Car insurance

An even more insidious than normal form of insurance, in that its prices are grossly inflated whenever possible (by age discrimination, sex discrimination, or by the occurence of an event that triggers an actual insurance payout), and in almost every state within the United States is compulsory (that is, you can be put in jail for operating a motor vehicle without insuring it).

There are two forms of car insurance commonly available: liability and comprehensive. Liability insurance pays up to its stated limit if an insured vehicle and person (both must be normally covered under the same policy) is involved in any accident which causes damage to another person's body or property, and the person operating the insured vehicle is found to be liable for the accident. This form of insurance is actually the more useful of the two, as it can help protect the insured from lawsuits by ambulance chasers and their clients.

Comprehensive insurance pays up to either its stated limit or the actual cost of repairs (whichever is less), less its stated deductible, when the covered vehicle is damaged in any way. Most comprehensive policies will cover any accidental damage, and any intentional damage not caused by the insured (that is, the insurance will pay for repairs when the car is vandalized by a junkie or when its owner accidentally backs into a brick wall, but not if the owner intentionally walks to the vehicle and slashes its tires with a switchblade).

Both forms of insurance are in fact forms of gambling; the policy holder is betting s/he will suffer enough losses covered by the insurance policy to offset the costs of the policy itself. This is, in many cases, a losing bet. Liability insurance becomes immediately more expensive if it ever pays, because only the "guilty party"'s policy pays. In no-fault states, everyone pays more because nobody can be found to be "at fault". This rate grows every time the insured driver causes (or is the most prominent catalyst of) an accident. In no-fault states, everyone's rates gradually climb over time.

While the above rate increases might seem fair, what makes liability insurance pure evil is that it is automatically (and intentionally) doubled or tripled when the driver is under 25 years old, is male, is unmarried, is a bad student, or some combination of the above (look for tripling in these cases).

Proof that insurance companies discriminate based on age is apparent, and admitted by insurance companies themselves because such discimination is not illegal: "your rates are higher because you are under 25." Proof that insurance companies discriminate based upon sex is also readily apparent, although they won't outright admit such discimination because it is illegal: "your rates are higher because you are male, and statistically male drivers produce more claims than female ones."

The true proof of the pure evil nature of liability insurance comes from this paradox: my wife, who was 18 years old when we were married, immediately qualified for State Farm's "married female over 25 years old" rate, the company's absolute lowest rate category (excluding discounts for good driving, good grades, etc.), even though she is still not 25 years old, even today.

Comprehensive insurance sounds like a great deal, until you factor in the deductible, which you must pay in full before the insurance company pays a dime. For most people who cannot afford a deductible lower than $500 (a common value), this means not being provided any assistance whatsoever by their insurance companies until they incur a loss of over $500. Of course, if you cannot reasonably afford a deductable lower than $500, you are likely not in a position to be able to conjure up $500 at any given moment to begin with.

I have paid approximately $24,000 in insurance premiums since my 16th birthday, and my insurance provider has paid a total of approximately $4,500 in that time. This is a net difference of $19,500. Compulsory insurance (liability) comprises roughly half of this amount, and has never paid in my case because I have never caused an accident. By now, even an accident that results in the complete destruction of my vehicle would only roughly cause me to break even; had I been able to put away that insurance premium money into a savings account or money market instead of lining State Farm's pockets, I could have afforded to completely replace my vehicle out-of-pocket now.

My grades were excellent in high school and college, my driving record is clean (no tickets, no accidents caused by self, etc.), and my only "crime" is being male and under 25. Being married instantly gave my wife nearly a 50% discount on her insurance premiums; it gave me nothing.

Furthering the evil nature of car insurance is the fact that it is compulsory in most states, and that there are so many laws in place to protect insurance companies at the expense of their customers. There are near infinite ways for an insurance company to avoid paying what it should otherwise be legally bound to pay. People who commit insurance fraud (acting with the intention of defrauding an insurance company) face stiff penalties, usually far in excess of the actual damages incurred. Insurance companies simultaneously complain about regulations stifling their profits while reminding their captive markets that they need insurance at ever-increasing prices.

I submit these as evidence that car insurance is pure evil.

UK Car Insurance Explained

Car insurance prices are a huge mystery to most of us. We don't get it. The car dealers don't seem to fully understand it. Heck - the car insurance company itself seems to be confused at times. So we decided to send our brave researcher into the dungeons that is the darkest, blackest backwaters of the automotive industry, in what can be best described as Indiana Johnson and The Secret of the Car Insurance Rate.

The Car: Insurance Groups

There are a lot of variables that come into an auto insurance quote. Most importantly, however, is the car itself: The way this is put into a system is called car insurance groups. This is a system of classification that separates all cars into groups - ranging from group 1, which is cheapest to insure, and includes cars such as the Citroen 2CV and the Fiat Panda. A the other end of the scale, we have group 20, where you may have to pawn your firstborn in order to pay your ransom to the insurance company. Cars in group 20 include most of the sexy cars out there, such as Porsches, flashy BMWs, shiny Audis, and posh Bentleys.

