Dropping auto insurance to save a few bucks in the short run can be very costly over the long run.
Foster City, CA (PRWEB) June 27, 2011
In tough economic times, drivers may be tempted to briefly skip paying for car insurance. But Insurance.com has found that pausing coverage can be a costly decision over the long haul because car insurance rates jump for drivers with a policy lapse.
Drivers who let their most recent auto insurance coverage lapse before purchasing a new policy paid an average of 5.7 percent more for annual coverage than drivers who maintained continuous coverage, according to an examination of 184,000 car insurance policies sold through Insurance.com in 2009 and 2010:
- All drivers in study who had no policy lapse: $1,405
- All drivers in study who had a policy lapse: $1,485
Drivers insuring a single vehicle whose previous policy had lapsed paid 8.8 percent more in average annual premium costs than drivers who maintained continuous coverage for one vehicle:
- Drivers with one vehicle and no policy lapse: $1,222
- Drivers with one vehicle who had a policy lapse: $1,329
Insurers begin charging higher rates with policies that lapse by as little as one day, according to the Insurance.com data. The penalty is even greater when insuring multiple cars.
Drivers insuring two or more vehicles whose previous policy had lapsed paid 12 percent more in average annual premium costs than drivers who maintained continuous coverage for two or more vehicles:
- Drivers with two vehicles and no policy lapse: $1,781
- Drivers with two vehicles who had a policy lapse: $1,994
"Dropping auto insurance to save a few bucks in the short run can be very costly over the long run," says Chris Kissell, managing editor of Insurance.com. "It's the very essence of 'penny wise, pound foolish.'"
There are several reasons insurers raise rates for drivers who have a lapse in coverage. One of which is based on car insurance company research, showing that drivers with a history of letting their policies lapse are more likely to get into accidents.
Each insurance company has its own formula for determining how high rates go after a policy lapses and how long the penalty will remain in place.
The average annual premium was calculated by examining 184,534 policies sold through Insurance.com in 2009 and 2010. Rates for drivers who self-reported continuous coverage were compared with rates for drivers who self-reported a policy lapse of at least one day on their previous policy.
For more information on finding cheap car insurance and articles on understanding different coverage options, visit Insurance.com.
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