'Shopping Around' for Car Insurance .... The Impact of Credit Scores and Other Unrelated Factors ... Smart Buyers Beware

Smart Buyers know that it's wise to 'shop around' before making major purchases.

And buying or renewing a car insurance policy definitely falls in the category of major spending.

That said, the importance of shopping around for car insurance isn't well understood by most 'shoppers.'

Your car insurance premiums --- what you don't know can cost you  is an eye opener, and clicking on and reading the below referenced study by Consumer Reports is well worth the time:

"Car insurance costs can add up, and there’s no shortage of experts advising drivers how to keep costs down, but are you really saving when you think you are?

What you probably don’t know is that your credit score — that number representing your creditworthiness and used to determine rates on personal loans and mortgages — can impact your car insurance rates. . . .

Consumer Reports has released findings of a study looking at 2 billion price quotes from more than 700 companies and how you can get the best rates. . . .

 Among the key findings:

Rates swing based on credit score and which state you live in

People with just “good” credit scores paid $68 to $526 more than similar drivers with the best credit scores, depending on what state they called home. . . .

Taking an example in Florida, adult single drivers with a clean driving record and poor credit paid $1,552 more on average than if the exact same drivers had excellent credit and a drunken driving conviction. . . .

If a consumer faces a ruined score due to divorce, job loss or bankruptcy, he/she can request that the insurance company waive the score in calculating the premium.

These exceptions for extraordinary life circumstances are protections the insurance industry put into place, but few consumers seem to understand or exercise them. Despite about one million bankruptcies and one million divorces last year, according to Consumer Reports, insurance firms might get just one request a month among its thousands of policy holders. Other companies surveyed didn’t appear to keep any records of such requests.

Bundled savings? Student discounts?

You might think advertisements about bundling your various insurance policies or good student driver habits can save you money. But Consumer Reports says they don’t, despite a $6 billion annual spend on advertising.

A typical policyholder would save just $97 a year by bundling home and car insurance. Student-driver training discounts are worth very little — a mere $63 in annual savings nationally for CR’s sample family.. . .

“These practices are pricing consumers out of the market,” says Norma Garcia, senior attorney and manager of the financial services program at Consumers Union.

Insurance companies often create their own scores based on criteria they establish, making them different from FICO scores that consumers often access."

Summing Up 

To repeat, you should spend some time reviewing the Consumer Reports article referenced above. You'll be glad you did.

It's absolutely a Caveat Emptor world out there when it comes to buying car insurance, and Smart Buyers are well advised to be guided accordingly. 

Sellers of insurance will charge what the market will bear, and 'long term, loyal and satisfied' customers who don't routinely 'shop around' will end up paying the most. It's sad but true

As a result, Smart Buyers will 'shop around.'

Let's resolve to be both well informed and aggressively acting in our own best interests when purchasing or renewing car insurance or anything else.

That's my take.

Thanks. Bob.