Personal Finance Tips

There are all types of idiom suggesting your home is like a castle. You can shelter from danger. Fight off enemies. Generally defend yourself and what you own. The one constant in all this is the idea that, once the danger has passed, you can throw open the doors and walk confidently out into the world. Homes are not supposed to be prisons. If that’s what we make of them, doctors call this agoraphobia or some other mental disorder and lock you up in a hospital until you say you feel like going out again. So here comes the big question. When you do walk out, how much are you worth? This is not a question for people traffickers or slavers, you understand. But a practical question involving a little math. Ignoring the times when you dress down and wander round the neighborhood incognito, let’s start with the wardrobe. Suppose you had to replace all the clothes you stand up in including those shoes and any pleasing leather wallet or purse, how much would it cost? Then add in all those accessories like a good watch, jewelry and any bling that’s actually worth some real dollars rather than for show. Do you have anything digital or electronic like the latest iPhone or a Kindle. They can be surprisingly expensive to replace. And what do you have inside the wallets or purses – those plastic cards? How are you insured if you are robbed and ten minutes later, your accounts are hit from a nearby ATM?

Now you are all thinking this is not really relevant to you. Sure you read about street robberies but you don’t really do much walking. You always park close by and are inside the building before anyone has a chance to notice you. Ah, so what happens if you are caught in a traffic accident and all your clothes and the property you are carrying with you in the vehicle are damaged or lost? Or have you seen the statistics on the risk your vehicle will be stolen? What’s the value of all the “stuff” you leave in the trunk or on the back seat?

The bad news is that the standard auto insurance policy does not cover the contents of your vehicle or your clothes. The only way you will recover any of that value is through your home insurance policy. Now’s the time to read through the small print. One of the more common clauses limits the value of any claim you can make for property lost outside the home. You might want to ask your insurer to increase the amount, particularly if you occasionally go out carrying or wearing something really valuable. It might be worth adding a schedule to your policy listing the more valuable items you want covered. If the insurer asks for a big increase in premium, get as many home insurance quotes as possible. There can be significant variations between insurers on their coverage of property outside the home. It’s all up to you to do a little research to find the best policy to match your needs.

A lot of car owners don’t even suspect the fact that such seemingly unrelated things as auto insurance rates and credit rating have a very strong bound. Moreover, a customer’s credit rating may be the factor that will either lower or increase his or her insurance premiums. But why that is so and what does credit rating has to do with auto insurance?

You probably know that any auto insurance company uses a set of factors when determining the rates a customer will pay for their services. The list of factors is pretty much the same across different provider and includes typical car variables (make, model, engine volume, etc,) as well as specific demographic factors such as the person’s age, sex, marital status, driving record and others. The latter factors are used to determine how likely the person is to file an insurance claim. Using statistical analysis auto insurance providers can tell that a certain group of drivers (say, those younger than 25) is more likely to have an accident and file a claim than another group (married drivers with higher education). And the rates are set in order to cover these risks.

As it turns out, a person’s credit rating can be an indicative factor when assessing insurance risks. It was statistically proven that customers with lower credit scores and worse credit records tend to file insurance claims more often than those with better scores. With this in mind, a lot of auto insurance providers are using the customer’s credit rating when calculating their rates, and in most cases it is done without the person knowing it. Some would say that it’s an infringement of personal data, however the US legislation allows insurance and lending institutions to use such date for internal purpose. And they are exercising this right whenever they need to.

This raises another question: what actually affects one’s credit rating? There is a set of factors that will significantly influence your credit score, such as:

• Public records
• Payment history
• Duration of credit history
• Inquiries for credit
• Open credit lines
• Types of credit lines used
• Unused credit

Using these factors you will be able to determine how good or bad your credit score is and try to improve it by consulting with a credit expert.

Still, there’s good news for those who feel that their credit score isn’t that advantageous. Not all auto insurance companies are using credit rating when calculating quotes. So finding one will be a good option of your credit score cannot be improved. You can consult with your insurance agent or find a respective list in the Internet.

If you feel that you can improve your credit rating, then you first have to get your credit report and analyze it preferably with a finance expert. See what can be improved, make the necessary changes in your credit lines and allow about 30 days to pass for your credit rating to change. Only after this you can get auto insurance quotes with just any company and chances are that your premiums will be much lower than before reviewing your credit report.

Whenever you ask a talking head paid by the insurance industry, “How do you calculate the premium rate?” the answer is always the same. There’s a big smile of sincerity and that reassuring voice says, “We look at the driver. It’s all about who you are and what you drive.” And that, of course, is how it should be. Actuaries are paid to estimate the risk of accidents and, as they keep telling us, the statistics never lie. These actuaries are like pack rats. They collect every last detail of every accident that gets reported. It doesn’t matter whether it’s a police report, a claim to the insurers from a hospital for treating accident victims, or reports in local newspapers. They have information about accidents going back to the time we were switching over from real horses to horse-powered engines. So ask how many men aged 33 have had an accident at 2 a.m. while driving a red Ford Contour in the rain with a new moon and, with the click of a mouse, you will have the answer by return. It’s the detail that’s so impressive. More importantly it shows exactly how many claims are made by male as opposed to female drivers, and what the average value of the claims is.

All around the world, the statistical evidence shows women making fewer claims and, when they are involved in accidents, the amount claimed tends to be lower.

The reason for this is that, in general, women drive within the law. They do not try to beat the lights or drive too fast on city streets so, if there is an accident, they are traveling more slowly and the impact is less damaging both to the vehicles and the people inside. Not surprisingly, this excellent safety record has been rewarded by lower premiums. Where the risk is lower, drivers pay less. Except, in Europe, this will change next year.

