Is the Bare Minimum Car Insurance Okay?

 

Buying a car can be an expensive prospect, especially when buying a new vehicle, and car payments are just the beginning.  There are also various fees that must be paid, such as the cost for getting the vehicle registered and, of course, the cost of insurance.

When buying your Greensboro car insurance, you'll learn that there are two classifications:

1. Car insurance required by North Carolina law for all vehicles operated on public roads
2. Optional car insurance not required by law but recommended for your protection

Insurance Required By Law

All but a couple of U.S. states mandate a certain amount of car insurance for drivers.  Each state has their own requirements regarding types and minimum amounts of coverage required, but the main focus is for bodily injury liability and property damage liability coverages.  Some states also require protection against uninsured drivers and for Personal Injury Protection (PIP) insurance.

In North Carolina, the legal requirement  is for a minimum of $30,000 per person bodily injury liability protection per accident, $60,000 for all persons in bodily injury liability protection per accident and $25,000 in liability coverage for property damage.  You're also required to have the same dollar amounts ($30K/$60K/$25K) in uninsured/underinsured motorist coverage.

Why Carrying Bare Minimum Car Insurance Is a Bad Idea

Required liability coverage is meant for "the other guy" involved in an accident that you cause.  The money paid out goes to help pay towards injuries and/or property damage sustained as a result of your driving errors.  There are two major problems to consider regarding this "bare minimum" coverage.

1. Your Greensboro car insurance liability coverage does nothing to pay for your injuries or property damage.  To be protected for your own losses in an accident you've caused, you must add certain optional coverage to your insurance policy such as collision coverage, personal injury protection (PIP) or medical  payments coverage.
2. The bodily injury and property damage liability amounts required by law are extremely low compared to actual costs typically seen as a result of an auto accident claim.  If an accident you cause seriously injures a third party and they require significant medical services, charges can amount to tens or hundreds of thousands of dollars.  Multiply this by the number of passengers injured from the other car and you can see how woefully inadequate "bare minimum" coverage is.  Experts suggest you should carry five or ten times the minimum required.

Car Insurance Trackers: What Data is Tracked?

 

Many vehicle insurance companies are now offering policy price discounts for clients who volunteer to equip their car or truck with an insurance tracking system.  Historically, car insurance companies have relied on various demographic information in order to determine the likelihood of a policy applicant making future claims.  This began with the creation of tables, known as actuarial tables, notating the number of vehicle accidents by location, by driver's gender, age, type of vehicle and more.

Then, when you were applying for insurance coverage, your personal driving history, including driving infractions and any past claims, were added to those statistics.  Driving history proved to be a good indicator of future potential claims.

While these actuarial tables remain an important part of your car insurance underwriting, determining whether or not to sell you a policy and at what premium rate, car insurance trackers add another level of accuracy to this process.

What is a Car Insurance Tracker?

Car insurance trackers were first introduced in the U.S. by Progressive Insurance Company in 1998.  Progressive's program, called Snapshot, is what's known as usage-based insurance.  It personalizes your car insurance premium rate based on the way you actually use your vehicle.  You pay according to the data collected by your tracker, which is sent to your insurer and analyzed to determine your driving habits.

Many auto insurance companies offer usage-based programs.  Most provide an immediate discount to your policy cost simply for signing up to participate in the program.  You then get a personalized premium rate at renewal time, depending on the results of the analysis of your driving habits.  While there's the potential that your premium rate may increase if it's found that your driving behavior shows increased risk, most drivers experience lower policy costs at renewal time.

What Data is Tracked?

There are two ways for data to be tracked: one is with a dongle that plugs into your car's computer via the OBD-II port and the other is through an app loaded onto your smartphone.  Once collected, the data is sent wirelessly to your insurance company for analysis.

Insurers are interested in information that indicates your typical driving habits, particularly those that show risk of potential claims.  Data collected by the tracker system may include:

• Hard acceleration
• Hard braking
• Speeds driven
• Fast cornering
• Use of handheld device while driving
• How often you drive, for how long and what time of day

How Do Car Insurance Tracking Devices Work?

 

Car insurance tracking devices are a great piece of technology, not only for drivers who use them but for companies that insure those drivers.  Also known as "telematics," vehicle tracking devices have been popular with many insurance companies since the late 1990's, with Progressive Insurance Company pioneering efforts in the U.S. to get these devices used in cars driven by their auto insurance policyholders.

What are the Benefits?

