The Three C’s for Auto Insurance

Insurance carriers always advertise how easy it is to save money on your car insurance.  What they don’t tell you is…

Insurance carriers have their own underwriting guidelines to rate their auto exposures.  Most of the rates are calculated using extremely advanced algorithms and there is not a “one size fits all” scenario when rating auto insurance.  You could have a fantastic rate with one carrier an entirely different rate with a different carrier.  There are many characteristics that are used for rating auto insurance.  I think the Three C’s are some of the most significant that I have seen when reviewing a client’s auto insurance and thought I would share them with you.

C is for CREDIT:  Credit has been used in rating auto insurance risk for a very long time.  In fact, we see a change in underwriting for home insurance where credit is now one being utilized.  Of course, those individuals who maintain high credit ratings will ultimately see better pricing/rates than individuals with poor (or no) credit.  Insurance scoring is a soft hit, meaning it does not typically affect your BEACON score.  Insurance carriers are also utilizing “Insurance/Financial Data” more than actual credit scores in some cases.  Maintaining good credit practices will usually result in lower insurance premiums.

C is for COVERAGE: Most people think that if they reduce coverage, they will experience reduced premiums.  This is true on an existing policy, but not when shopping for a NEW policy.  Proof of coverage is a much larger variable than most would think.  Carriers put a significant weight on prior bodily injury limits.  Those individuals who maintain 100/300 Bodily Injury coverage will have significantly lower premiums when shopping insurance than those individuals who carry prior limits of 10/20 or 25/50.  I just did this exercise with a client on the phone.  She currently has 100/300 limits and her new rates were around $800 per six months.  When I changed her PRIOR limits to 25/50, her ‘new’ rates increased to $1100.  Maintaining high prior limits is extremely important.

C is for CLEAR RECORDS:   Ok, so I am being a little flexible here.  There is no question that having a clear driving record is better than not.  What people don’t think about is what kinds of accidents to claim on their insurance.  Bottom line: if you can pay for it out of pocket, you should.  If not, file the claim.  What is important to know is that carriers look at FREQUENCY of claims, not just the claim itself.  We have seen clients with multiple towing/labor claims experience significant rate increases for such small claims due to the number of claims filed.  Insurance is for catastrophic coverage and should be used for issues that can’t be paid out of pocket.

As stated earlier, there are many characteristics that affect auto premiums.  These are just a few.  Please call our agency if you ever would like to do a review on your auto insurance.


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