The European Court for Human Rights has just ruled that men and women must pay the same premiums. At the end of 2012, there must be a new system in place to calculate premiums without relying on gender as a key factor. So what’s going on? Well, ask yourself, is it fair to charge someone more to insure their vehicle just because they are male. No one asks to be born male or female so why penalize all those who have the bad luck to be born male? Keeping this real, men don’t crash because their sexual apparatus gets caught in the steering wheel. People get into accidents because they drive badly. There’s no point in forcing people to pay more because of something they are powerless to control. There’s every reason to base auto insurance quotes on actual driving records because, if the record is bad and the premium rate is high, it gives those drivers an incentive to improve their driving. Calculating premiums should be very personal, looking at how well each individual drives. Grouping everyone together on the basis of their gender for issuing auto insurance quotes is arbitrary and unfair (at least, in Europe).

Having a car is definitely a necessity in the US. The ability to travel across greater distances and the convenience of moving around a car gives us is definitely worth investing the money. However, some costs can definitely make this pleasant and useful object a bit expensive to maintain. Gas price is just a part of the problem, as you can always switch to a car with better gas mileage to save some money. But there’s one aspect that definitely annoys nearly all car owners out there – the necessity of insuring the vehicle.

The simple fact that car insurance is a must makes a lot of drivers think that they are made money on. Of course, having mandatory auto insurance helps maintain the order on the road with so many vehicles out there. By insuring your car you get the financial back-up for nearly any situation that may happen on the road. But sometimes this back-up comes at a price that’s not too wallet-friendly and that’s when car owners start questioning car insurance in general. Sure, getting rid of insurance altogether is not the smartest thing to do both financially and socially: you are acting irresponsibly towards other drivers who you may have an accident with and you risk ending up with enormous costs to cover out of own pocket in case the accident takes place after all. So what can be done about auto insurance in order to reduce its costs?

If you had your auto insured for long enough, you probably know that a typical policy consists of different coverage options. Third party liability coverage is the only mandatory part, consisting of bodily injury and property damage that have to meet the local state requirements. All other coverage types are purely optional and that’s where you have all the freedom to cut your auto insurance costs. Collision and comprehensive coverage is definitely a good way to cover your cur, but if your ride is quite old and doesn’t have much market value then you don’t need these types of coverage as they will only cover the actual market value of the vehicle if it gets into a crash. Rental car insurance may be a good addition to the policy, covering your rental car expenses while your car is being repaired, but let’s be honest – do you think you will need it more than once or twice? Even if you never use this option you’ll still have to pay additional money for having it in your policy.

And let’s not forget about the deductibles. A deductible is a set amount of money you have to pay out of own pocket before the coverage kicks in. Deductibles have an inverse relation to premiums. This means that the higher is the deductible in your policy the lower is the premium. Typically, a deductible of $250 is set with most policies but you are free to raise it up to $2,000. Of course, you should only choose the amount you can actually afford, otherwise there’s no sense in saving money on auto insurance this way because you won’t be able to meet the deductible in the first place. But by raising it from $250 to $500 can give you an average 10% cut in premiums. Sounds nice, doesn’t it?

Do you know how to protect against insurance fraud? It costs Americans $80 billion each year, or $950 per person, and it affects people of all ages, incomes, and races. Luckily, following some basic steps and staying cautious can save you money – both directly from avoiding needless repairs, and indirectly from contributing to higher insurance costs.

Unsolicited Inspections

The starting point to insurance fraud can often come from “professionals” claiming you need repairs to your vehicle when none are required. To counter this, do not accept unsolicited inspections to your vehicle (or home, for that matter). Of course, if you are seeking professional advice for a particular vehicle problem, that is acceptable. But if unrelated repairs are suggested, be cautious as this may not be covered by your insurance provider.

In the event of an auto accident, be wary of anyone approaching you claiming to be your insurance provider, a medical professional, or an attorney and advising you to seek representation. In some cases, you may even be approached at the scene of the accident. Always make sure you are speaking with who you think you are: ask for a driver’s license number and references.

Protect Yourself

To avoid unnecessary repairs and inflated costs, make sure all repairs are put in writing, cost estimates are clear, and there are no blanks on the sheet. Blank spots are gateways to significant additional charges, which can be filled in at any time.

When you are in an auto accident, make sure you record the other driver’s:

• driver’s license number
• license plate number
• insurance information
• contact information

You should also keep a pen, paper, and disposable camera in your car to take notes and pictures of the accident so you have the most accurate record of it. Avoid hearsay and exaggerations by other drivers. Some accident fraud comes from people hoping to collect insurance money from an accident that they intended, but looks like your fault to authorities.

You are in Charge of Your Policy

Do not be afraid of getting multiple opinions. Mechanics and others who make their living from accident disputes – legally or illegally – have every interest in keeping you with them, and may pressure you into getting work done quickly, or guaranteeing their quality and speed. Always consider shopping around to get the best understanding of what you need to resolve accidents and other car issues.

Furthermore, never let contractors persuade you that they understand your policy better than you do, or that you should not be in close contact with your auto insurance provider. Your insurance policy is ultimately your responsibility, and you are the one with a vested interest in maintaining low rates and only necessary repairs, whereas contractors, again even otherwise legitimate ones, are interested in more work.

And you can always get a new policy for less by using auto insurance quotes.

Protecting Others is Protecting You

Auto insurance fraud affects everyone; by inflating prices and making fraudulent claims in the American private insurance system, insurance premiums rise for everyone as insurance companies increase their costs. Ultimately, everyone pays the price for insurance fraud. If you have any information about insurance fraud you can anonymously contact the National Insurance Crime Bureau at 1-800-TEL-NICB, or online at www.nicb.org.