For insurers, the benefits of having tracking devices operating in their policyholders' vehicles include:

• Letting the insurance company know how safe of a driver you are by collecting data on such things as harding braking, fast acceleration, aggressive cornering and speeds driven.
• Letting the insurer know how much you drive, what times of day your car is being used, where it's being parked overnight and whether you're using your cell phone while driving.

All of the above-listed data give a picture of your driving habits and your likelihood of engaging in behavior that may cause you to be prone to be involved in an accident.

Benefits to you as a driver with telematics operating in a vehicle include the collection of data that can potentially help you to become a safer driver.  Learning how to overcome your tendency for fast acceleration and other forms of aggressive driving can help save you money not only on your insurance policy premium costs but also your fuel usage.

How it Works

There are two types of auto insurance trackers.  One is a dongle that plugs into your vehicle's On-Board Diagnostics II (OBD-II) Port, which is where your mechanic accesses data from your vehicle's on-board computer.  The other method for activating an on-board tracker is to load a special app onto your smartphone, which you must then carry in your car when driving.  The data collected by these two tracking methods is then sent to your insurance company where it can be analyzed.  Many insurance companies will give you an immediate discount on your policy premium cost when you sign up for their auto-tracking program.  Others will wait a predetermined amount of time to analyze your driving habits before deciding whether to offer you a discount and for how much.

Some Additional Benefits

Additional features some trackers provide include contacting emergency services in the event of a collision even if, as the driver, you're unresponsive.  They can also send roadside assistance if your car breaks down.

Car Insurance Costs: How Much Does Age/Experience Matter?

Of the dozens of different factors used to determine your Greensboro car insurance costs, age/experience is primary. To an insurance company, the age of a driver represents general measures of both driving experience and accident risk.

Insurance company statistics show that, on average, the more years a driver has had behind the wheel, the less likely they are to have an accident and make a claim on their car insurance policy. According to the Insurance Institute for Highway Safety (IIHS), teen drivers (ages 16-19) have crash rates of four times that of drivers 20 years and older. Since insurers believe that young drivers are more likely to have accidents and make claims, teens' insurance rates are going to be more expensive.

What Adds to Higher Teens' Risk

Teen drivers are considered higher risks by insurance companies for a number of reasons. Their immaturity can lead to risky behaviors, such as speeding, and being inexperienced at driving makes them less likely to respond well in hazardous situations. Alcohol also plays a role in many teen crashes. While they may be less likely than adults to drink and drive, their accident rate is higher when they do drink and drive because of their relative inexperience with both driving and drinking.

Age Matters, Both Young and Old

This risk assessment continues on for a certain number of years. Assuming one is licensed at 16 years old, by the age of 25, you'll see your Greensboro car insurance costs drop significantly, to where they're only about one-third of what they were when you were 16-17. They'll continue to drop until you're about age 55, at which point they'll typically be as low as they can go. Drivers in their mid-30's to late 50's represent the lowest driving risk to insurers due to their greater road maturity and driving skills.

Typically, once you enter into your 60's, your insurance rates will again begin to climb. Aging brings with it slower reflexes and reaction times, which pushes seniors into a higher risk category in the eyes of insurers.

Saving on Your Insurance as a Younger Driver

There's nothing you can do to add years of experience to save on insurance premiums but there are some things that can be done to lower your insurance costs. Being added to your parents' policy, if they're willing, may cost half as much as taking out a policy on your own. Also, apply for all discounts available.

What Is Usage-Based Car Insurance?

Usage-based car insurance is known by a number of different names, including:

• Pay-as-you-drive (PAYD) insurance
• Pay-per-mile insurance
• Behavior-based insurance
• Telematics

These forms of usage-based car insurance are ones where your insurer calculates your insurance premium rates based on your car usage and how you actually drive your car rather than the way they think you'll drive your car based on their statistical data used during the underwriting process.

Traditionally, car insurance premium rates are determined by using lots of data that are meant to tell the insurance company what type of risk you represent to them.  This is done by trying to figure out how other drivers displaying your characteristics and driving habits are most likely to drive. There are also lots of other factors used to determine what level of risk you represent to your insurer. These may include:

• Age
• Gender
• Zip code
• Occupation
• Marital status
• Driving record
• Credit rating
• and other factors, depending on the insurer

How Usage-Based Car Insurance is Different

With usage-based car insurance, your policy premiums are based on how and how much you actually drive your car. As a safe driver, you should look forward to saving some money. Conversely, as a riskier driver, your premiums will be higher than your peers who are considered safer.

