Are you paying too much for car insurance?
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  1. #1
    Registered User CookieLee's Avatar
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    Default Are you paying too much for car insurance?

    Reference this article:

    Car Insurance: Why the Rich Pay Less, Even with Bad Driving Records | TIME.com

    The article outlines a survey that indicates that wealthy drivers with a higher education degree and a bad driving record are charged LESS in auto insurance premiums than a good driver with a lower earning job and only a high school education.

    It is against the law for insurance companies to offer different rates depending on race and even where you live (your zip code) but apparently they are getting around those laws by offering significantly lower rates to the wealthy and highly educated.

    A few insurance companies didn't use this practice. Is your insurance company one of them?

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    Super Moderator Spirit Deer's Avatar
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    Insurance rates here are based in part on where we live. I can't see why that would be illegal. If you're in a metro area, it would only make sense to charge more for insurance since the chances of a loss are greater than if you live in a rural area with less crime and less traffic.

    Our rates are also based on how much we drive. Again, that only makes sense. The more miles you drive, the greater your chances of an accident.

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    ditto in MA, at least, rates are determined by your zip code. If your zip code is in a high crime area (usually the low-income ghetto) you're going to pay a higher rate. If your zip code is in the coveted lower crime area there will be higher income people living there because they keep the prices of houses high enough that only the richer can live there.

    So. just so you know - statistics can be skewed

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    Registered User nodmicks's Avatar
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    Quote Originally Posted by Spirit Deer View Post
    Insurance rates here are based in part on where we live. I can't see why that would be illegal. If you're in a metro area, it would only make sense to charge more for insurance since the chances of a loss are greater than if you live in a rural area with less crime and less traffic.

    Our rates are also based on how much we drive. Again, that only makes sense. The more miles you drive, the greater your chances of an accident.

    Same here. Mine is also high because I have 16 and a 19 year old boy. If i was in Milwaukee my rates would be way higher!

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    I read the article. I seriously can't remember anyone asking for my job or income when I last changed auto insurance companies. So how did the insurance company know who was poor and who was rich?

    Maybe credit scores - and I'm thinking (although this is just a guess, I haven't read anything to support it) that maybe richer people have higher credit scores?

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    Registered User nodmicks's Avatar
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    Quote Originally Posted by Telephus44 View Post
    I read the article. I seriously can't remember anyone asking for my job or income when I last changed auto insurance companies. So how did the insurance company know who was poor and who was rich?

    Maybe credit scores - and I'm thinking (although this is just a guess, I haven't read anything to support it) that maybe richer people have higher credit scores?
    Ours totally goes by credit scores. No one has asked what we make. I had a good credit score when poor also so I can't see how income make any difference.

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    Registered User Contrary Housewife's Avatar
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    They definitely check credit scores. When DH was unemployed for a year his took a hit and our insurance sent us a letter saying they considered us a higher risk and were going to raise our rates. So I switched companies.

    But I can see their point of view: if you aren't careful enough to pay your bills on time, why would you be careful about how you drive?
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    Interesting article. I know our insurance company uses credit scores...which I really don't think is 100% fair since sometimes people do fall on hard times. Personally, I think if you make your insurance payments on time that's what should count. Just because you forget a credit card payment doesn't mean you will forget to pay your car insurance .

    They also use your driving record, but only go back 3 years. I am happy with the rates we pay when I hear what others are paying.

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    Quote Originally Posted by nodmicks View Post
    Ours totally goes by credit scores. No one has asked what we make. I had a good credit score when poor also so I can't see how income make any difference.

    I know that income doesn't affect your credit score and you can have a great credit score with low income, I'm just wondering if richer people tend to have higher credit scores than poorer people. Like people with a college degree tend to make more money than those who don't.

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    Registered User nodmicks's Avatar
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    Quote Originally Posted by Telephus44 View Post
    I know that income doesn't affect your credit score and you can have a great credit score with low income, I'm just wondering if richer people tend to have higher credit scores than poorer people. Like people with a college degree tend to make more money than those who don't.
    I dont really know.

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    That was a poorly conducted study. The two women should have been exactly identical except for income for them to claim the differences in rates were due solely to income. The lower income woman had a 45 day lapse in coverage which the higher income woman did not.

    Hartwig points out that there is one difference between the two hypothetical customers — a 45-day lapse in coverage — which could account for higher rates for the receptionist. This is true: A study published in 2011 by Insurance.com found that people who let their car insurance lapse paid an average of 5.7% more for coverage. But the CFA found that in more than 60% of the instances where the receptionist got a higher quote than the executive, the receptionist was quoted a rate more than 25% higher than the executive — a much bigger discrepancy than a lapse in coverage alone would seem to account for.

    Read more: Car Insurance: Why the Rich Pay Less, Even with Bad Driving Records | TIME.com

    To claim that the difference in rates was more than could be explained by that difference and, thus, due to income disparity is jumping to conclusions on the part of the Consumer Federation of America, imo. Also, if the secretary received a higher rate 60% of the time, then 40% of the time she didn't. I wonder how many times the executive received a higher rate?

    I sense an agenda behind this- more bashing the rich. The bigger lesson would be to just shop around for auto insurance rates, imo.

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    So my question is - if they didn't ask about income - how did the insurance companies know who was the rich customer?

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    Registered User mombottoo's Avatar
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    Quote Originally Posted by Telephus44 View Post
    So my question is - if they didn't ask about income - how did the insurance companies know who was the rich customer?
    When we changed companies the new company asked if we had health insurance through employment. Perhaps, that is how they find out...if you don't have private health insurance or have medicaid or medicare then your auto would have to be primary when it comes to the medical portion of your auto coverage.

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