Things that affect the insurance group allocation are many, and not always logical either. As a general rule, expensive cars cost more to insure: mostly because they also cost more to repair if something does happen to them. Faster cars - especially cars that are built to look fast as well, such as Ferraris, Maseratis, and all "hot hatchbacks" , such as the Golf GTI - cost more to insure. Bigger engines equal higher car insurance rate.

Cars that are typically ignored by thieves may end up being the cheapest car insurance. Cars that have good factory-fitted alarm systems and immobilisers, tracking systems or other safety and security systems may also be put in a lower insurance group than similar cars without the features. Cars that are easier to break into are in higher groups, as it is easier to steal items from the car, etc.

There are a few things that may increase the price of insurance that doesn't impact the insurance group itself: After-market alarm systems, for example, don't change a car's insurance group, but may lower your insurance cost nonetheless.

Conversely, expensive car stereos, body modification kits, engine modifications, aftermarket alloy wheels, satellite navigation systems, custom paint jobs, and racing modifications such as suspension upgrades, drive-train upgrades etc, will increase your insurance premium.

The number of miles you drive is obviously also an influence: Statistically, if you spend more time on the roads, you are more likely to have an accident. This is also reflected in your insurance rates.

The Driver

The second part of the insurance premium is the person driving the car. Young drivers are punished because their youthful impertinence traditionally causes a lot of accidents. Male drivers are punished because too many of us are testosterone-overloaded thrill-seekers. People who have newly acquired their license are also put on a higher rate, as they are considered higher risk drivers due to their lower experience level. Obviously, if you are a young, male driver who just received your license, you are going to be paying for it on a spectacular scale.

Some health problems and any driving convictions (especially dangerous driving or driving under the influence of drugs or alcohol) may make it difficult or even impossible, to get cover at a reasonable price. If you do have any these, however, honesty is still the best way forward: If you forget to mention or withhold the information, it may invalidate your insurance policy. This may cost a lot more money in the long run, as you are effectively driving without any policy at all.

The next thing that comes into play is where you live. Inner city residents are penalised due to higher risks of accidents in inner-city traffic, vandalism and burglaries from the car. If you live in a quiet village that has not seen any crime since somebody painted the postman's cat orange in 1976, you are likely to get a far lower insurance quote.

The place where the car is kept is also an issue: If you can keep your car in a locked garage with armed guards in gun-towers and top-trained German attack-dogs surrounding your castle estate, you are likely to receive a lower insurance premium than if you have to park your car on the edge of a deserted dock landscape every night. Essentially: the more secure your car is kept over-night, the less you pay. Usually, insurance companies operate with three or four levels, such as "on the road", "on driveway" and "in locked garage", but if you have special circumstances, such as an alarmed garage, or other reasons why your car is more safe, make sure to tell your insurance company, as they may knock another couple of pounds of your price.

How to lower your insurance rates

Now that you know all the quirks the insurance system, lowering your insurance is easy: Buy a "boring" car with a good alarm system, move to a remote village, be about 50 years old with a perfect driving record, and drive less than 3000 miles a year.

Of course, that is not doable for everybody. There are, however, a few tricks you can try:

- Before you buy a car, check the insurance class of the car you are planning to buy, and see if any of the other models you are considering have a lower insurance class. You could consider choosing a 1.6 litre engine over a 2.0 litre engine, as this might drop you down an insurance class. And save you petrol, too!

- Make sure a good alarm system is installed.

- See if the cost of hiring a garage to keep your car in may actually be lower than the money you save on insurance.

If you are a new driver, it is possible to drive a car on a parent's or a friend's name. However, you are not building up your own no-claims discount, which means that when you finally do take out a car insurance in your own name, you are still paying a lot of money. In the long run - especially considering that insurance prices are slowly rising anyway - it is better to just bite the bullet and take out an insurance policy in your own name. It is expensive for the first year, but after that the price will quickly drop off.
- When shopping for an insurance, try ringing around and using on-line quote systems. Don't forget that large supermarket chains and your own bank also may have offers of insurance. Get at least 5 quotes before you choose. You can also consider services that compare prices, such as Confused or Insurance Supermarket, but be aware that while you get more quotes, they are not necessarily the best quotes.
- Check if your profession has special offers available to it, via unions, fleet insurance programmes or similar.

And, of course, most importantly: Drive carefully, and be vigilant about where you park your car, and about not leaving valuables in your car. Not making claims (even though it may not be your fault) is always better, as your no claims bonus (NCB) is going to be your best friend as time progresses.

Originally written for http://www.askaprice.com