This type of insurance is relatively new and has been fairly slow to catch on with the public. One reason for this is the fact that people may feel it an invasion of privacy to allow their insurance company to track their driving.

 

 Different Types of Usage-Based Coverage

Some usage-based policies figure premium costs strictly on the number of miles you drive during the policy period. Even as a risky driver, you won't see a premium penalty unless a claim is filed against you.

Other policies are behavior based, meaning premium rates are determined by how and when you drive. Using a mobile app that works in conjunction with your smart phone, data can be sent to your insurer to tell them not only where and how many miles you drive, but also any risky actions you take. These may include:

• Talking on your phone while driving
• Fast accelerations
• Hard braking
• Speeding

As an alternative to the mobile app, some companies use a dongle that plugs into your car's on-board diagnostics port.

Not all insurers offer usage-based car insurance, but some of the best, such as Progressive, do.

Is Car Insurance Different for Leased Cars?

All motor vehicles being driven on public roads in NC are required by law to be covered by at least a minimum amount of vehicle insurance. This includes liability protection and protection against losses from injuries resulting from an accident caused by an uninsured or underinsured driver. Liability coverage is meant to protect the other drivers involved in an accident for which you are deemed responsible. It can help pay for their losses resulting from physical injury or damaged/destroyed property. Greensboro car insurance liability coverage does nothing to protect you from losses such as personal injuries or damaged, destroyed or stolen vehicles.

To be protected for these losses you must add more to the basic liability coverage found in a minimal Greensboro car insurance policy. For more complete protection you need to at least add collision and comprehensive coverage to your policy. There are other protections you may choose to add, but these three – liability, collision and comprehensive – should be at the top of your list unless your car is of such low value you can't justify the additional cost of adding this coverage.

Buying Versus Leasing Insurance Requirements

Whether you're buying a car, using a car loaner or leasing a car, insurance requirements are similar. The specifics of the coverage are dictated by the lender or the lessor, with their main concern making sure their financial exposure is protected in the event that something unexpected  happens to your car. With this in mind, you'll be required to have full coverage in place, including collision and comprehensive protection.

As with all cars being driven on NC public roads, you must carry at least the minimum amount of liability protection. It's worth mentioning here that the State's minimum liability requirements are low and would typically only cover a small fraction of the money you'd need to pay for losses you cause to others in an accident deemed your fault.

Gap Insurance

One other type of protection leasing companies typically require is something called gap insurance. New cars start to depreciate in value the minute they're driven off the lot. A new car may depreciate in value as much as 20% or more during the first year. If you have an accident and total your leased car early on, the payoff from your insurer may not be enough to cover your outstanding financial obligation. Gap insurance will cover this shortfall and can be purchased from your loan officer.

How Much Will Adding a Teen Driver Increase My Auto Insurance Rate?

If you're not prepared in advance for the auto insurance rate amounts currently being charged by insurance companies for new teen drivers, you may well be shell-shocked when it comes time for your teen driver to insure his or her vehicle. Teens are some of the most expensive drivers to insure because of the large risk they typically pose to auto insurance companies. Statistically, teen drivers are most likely to be involved in accidents, to cause accidents and to drive in such a way as to get ticketed for moving violations.

According to the Center for Disease Control and Prevention, drivers between the ages of 15 and 19 are four times more likely to be involved in an automobile crash than older drivers. This makes vehicle crashes the number one cause of death among individuals within this age group.
The riskiest age for car crashes is 16. Their crash rate is double that of 18 and 19-year-old teens. With risk being a major determining factor in setting auto insurance rate amounts, it's no wonder teen drivers are faced with paying the highest of those rates.

Individual Policy Rates Versus Adding Your Teen to Your Policy

There are numerous ways to lower costs when insuring teen drivers. The first is to add him/her to your policy rather than having them take out an individual policy of their own. The cost difference between these two options is significant. Taking into account all teen drivers between the ages of 15 and 19, and factoring cost differences between a wide variety of different insurers, the average cost of an individual teen driver's insurance policy for a modestly priced vehicle is about $3,000 annually.

This rate includes liability protection of $100K per person per accident (bodily injury), $300K total bodily injury per accident and $100K property damage per accident. Comprehensive and collision protection aren't included in this estimate.

Compare that cost with an average increase of $620 when adding your teen to your auto insurance policy.

Other Ways to Save

Most auto insurers offer numerous discounts when taking out or adding your teen to a policy, however, be advised they aren't likely to be forthcoming with all the discounts they have available. In other words, you have to ask about each and every discount for which you may qualify. These can quickly add up to significant savings. Check out this blog post.