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Costly Car Insurance Industry Practices

Car insurance consumers seem to be constantly fighting an uphill battle when it comes to the rates they pay for their policies. Year after year, average rates continue to climb. It is hard to understand sometimes why this is the case. But a look at some common car insurance industry practices helps you better recognize the reasons why your rates might be higher than you would expect. There are some industry norms that would surprise many of us. This article discusses several of those surprising and costly car insurance industry practices in the context of a larger discussion of what we can do to keep our rates as low as possible to save money over the long run.

Paying for Your Friend's Mistakes

Many people have an incorrect understanding when it comes to auto insurance as it pertains to individual coverage. They think that the policy they own only covers them and their families. Their reasoning is that the drivers in their household are the only ones whose performance matters to their premiums. While this is generally true most of the time, there is a rather significant exception that comes up more often than you might think. Loaning out a car to your friend exposes you to risk as far as your auto policy goes.

We might think the only thing we risk is the condition of the vehicle itself when we allow a friend or extended family member from outside our household to borrow a car from us. But the truth is that you are essentially letting that driving on to your policy for as long as they possess your car with your permission. By allowing that friend to drive your car, truck, or SUV, you are basically vouching for him as a driver to your insurance company. In the event of an accident, you will have to pay for any deductible that comes due; and beyond that immediate expense, your insurance rates could also increase as a result of the accident even though no one listed on your policy was involved. This is especially true if you have had other recent claims against your coverage. Use caution whenever you loan out your vehicle, and be aware of the possible insurance repercussions should something go wrong.

No Coverage for Personal Property

An equally significant (and in many cases, equally shocking) fact about typical auto insurance coverage is the way it excludes protection for personal property. Many drivers buy policies including comprehensive protection and expect these plans to be, well, comprehensive. But in reality, there are numerous limitations and exclusions to the coverage you actually get when you buy these comprehensive plans. One of the most significant exclusions involves your personal property.

Many consumers buy comprehensive auto coverage thinking that it covers anything and everything beyond accident damage. Theft protection is one of the biggest reasons we pay good money for comprehensive. But in cases of break ins, your personal property is in most cases not included in the coverage offered by your auto insurance plan. If your car is broken into, the damage to the vehicle is covered, and any factory installed parts may be covered, but unless you have special provisions for aftermarket parts, they will likely not be covered by your comprehensive policy. And any personal property will likely be excluded as well. The name "comprehensive" certainly suggests that this mode of coverage is something more than it is, and it is a good idea to take a good look at any exclusions and limitations of coverage before you pay all the extra money for this part of your policy.

Cancel Policy When Switching Providers

A major area of confusion for a lot of consumers revolves around the necessary steps to take when switching auto insurance providers. Many think that if they wish to switch companies at renewal time, all they have to do is send that new company a check and ignore the renewal bill for the old company. The trouble is, by failing to tell them you've decided to switch, you risk being canceled, an action that appears on your credit and will likely increase your rates elsewhere. Make sure you let your old insurer know that you are switching, and don't just leave them to figure it out on their own.

These are just a few of the industry norms that catch a lot of consumers off guard. Don't let your insurer take you for more money that what you should really be paying. Make sure you are up to date on industry practices, and be prepared for whatever might come as a car insurance policy holder. There are many costly car insurance industry practices. Some you can't do anything about, but others you can prevent to save money.


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