4 Ways to Stay Out of Trouble with Auto Insurance Companies
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UPDATED: Apr 9, 2019
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No one wants to pay more for their auto insurance than is absolutely necessary, especially during tough economic times. That’s why it’s important for drivers who already have good rates to do the best they can do to keep those rates low.
To that end, we’ve listed below four ways to stay out of trouble with auto insurance companies.
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As you go through these four ways of staying out of trouble with auto insurance companies, remember that there is no foolproof system to prevent all rate increases in the future.
The idea here is to avoid unnecessary increases that fall outside of inflation and the normal costs of doing business.
By controlling the factors that cause unnecessary increases in your rates, you can keep your monthly premiums as low as possible.
Avoid Traffic Accidents
The most important thing you can do to stay out of trouble is to avoid traffic accidents at all costs. This may seem obvious, yet far too many drivers engage in risky activities behind the wheel that can result in serious crashes.
According to statistics from the National Highway Transportation Safety Administration (NHTSA), there were 30,000 fatal traffic accidents in 2010.
In addition to that, there was a much larger amount of non-fatal accidents.
Every time a driver is involved in an accident, his insurance company gets involved to some extent. Depending on the state in which a driver lives, and his culpability, his auto insurance company will have to pay out to satisfy claims.
Because claims often far exceed how much a driver pays in premiums, a driver with multiple accidents becomes a financial liability for the insurance company. They have no alternative but to raise that driver’s rates accordingly.
From the insurance company’s point of view, an auto policy is a risky proposition. If you reduce the risk of your insurance company losing money on you, they will be more than willing to keep your rates as low as they can.
So drive carefully, take weather and road conditions into consideration, and do not engage in distracting activities like texting, eating, or changing your music while driving.
If you do have an accident that causes only minor damage, consider paying for it yourself instead of filing a claim.
The money you spend now may end up being far less that what you’d pay in the future if your insurance company decided to raise your rates.
As a general rule, any repairs costing only a few hundred dollars more than your deductible are candidates for self-pay. Anything higher than that will probably be better off being covered by your insurance policy.
Would you be surprised to find out that there were more than 4.3 million traffic tickets issued to Florida drivers in 2011? It’s true. But perhaps even more alarming is the fact that nearly 500,000 of them were felonies including DWI/DUI, leaving the scene of an accident, and vehicular manslaughter.
If there are that many tickets being issued just in Florida, can you imagine how many are issued across the entire nation?
Drivers may not consider traffic tickets to be all that important where insurance rates are concerned, but insurance companies don’t see it that way.
To them, a traffic ticket represents a driver who is exercising poor judgment behind the wheel; judgment poor enough to increase the risk of an accident.
If you want to stay out of trouble with your car insurance company, drive safely and legally so you don’t get tickets.
Outside of the previously mentioned felonies, one of the worst types of tickets you can get is one for speeding. Excessive speed is a contributing factor in a large number of fatal accidents across the United States.
Every time you’re caught exceeding the speed limit, you are telling your insurance company that you are willing to take a chance at adding to those fatal accident statistics. They will respond by raising your rates.
Another violation now being taken seriously among insurance companies is the texting-while-driving ticket. As cell phones and texting have become increasingly more popular among young people, fatal accidents involving texting while driving have skyrocketed.
If you’re caught, expect a hefty increase in your insurance, in addition to a costly ticket.
Pay Your Premiums on Time
Any business depends on its customers paying bills on time in order to stay financially afloat. The auto insurance industry is no different.
As a matter of fact, because of the way the insurance industry works, it is extremely important from a cash-flow perspective that customers pay their premiums when due.
To help understand this, consider the fact that an insurance company doesn’t produce a product in the same sense that a manufacturer does. Therefore, it doesn’t earn a profit by taking raw materials and converting them into something that can be sold at a higher cost. They make their profit through investments.
When you purchase a car insurance policy, the company takes a certain amount from your payment and puts it into a reserve bank account to cover future claims. By law, insurance companies must maintain reserve accounts at specific levels.
But what’s left over after funding of those reserve accounts gets invested with the hopes that they will turn a profit.
It is the wise investments of an insurance company that keeps them in business.
In order for all of this to work as planned, insurance companies need to have a constant stream of premium payments coming in to fund their investment activities. When a driver fails to pay her insurance bills on time she’s interrupting cash flow.
That’s a good way to get in trouble with your auto insurance company and wind up with a rate increase.
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Our fourth way to stay out of trouble with your auto insurance company is to be honest in all your dealings with them. This starts when you talk to an agent in anticipation of beginning a brand-new policy.
Be honest about your driving record, how many miles you put on your vehicle annually, where you store it at night, and so on.
In terms of your driving record, the insurance company has access to it anyway. Not being honest about it up front won’t help you out. As for the other factors, if you are dishonest you may get away with it for a while.
You probably won’t get away with it forever.
If you have an accident, and it’s found out in the course of your investigation that you were not honest when you purchased your policy, your insurance company may have a legal right to deny your claim.
They would also have the legal right to raise your premiums in order to more accurately reflect your circumstances.
A good example of being honest is reporting your teenager as soon as he gets his learner’s permit.
Most insurance companies won’t alter your policy until the child actually earns a driver’s license, but informing them at the time of the learner’s permit lets them know you’ll soon have a new driver to add to the policy.
According to the Insurance Information Institute, failing to report a teenage driver could be considered legal misrepresentation and allow your insurance company to deny a claim.
What to Do if You Get in Trouble
If you find yourself in trouble with your auto insurance company, you may have a difficult time affording to keep your insurance because you’ve been bumped into a high-risk pool. If that’s the case, there are a couple of different options you can take:
- Surrender your vehicle registration and find another means of transportation until such time as you have a clean license
- Sell your vehicle and purchase a used car that’s less expensive to insure
- Shop around for a new policy from a company that specializes in high-risk drivers
If your insurance company drops you altogether and you’re unable to find a conventional policy with another insurance company, you may be eligible to participate in your state’s high-risk plan.
For example, the Wisconsin Auto Insurance Plan is a state-sponsored plan that provides car insurance for drivers who do not qualify for standard car insurance. Just about every state offers something similar.
These plans don’t actually sell or write insurance policies; they provide financial backing to insurance companies as a way to encourage them to participate. If you purchase a policy through one of these plans you are actually purchasing it from a licensed insurance company.
That company is offering the policy based on the state guarantee that they will not lose money on any claim you make.
Finding and maintaining affordable car insurance coverage is a matter of staying out of trouble and keeping your nose clean. It’s not hard to do, but it does require some diligence and a commitment to act and drive safely and legally at all times.
Not only will you avoid unnecessary rate increases this way, but you’ll also be safer for everyone else on the road.
Right now is the best time to begin searching for the best car insurance online by entering your ZIP code into our FREE search tool on this page!