degree of credit being granted.
Can't she get a pay-as-you-go plan?
It totally is, but I think there is reason behind it. You're proving you're responsible. ATT or whomever you are signing a contract with needs to know you are going to pay your bills. A credit score proves that, mostly.
It's also very difficult to buy anything major with no credit, like a car. I've had friends that couldn't rent apartments because they didn't have credit or had to get people to co-sign. You're crippled by the system if you don't buy into it. Buying into it doesn't mean you'll end up in a ton of debt if you're smart.
Reaching the point where it's almost a requirement for functioning in modern society these days I think.
You're right - even if you can pay cash, it's sometimes worth getting into the habit of putting purchases on credit (and paying it off every month!) just to build that score.
The danger comes when you let the card burn a hole in your pocket. Just because you CAN have that lovely 27" monitor today, doesn't mean you can actually afford it.
I've seen friends with their first credit card treat it as though it's the devil and about to plunge them into a life of bad credit hell at a moment's notice. I've also seen other friends think that it's cash in their pocket.
Oh I agree it does make sense, it just seems strange that your ability to rent a place, get a job, insure a car, etc all could be damaged by making poor choice s in your youth or having a shitty wife ruin your credit.
Correct, and it's not like they just decided one day to start using credit scores as an indicator for risk level. The data has proven over the years to be pretty darn accurate in determing how much a risk the person is to insure. In fact it has become one the best ways to predict risk, that is why the industry as a whole is gradually jumping on board.
Not even true. Credit score does not measure how responsible you are financially. Interestingly, it is a measure of how much money they can make from you if you have credit with them. Paying a loan early should show responsibility but can negatively affect your credit. This is because the loan issuer will make less money if you pay early. However if you make late payments and the like, there is a chance you end up declaring bankruptcy which doesn't end well for the bank. Also, paying rent and for all necessities does not affect your credit score, even though it is responsible to pay rent before buying a new car. A person who buys a new car on credit (and makes some payments) will have a better credit score than people who responsibly within their means and without loans (even if they buy the same car with cash).
I don't think that a credit score is a fail proof measure of a person's financial responsibility, but insurance companies are looking to track trends, not make case-by-case judgements. While there are of course exceptions to pretty much everything, most people that have poor credit have been financially irresponsible, and most people that have good credit have been financially responsible. It's a simple matter of statistics.
I had to quit my job of being a pizza delivery driver because my insurance didn't cover me when I used my vehicle for work. Apparently the way you play the game as a delivery driver is to just not tell your insurance company.. which could be bad if you were to actually get in a wreck.
One more thing: Insurance agents have absolutely no control over your rate. They take your information, put it into their system, and it spits out a figure. Your insurance agent cannot give you a "good deal" on insurance unless they 1) lie on your policy, which has the potential to royally screw you over or 2) are an independent agent and are willing shop your information around to find the lowest rate. Even then, they're not giving you any kind of discount, they're just finding the people willing to charge you the least.
It actually makes quite a bit of sense. The factors that go into a high credit score often reflect intelligent, well planned behavior. People capable of managing their finances responsibly probably think twice before acting like an idiot in the various other situations they deal with in their lives.
This is of course a statistical analysis, not a guarantee - there are always exceptions, but on the whole, it's a pretty good predictor.
As someone who has never had a credit card and owe 0$ to anyone I find it completely insane how I pay more for things.
I was always under the impression that you need build "good credit". For example, you get a credit card, put groceries and gas on it or something typical every month, and pay it off at the end of the month. I had a 750 credit score in college just by doing this for a few years.
My sister tried to open a cell phone contract with ATT and couldn't because she had no score. I am sorry, but that is insane.
Can see it for something like a phone contract... it's basically a revolving loan - every month they lend you money (in the form of calls) and you pay it back at the end of the month.
I had perfect credit, mortgage, multiple credit cards etc in my home country, moved to a new country and had all the same problems again. Including not being able to get a credit card or a mobile phone.
Credit card was solved by applying for a store card (generally have more lenient requirements), using that for a year & then applying for a credit card again.
Mobile phone was solved by giving them a $200 deposit which they held on my account for 2 years.
I've also heard of people getting CCs, in circumstances where they'd otherwise be rejected, by doing the same deal - you give the CC company a deposit equal to your credit limit and they hold that on the account for a year or two.
Unfortunately so much of today's society is based around instant gratification (I include trivial stuff like buying online in that), and that requires a certain degree of credit being granted.
Can't she get a pay-as-you-go plan?
It totally is, but I think there is reason behind it. You're proving you're responsible. ATT or whomever you are signing a contract with needs to know you are going to pay your bills. A credit score proves that, mostly.
It's also very difficult to buy anything major with no credit, like a car. I've had friends that couldn't rent apartments because they didn't have credit or had to get people to co-sign. You're crippled by the system if you don't buy into it. Buying into it doesn't mean you'll end up in a ton of debt if you're smart.
Reaching the point where it's almost a requirement for functioning in modern society these days I think.
You're right - even if you can pay cash, it's sometimes worth getting into the habit of putting purchases on credit (and paying it off every month!) just to build that score.
The danger comes when you let the card burn a hole in your pocket. Just because you CAN have that lovely 27" monitor today, doesn't mean you can actually afford it.
I've seen friends with their first credit card treat it as though it's the devil and about to plunge them into a life of bad credit hell at a moment's notice. I've also seen other friends think that it's cash in their pocket.
Oh I agree it does make sense, it just seems strange that your ability to rent a place, get a job, insure a car, etc all could be damaged by making poor choice s in your youth or having a shitty wife ruin your credit.
Correct, and it's not like they just decided one day to start using credit scores as an indicator for risk level. The data has proven over the years to be pretty darn accurate in determing how much a risk the person is to insure. In fact it has become one the best ways to predict risk, that is why the industry as a whole is gradually jumping on board.
Not even true. Credit score does not measure how responsible you are financially. Interestingly, it is a measure of how much money they can make from you if you have credit with them. Paying a loan early should show responsibility but can negatively affect your credit. This is because the loan issuer will make less money if you pay early. However if you make late payments and the like, there is a chance you end up declaring bankruptcy which doesn't end well for the bank. Also, paying rent and for all necessities does not affect your credit score, even though it is responsible to pay rent before buying a new car. A person who buys a new car on credit (and makes some payments) will have a better credit score than people who responsibly within their means and without loans (even if they buy the same car with cash).
I don't think that a credit score is a fail proof measure of a person's financial responsibility, but insurance companies are looking to track trends, not make case-by-case judgements. While there are of course exceptions to pretty much everything, most people that have poor credit have been financially irresponsible, and most people that have good credit have been financially responsible. It's a simple matter of statistics.
I had to quit my job of being a pizza delivery driver because my insurance didn't cover me when I used my vehicle for work. Apparently the way you play the game as a delivery driver is to just not tell your insurance company.. which could be bad if you were to actually get in a wreck.
One more thing: Insurance agents have absolutely no control over your rate. They take your information, put it into their system, and it spits out a figure. Your insurance agent cannot give you a "good deal" on insurance unless they 1) lie on your policy, which has the potential to royally screw you over or 2) are an independent agent and are willing shop your information around to find the lowest rate. Even then, they're not giving you any kind of discount, they're just finding the people willing to charge you the least.
