Why You Need to Keep Your Auto Insurer in the Loop About Life Changes – The Motley Fool
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Not keeping an insurer abreast of changes could be a costly mistake.
Key points
Every driver needs to alert their insurer to changes in their situation.Auto insurance is priced based on risk.Life changes could change the level of risk an insurer faces when providing coverage.
Drivers who purchase auto insurance often assume they’ve fulfilled their obligations once they’ve bought the coverage their state requires and secured the protection they need for their assets. In fact, many people buy car insurance once and then don’t think about it again except to pay their premiums.
In reality, however, it’s a good idea for motorists to keep their insurer updated about important life changes they make. Here’s why.
It’s essential to keep auto insurers abreast of key changes
The big reason that drivers need to let insurers know about life changes is because insurers set premium prices based on the level of risk a motorist presents. And when a driver’s life circumstances are altered, this could mean they present more or less risk — and thus premium prices could change.
Say, for example, a motorist has shifted to working from home as a result of the ongoing COVID-19 threat. In this case, there’s a significantly reduced chance of a motor vehicle accident occurring because the driver is not commuting any more. Spending less time on the road means there’s fewer opportunities for something to go wrong in the car that leads to an insurance claim. If an insurer isn’t made aware of the life change, though, the company may not know to reduce premium prices. As a result, the driver may not get a reduction in premiums they deserve.
Likewise, if a motorist gets a new job, it may be possible their new company affiliation comes with discounts as some insurers provide savings for people who work for certain employers or who work in certain industries. Again, the insurance company wouldn’t be aware of the policyholder’s newfound eligibility for the discount unless they were told about the new job.
Drivers don’t always know when a change in circumstances could lead to a need for different insurance coverage or could result in premium costs going up or down, so it’s best to err on the side of caution and report any big shifts to insurers ASAP.
Let your insurer know if these changes occur
While there are many different changes in life circumstances that could affect insurance costs, some of the biggest things to let car insurers know about include:
Getting married or divorcedA teen beginning to driveA driver moving out of the houseSwitching to a work-from-home position or retiringDriving fewer miles than in the pastMovingPurchasing a new vehicleGetting a new job
Each of these changes could have a substantial impact on the level of risk associated with providing insurance coverage.
New drivers, for example, could present a greater risk of a collision occurring and could result in higher premiums. A move to a new location could also affect the risk of accidents or theft if the new neighborhood is safer or riskier in terms of collisions that occur in the area and crime rates.
By alerting an insurer when these changes occur, drivers can ensure the insurance company can reassess premiums as needed. Ideally, this will result in a reduction in coverage costs — such as when the number of miles driven is reduced. But even when a life change results in costs going up, it’s important to tell the insurance company to make sure the right protection is in place.
Ensure you are selecting the right car insurance coverage
Auto insurance is something that most people don’t think about very frequently. While there are several factors that drive people to look to change auto insurance carriers, it is important to educate yourself in order to ensure you select the right coverage for you. The right coverage means not paying for coverage you don’t need and not foregoing coverage that would make sense for your personal situation. While price is a major factor, we also consider other factors such as customer service and the claims process when choosing what we think are the best auto insurance providers.
