Demystifying Insurance

Motor Vehicle Insurance Questions Answered

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Q: Why do women pay less for car insurance than men?

A: In short, because of statistics. Insurance companies use statistics to help determine how much risk is involved in issuing a policy to a person, and the data show that men are more expensive to insure.

It's not that men file more claims than women. Actually both genders file about the same number of claims. The problem is the nature of the accidents involving men are different than those involving women.

Women tend to drive more slowly, so when they are involved in an accident, there is less damage and repairs will cost less. Men tend to drive faster, tend to drink and drive more often, and consequently have accidents that cause more extensive damage and greater injuries. This costs the insurer much more to fix, so the premiums are higher.

Q: Why do young drivers pay higher premiums than older drivers?

A: Insurance companies research all sorts of data about vehicle accidents, and one thing that is clear is drivers under the age of 25 are a higher risk to insure than older drivers. The primary reason seems to be that young drivers do not have a great deal of experience driving, so they are more likely to cause an accident. They are also more likely to have more than one accident before they reach 25.

Young male drivers are even more of a risk than young female drivers. Not only do young men have less driving experience, they also have a much greater tendency to speed and to drive impaired than either female drivers of the same age group or older drivers of either gender. A young male driver is the most expensive person to insure on a motor vehicle.

Q: Why does it cost more to insure an SUV when it is a safer vehicle to drive than a car?

A: Most people who drive sport utility vehicles (SUVs) say they prefer the vehicles because they feel safer than when driving a car. Unfortunately, that perception is faulty, and it shows in the higher premiums insurance companies charge.

According to crash statistics, SUVs are not really safer to drive than other vehicles. In fact, with the higher center of gravity, you're more likely to have the vehicle roll or flip in an accident than if you were driving a car.

It's not just the potential for rolling that makes the premiums for an SUV up to 20 percent higher than for a car. It's the damage that can be done to an SUV in a minor accident as well as the increased damage an SUV does to other vehicles and people in accidents that raises the insurance rates.

The bumpers on an SUV don't withstand minor accidents in parking lots or slow traffic as well as the bumpers on a car, so there is more repair expense in accidents that might do very little damage to another sort of vehicle. But it's the liability claims that really drive up the insurance premiums.

The amount of damage an SUV can cause to a smaller vehicle is high, and the potential injuries to passengers in the other vehicle are much higher than when two cars are involved in an accident. Also, a pedestrian struck by an SUV is far more likely to have serious injuries than if hit by a car. So, you will pay higher premiums for an SUV, and if you have an accident with another car or a person, expect the price of your liability insurance to jump.

Q: Why do insurance companies cancel your insurance after you make your first claim?

A: This warning is often given from friend to friend, but it rarely, if ever, happens. However, though insurers won't drop you that quickly, some will raise your premiums after one claim.

If you have a car accident where you are at fault, your insurance premium may go up. If the accident is your fault, plus the result of reckless or drunk driving, your premium will certainly increase. Premiums are based on risk. If you've had an accident due to bad behavior, you become a much greater risk to insure, because according to statistics, you're likely to repeat the action in the future.

When will making a claim put you at risk for cancellation? It depends on the insurance company, but if you show a pattern of accidents that are your fault, you may only get two or three claims before the insurer refuses to continue your cover.

Q: When is the right time to drop the comprehensive insurance policy on my car?

A: While you need to decide what is right for you. There are a few options if you are considering dropping your comprehensive policy. You may choose to not carry comprehensive at any time, but that means you will have to pay for any damage to your car by yourself. The exception is an accident where you are not at fault and another driver's third party liability must cover your vehicle. If you have a great deal of money, it may be worth not carrying comprehensive insurance and paying for repairs as needed rather than paying monthly premiums.

Some people may consider dropping comprehensive insurance as an option when your car is around ten years old, and worth about the same amount as your excess would be under your insurance policy. While we advocate no position on whether you should drop your comprehensive insurance, you can calculate for yourself the costs and benefits and make a decision that suits you.

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