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Credit Scores Linked to Insurance Losses
A study by The University of Texas at Austin supports what insurance companies have known for a long time - people with lower credit-based scores are more likely to file claims. Analysis of more than 150,000 randomly selected Texas auto policies revealed a "significant relationship" between insurance credit scores and automobile policy losses.
Conclusion? People with lower credit scores file more - and more costly - auto claims than the average policyholder.
Don Hanson, southwestern regional manager for the National Association of Independent Insurers, says the study will help people understand why these are important tools for evaluating the risk of loss. "Combined with other applicable risk factors, these scores help insurers get a complete picture of risk," he says. "And this allows them to price their policies more appropriately to that risk."
Factoid:
Industrywide, 16% of policyholders have a lower premium due to good credit.
by Mitch Swanda, CFPTM USAA Financial Planning Services
Content provided by USAA
Life in the military requires the ability to adapt constantly - to new places, new responsibilities and new challenges. It's no different when it comes to staying on top of your insurance coverage. Auto insurance, in particular, requires routine review and adjustments to maintain the right level of coverage and avoid paying too much. Here are five tips to help you take the wheel on your policy and find auto insurance savings down the road.
Research Your Ride
Before you buy your next car, consider its potential insurance costs. An accident-prone vehicle that typically suffers serious damage in collisions or is expensive to repair will cost more to insure. Cars that are popular among thieves also warrant higher premiums. You can research these factors for many different vehicles at the Insurance Institute for Highway Safety Website.
Brush up on Geography
The next time you PCS, keep in mind that where you choose to live can affect your insurance premiums. You could pay more if your daily driving routines - like a long commute on congested freeways - make an accident more likely. High rates of theft and vandalism in your area also will be factored into insurance costs, which is all the more reason to research crime statistics as you're deciding on your next neighborhood. Finally, don't forget that each state has varying legal requirements for the minimal levels of insurance coverage drivers must carry.
Understand Your Options
Review your insurance policy to ensure that your level of coverage matches your needs. You might find instant savings by dropping collision coverage on an old vehicle, since the cost of maintaining the coverage might outweigh the value of the car.
If you're preparing for deployment, another possible savings tactic would be to discontinue liability coverage on your vehicle (where allowed by state law), provided it will be properly stored and no one will drive it during your absence. Keeping only comprehensive coverage would reimburse you for theft, vandalism or weather damages that may occur while you're away.
Raising your collision or comprehensive deductible - by as little as $250 - is another way to lower your monthly premiums. But remember that an increased deductible means you'll pay more out of pocket in the event of a loss, so you should only take this direction if you're financially prepared to pay the higher deductible.
Save Through Safety
When car shopping, be aware that safety features such as air bags, automatic seat belts and daytime running lights might merit an insurance discount. Maintaining a clean driving record also can keep your monthly premiums down, and a defensive driving training course often can more than pay for itself in the form of reduced insurance rates.
Investigate Your Insurer
Sooner or later you'll probably need to put your policy into action. Before the crisis hits, take time to make sure the insurer you choose can hold up its end of the bargain. Review the company's complaints record and rankings on customer satisfaction and financial security, available through your state's department of insurance Web site or industry analyst companies like J.D. Power and Associates or A.M. Best Company.
You'll also want to explore a number of other money-saving opportunities the company might offer for military personnel, such as special rates during deployment.
A good rule of thumb is to review your coverage annually, and check in with your provider in advance of any major changes to your lifestyle or financial situation. It just might make your life a little easier, and leave your bank account a little larger.
Mitch Swanda is a salaried CERTIFIED FINANCIAL PLANNER™ practitioner with USAA Financial Planning Services, one of the USAA family of companies. USAA is a diversified insurance and financial services organization that has served the military community since 1922. Swanda also served six years on active duty in the U.S. Navy.
