AUTO INSURANCE ARTICLE
Risk Management: Changing The 'Buy Insurance' Mentality
By: coppeneurWhen you drive that car on the road, there’s no way for you not to buy auto insurance. But do you know that there is something better than just buying coverage? Especially during these times when people want to have better cash flows?
Drew Tignanelli, the president of The Financial Consulate, a Maryland-based financial advisory firm came out recently with an article urging that “If people would manage risk rather than "buy insurance," they can save real money in the long run”. By that he didn’t really mean doing away with insurance. What he meant was instead of relying to the sales pitch of insurance agents alone, knowledge on risk management is something that every policyholder wannabe should dip their fingers into.
Risk management can dramatically alter the way you spend your money not only for your auto insurance but for your other insurance policies as well. Risk management, according to Tignanelli is “the process of analyzing the financial impact of an event (such as a death, disability, property loss, etc) and determining the most cost-effective way to minimize the potential of it causing economic hardship”.
After all, most insurance agents are driven primarily to sell their products. Helping you manage risk most of the time only falls second. For you to insure more is what your agent would mostly be suggesting and not less.
You must also take note that auto insurance rates vary widely from company to company and agents, your personal circumstances, the type of car you are driving, and your credit score. So if you want to “buy less” of auto insurance, know which factors for risk worthiness you can manage on your own.
First, shop around as every auto insurance company provides its own rates for each driver category. While one offer can be cheap for your friends, it can be the opposite for you.
Second, have a good driving record, if you can live in a less-dense neighborhood, the better. Where you live is a cardinal point that auto insurance companies include in their assessment of the auto insurance rate you need to pay. Living in a high-traffic area for example would usually generate a higher rate of auto insurance payment.
Third, if you’re buying a new car, find its insurance rating and safety record, not its appearance.
Fourth, improve your credit score. Insurance companies have found a high correlation between credit worthiness and driving safety. So the better your credit score, the less premiums will you be paying.
Two major factors – underwriting and rating -- determine what you pay for auto insurance. Insurers use underwriting to analyze your personal characteristics and decide how much risk you present. They then group you with others who pose a similar risk. The key is to learn true risk management practices and only insure to prevent economic hardships. Let’s take a specific example. You might want to reconsider your collision deductible coverage. Why is that? If it costs you more to pay out the deductible than the vehicle’s worth itself, then it is not a sound investment.
Saving money can be done not only while you have the insurance running. You can also save money even before you get your auto coverage because you have done your homework on risk management.