Top 10 Little-Known Facts You Should Know Before Buying Car Insurance

How many of us bother to look into the details of a car insurance policy?

For many, a meticulous review of the document only happens after a collision when properties get damaged, or, after an accident when someone gets injured or, worst, dies. The fact is, many consumers who own cars are not aware of many issues surrounding auto insurance - and this can have a significant impact on the claims they file later on.

The following lists down little-known auto insurance facts that a wise consumer should be aware prior to purchasing a policy.

Good credit will get you a discount.

There used to be a time when auto insurance carriers did not consider an individual's credit score when quoting a rate. Nowadays, it is becoming a common practice for a carrier to pull out one's credit score as part of the evaluation for giving a quote. This system is referred to as determining a person's "insurance risk score."

The idea is this - a person with a low credit rating is more likely to file a claim than one with the good or better rating. Insurance companies think that having a low credit score could be an indication that the person has missed payments or has the habit of making late payments on his credit accounts and thus believe that he will do the same to them.

In essence, insurance companies think that a good score reflects that the person is responsible enough to honor his insurance payments. They also think a good score shows that he has good driving habits which can lead to fewer claims in the future.

Stacking of underinsured and uninsured motorist policies can save you money.

Stacking happens when coverage for bodily injuries involving uninsured and underinsured motorists are combined by the policyholder who owns several vehicles. The benefit of stacking is that the payment limits are increased in the event an accident takes place involving a motorist with lacking or no insurance.

For instance, stacking a $50,000 / $100,000 policy for one car with a similar coverage for a second car will result to a $100,000 / $200,000 increase in coverage. The increased limits can substantially provide cover especially if there is considerable expenses in relation to the damages or the injuries arising from the accident.

Note, however, that stacking is not allowed in all states. Only a number allow this. Also, stacking is only applicable for coverages relating to bodily injuries suffered by the underinsured and uninsured motorist.

Standard policies do not cover theft of personal items.

Many consumers assume that a standard policy will cover for a stolen laptop, cell phone or other similar items, which they left in their car. It does not provide such coverage.

However, if you have a home insurance policy, you can ask for coverage for these items. You will still be required to file a report with authorities and pay the deductible for the coverage.

Car insurance premiums can be claimed for tax deduction for business use.

If a vehicle that has auto insurance is also used for business purposes, the premiums can be claimed as tax deductions. The U.S. Internal Revenue Service provides that to do this, one must establish how much time the vehicle is used for business purposes.

For instance, if it is used 40 percent of the time, then 40 percent of the premium paid on the policy may be claimed as a deduction. If a vehicle is used solely for business, then the IRS recommends the use of a standard deduction rate, which takes into consideration auto insurance premiums.

The option to pay in installments may carry a charge.

The annual premium on auto insurance can be a substantial amount to many consumers. That is why there are those who prefer to pay in installments. However, many insurance carriers will only provide this option if the consumer pays a fee.

One way to avoid having to pay a fee while still enjoying the convenience of smaller, monthly amounts is to set up a personal installment plan. To do this, one deposits the monthly equivalent of the annual premium in a savings account. When the due date arrives, the amount is withdrawn and full payment is made to the insurance provider.

Cancellation will not stop automatic renewal of policy.

In many cases, the insurance provider will require cancellation to be done in writing. If this is not followed, a consumer may still have his premiums withdrawn automatically from his account. Also, if no formal cancellation is made, the insurance company may report the consumer to a credit rating agency.

Insurance carriers automatically add teenagers to policies.

Many companies do this once they know you have a teenager of driving age with you even if he or she does not have a driver's license yet. Even if you have no plans of letting your teen drive the family vehicle, a company may add him or her to the policy. While this may come cheaper than getting a separate policy for your teen, you may still want that the insurance company inform you about this beforehand.

If you belong to a certain occupation, you can get a discount.

Some insurance carriers offer discounts to engineers, teachers and military personnel. For example, if you work in the military and you can submit papers that prove your rank and details of your enlistment, an insurance company will consider you for a discount. Some companies are also known to provide discounts to veterans.

Incorrect listing of vehicle can increase your insurance rate.

This thing can happen, for instance, if the car is a two-door coupe but is listed as a four-door sedan; or, the model name is wrongly listed; or, the proper mileage is not recorded - these types of inaccuracies can impact the rate you have on your policy.

Affiliation with the American Automobile Association can get you discounts.

Insurance providers give preference to drivers who are AAA members or those who belong to similar professional organizations. Inquire with your insurance agent which organizations and groups can get you discounts on your policy.

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