Tag Archives: Auto insurance

Automobile Recalls Affecting Insurance Rates

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The United States has one of the largest vehicle markets in the world. There are over 260 million registered passenger vehicles according to a 2007 Department of Transportation (DOT) study. With vehicles outnumbering licensed drivers, the automobile has become an integral part of American life.

With the amount of work that goes into vehicle design, it is not surprising that flaws occur. If you have been paying attentions to vehicle recalls, it seems like there is a new one coming out almost every day. Since the safety of a vehicle is a factor in determining insurance rates, it would seem logical that if a vehicle has had safety recalls, the insurance rate on the recalled vehicle may raise.

In general, car insurance premiums can be increased every time the policy is up for renewal. While an insurer may do this for a number of reasons, a mechanical defect of the vehicle cannot be controlled by the consumer. But, if the policy holder does not follow the recall notice in a timely manner, and ends up getting into an accident because of a failure of the recalled part, they could be held responsible for the damages. If you do not respond to a recall notice at all, an insurance company may drop you altogether. Another way your insurance rates can be affected by recalls, is the recalls decrease the resale value of the vehicle. If the replacement value of a vehicle decreases the insurance rates should decrease as well.

Safety issues that cause accidents and damages, can hold the car manufacturer responsible and may recoup money from them. In this case the insurance company does not need to gain more money from its policyholders since the car manufacturer is paying for what they are responsible for.

Dealing with the auto insurance industry is never easy and, when the vehicle manufacturers gets involved, it just adds to your problem. For now, there should be no cause of concern so long as you pay the premiums on time and take the vehicle in for repair as soon as you get the recall notice. If you believe your premiums have been raised unfairly or in error, you do have some recourse. Most insurance companies have procedures in place through which a customer can file a complaint. When all else fails, a customer can sign up with a competing insurer. Take precautions however: an auto insurance policy is a legally binding contract between you and the company. You need to give advance notice of cancellation and make certain your new policy is in effect. Don’t just stop paying your premium, or you could be penalized.

Factors That Affect Your Insurance Rates

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If you have ever compared your auto insurance rates with a friend or family member, you will see that they can be quite different for the same coverage. Insurance companies decide how much you pay according to factors that indicate how much of a risk you are. When you buy a new vehicle, it is always a good idea to keep these risk factors in mind to avoid huge rates when you go to insure your new vehicle.

  • New or Used: A brand new vehicle carries a higher value therefore making it a greater risk. What you buy and how much it costs will determine how much repairs will cost and whether you want collision coverage on the vehicle.
  • Driving History: Non-moving violations such as parking tickets have less impact on your premiums than moving violations such as speeding tickets and DUIs.
  • Age and Gender: Insurance companies use statistics to calculate your insurance premiums. Age group, gender, and marital status statistics collected over the years allow insurance companies to classify you either as a high or low risk client.
  • Accidents: If you have had a previous accident, insurance companies see you as higher risk. Depending on the severity of the accident and who was at fault, you may see your premiums go up 20% to 40%. Some accident claims may result in your insurer dropping you completely.
  • Where you live: Some states have higher rates. This has to do with how much traffic is on the roads, road conditions, where your car is stored, and how many automobile thefts are in your area.
  • Gaps in Coverage: Insurance companies view individuals who frequently let their insurance lapse as poor risks. If you are in this group, your choice of providers will be limited and you’ll likely have to pay much higher than normal premiums, even if you have a spotless driving record and claims history.
  • Credit Score: Some insurance companies believe that people with bad credit are higher risk when it comes to automobile insurance. As you shop around for insurance, ask each agent if your credit score determines your insurance rates. You should make sure your credit history is accurate so you don’t pay higher insurance due to false credit information.