Buy Carefully

By Author: Marcus Stalder
Total Articles: 491
Comment this article

Let's start off thinking about the purpose of discounts. Here's this big insurance company. It employs many people with high salaries and bonuses. Put another way, the premium installments you make pay these salaries and bonuses. So how come the company gets all generous and decides to offer you the chance to pay less? If you pay less, that's less money to pay those bonuses. Well, there's a lot of psychology goes into selling. All companies want your business so long as they can make a big profit out of you without having to work very hard. So they use price to attract the right people and drive away those it would rather not have. Insurance companies want to collect in as much money as possible from the safest drivers. These are the people who pay on time and never have an accident. No insurer wants bad drivers. All that paperwork when it comes to claims and actually having to pay money out - definitely don't want them. That means adjusting the prices.

The insurers pitch the premiums high to the bad drivers and lower to the good drivers. Being honest about this, if the bad drivers pay these premiums, the insurers can ...
... afford them to be bad. But why only "lower" quotes to the good drivers. Well, this is the second law of selling. If the buyer is inexperienced, he or she may just accept the quoted price and the profit is higher. You have to ask for discounts to receive them. You might be surprised how many people just accept the quotes and don't push for the extra discounts.

Anyway, no matter how well you drive, the other big variable is the make and model of the vehicle you drive. This is where price really comes into its own. The actuaries who collect in information about all the accidents in the US, work out the probability of any make or model either being involved in an accident or stollen. So the rates quoted to you are a direct reflection of this work. Now it's up to you to decide how to react. If money is no object, you drive whatever vehicle and pay the asked premium. But if your budget is limited, you do your homework. The best place to start is http://www.safercar.gov/. This site is run by the National Highway Traffic Safety Administration, offering 5 star safety ratings for all the vehicles sold in the US. This safety information is backed up in http://www.iihs.org/ratings/ where the Insurance Institute for Highway Safety also lists the safest vehicles in each class. Finally, you should have a browse around http://www.nhtsa.dot.gov which gives clear guidance on safety features and practices. You will find the pdf, http://www.nhtsa.gov/staticfiles/administration/program_development/2010_Comparison_Insurance_Costs.pdf particularly helpful in comparing insurance costs.

Although safer vehicles are more boring to drive, they are cheaper to insure. The car insurance industry uses premium rates to encourage you to buy modest cars and drive them carefully. If you cannot afford to change your vehicle, talk to the insurers or get multiple car insurance quotes to find out what discounts are available if you fit safety features. Acting safe gets you discounts.