Most insurance companies use a risk scoring system that is focused on insurance-specific factors as part of their determination as to whether or not they will take you on as a customer and what rate they will charge you.

Then, as you may have guessed, they consider other factors like your age, your driving record and, of course, the vehicle you are insuring (value, repair cost, risk of theft, etc.).

This all makes perfect sense to most people, but the factor that more and more companies are using as another factor for determining your risk may not make that much sense too you.  Nevertheless, it is important that you are aware that it may be affecting your insurability and the premiums you are paying. 

So, what is that other factor.  Believe it or not, it is your credit report information. Yes, a growing number of home and auto insurance companies are using credit bureau information to predict the potential of future losses.  Including determinations as to whether to accept you as a customer, whether to cancel your policy, and whether to renew your current policies.  In addition, they are using this information to determine what they will charge you for the premiums.

Why are they doing this you ask.  Where is the connection between auto claims and credit history?

Well, apparantly studies that have been done in the industry show that certain negative credit reports (like delinquent payments, outstanding balances on credit cards, accounts in collections, foreclosures, and bankruptcies) are related to the likelihood that a person will file an insurance claim.

This practice even affects those who don’t use credit.  Those who use cash, not plastic, to make purchases can get squeezed because in the eyes of the insurance companies, they have no credit history.

Now, not all states allow this practice.  You’ll have to check with your insurance company directly to see if they are using your credit history to calculate your insurance rates.

This gives you another reason to keep your credit sparkling clean. Make sure you repair any credit blemishes on your report so there are no surprises when it’s time to renew your insurance policy.  Click on the link to learn how to raise your credit scores.

Technorati Tags: Auto Insurance Comparisons, credit history, insurance premiums, insurance rates

How to make Auto Insurance Comparisons

Auto insurance premiums of different companies vary widely, so if you want to save some cash on insurance you are going to have to take time to shop around.  You can contact insurance companies directly or on the phone or web. 

There are also many resources available that make it easier to make auto insurance comparisons.  These include consumer magazines, consumer websites and government agencies, such as your State’s insurance department.

Auto insurance is meant to provide some peace of mind and to protect drivers financially in case they are involved in an accident or have their car damaged or stolen in some other way.  When making auto insurance comparisons of the different insurance companies make sure to select a financially stable company by checking with rating companies such as A.M. Best and Standard & Poor’s.

Get quotes from several types of insurance companies when making auto insurance comparisons.  Some companies sell through branch agencies while others sell through independent insurance agents that offer policies from multiple providers. Other companies sell directly to consumers on the phone or online.  Because of these differences the cost of insurance may vary.

Price is not the only factor you should consider.  Service and dependability are also important factors to compare.  You will want to find a representative that is willing to take the time to answer all of your questions clearly.  Start your search by asking friends and relatives for recommendations.  Check with your State’s insurance department to find out about and consumer complaints for the companies you are comparing. 

Many auto insurance companies offer discounts for various factors, such as good driving record, credit history, other coverage, type of vehicle, annual miles, etc.  Find out all of the available discounts for each company when making auto insurance comparisons.  To make sure your are comparing apples to apples give the same information to the agent each time. 

Check out some of our other posts to get more information on making auto insurance comparisons.

Technorati Tags: American Auto Insurance, Auto Insurance Comparisons