Little Reasons for Big Insurance HikesYou probably know that smoking can double the cost of your life insurance policy, or that teenage boys are harder to insure than teenage girls. However, these days, it often seems like policy providers can hike up premiums just because they feel like it. But the truth is that there’s almost always a reason, though they may be hard to identify.
“The rules on insurance underwriting exist as patchwork of state by state regulations with little national uniformity,” Alex Maybaum, Director of Consumer Advocacy for AnnualMedicalReport.com (a web site that helps consumers estimate their insurance costs based on their medical history), tells MainStreet. And, according to Vicki Sicilain, a Connecticut insurance agent, many providers are allowed to cherry pick who they insure and, subsequently, what they will charge them.
“There needs to be better legislation against it,” she says. “I have been in the industry for 23 years. I am still discovering small mistakes that will drive up your insurance premiums.”
To help you in your search, MainStreet talked to Maybaum, Sicilian and other industry experts to compile this little list of small choices that can, in fact, lead to big increases in the cost of your insurance policy.
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A Bad Credit ScoreAs if your credit didn’t cost you enough already, it may also have an impact on your car or personal life insurance policies.
“By missing a credit card or mortgage payment, by maxing out a credit card or even by applying for several credit cards within a short period of time, a motorist looking for car insurance might end up paying a higher premium.” Todd Christensen of Debt Reduction Services points out before adding, similarly, “letting a music, book or movie club account go to collections would raise an individual’s life insurance or homeowners rates above those of someone with no collections in their credit history.”
Not all insurance agencies will penalize you for your credit mistakes, but most do. You can check out this MainStreet article for a more detailed explanation of how your credit score can affect your insurance payments. You can also visit FICO’s page for insurers before you shop around.
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Buying a dogSicilian calls it the “dog list” and it includes Rottweilers, pit bulls and Doberman pinchers. However, your teacup Yorkie can make the cut if she’s of a certain temperament. Should Fluffy exhibit aggressive behavior or have a bite history (and Sicilian insists “they will check”), underwriters may refuse to write you a policy and, if they do … well, then, your rate is going to the dogs. Sicilian recalls one instance where a rottweiler caused her homeowner an extra $1,000 when a policy went from $300 to $1,300 a year.
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Lifestyle Choice“Through the application language, insurance applicants consent to allow the insurer to conduct an investigatory background and character check,” Maybaum tells MainStreet.
And anything you say or do can be held against you. Though it varies from state-to-state, personal lifestyle choices, such as marriage status, sexual preference, or a sloppy appearance (as pictured), can affect life insurance rates by $100 to $500 a year, according to Maybaum. Generally speaking, married couples will pay less than non-married couples. Hetereosexuals can pay less than homosexuals unless a state has put a law into effect to prevent it (California, Colorado, New York and New Jersey are some states that have strong statuatory protections for consumers.) Additionally, a divorce can cost you.
Maybaum quips “the saying ‘married men live longer’ is not just an adage.”
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Filing a Small Claim
Generally speaking, you may want to keep minor car accidents or small injuries a secret from you insurer … especially if they fall below your current deductible. According to Sicilian, you’ll end up paying for repairs or medical assistance anyway, and insurers will use their records as an excuse to raise your monthly rates.
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Towing your Car … through your insurance“Don’t buy towing and roadside assistance in your car insurance policy,” cautions Amy Danise, the Senior Managing Editor for Insure.com. “If you use it, it will go down as a claim on your insurance record.”
Danise points out that a single towing isn’t likely to affect your rates, unless it’s coupled with other recent claims, which can bounce you into a higher car insurance rate tier. The actual price increase will vary from provider to provider, but you don’t want something as small as a tow jeopardizing your premium. Opting for similar assistance through an outsider vendor, such as AAA, can save you down the road should your car break down.
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Opting for MedPay on Your Auto InsuranceSimilarly, signing up for Med Pay, an add-on to your car insurance policy that pays specifically for medical expenses, can come back to haunt you. Sicilian recently had a client come to her looking to switch car insurance policies. While the client himself had a clean driving record, he had been hit from behind through no fault of his own earlier that year. He hadn’t file a claim with his insurance provider, but, because he was insured, the Med Pay kicked in and paid part of his hospital bills. According to Sicilian, when a prospective new insurer found the Med Pay claims, they hiked their rate from $800 to $1300. Needless to say, this client didn’t switch policies.
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Buying a gunThat 8mm isn’t protecting your insurance policy. Purchasing and registering firearms can cost you an additional $50 to $200 per policy a year, according to Maybaum, depending on the strength and size of your arsenal.
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Not running Your DMV RecordA good rule of thumb is to personally run your Department of Motor Vehicles record before you go shopping for car insurance. You can do this online through your local DMV’s web site for a minimal charge (generally it costs between $3 and $10), and you may end up saving yourself some money … and a whole lot of aggravation.
“I had a ticket that was never supposed to go on my record, because I took a class and assumed it was all taken care of,” Melissa Kaupke, a Nashville resident, tells MainStreet. “It ended up on my record anyway. A year later, I switched car companies and only then found out about my record error.” Kaupke was able to get the error corrected, but the new insurance provider refused to lower her rate since they knew, now, that the ticket existed.
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Getting bad gradesWhile your child’s poor permanent record won’t hike up your monthly car insurance rates, it could cost them a substantial student discount. Geico, for example, offers a student discount to those who maintain a “B” average or better. According to Sicilian, most providers will discount a policy by 5 to 10% for those 23 and under. Timothy Gasper, owner of Gasper Insurance Services in Calif., adds “I’ve seen good student discounts as large as $800 a year!”
Time to hit the books.
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Treating Your Depression … or your acid refluxSicilian ran into a problem recently when a 21-year-old client in perfect health was denied medical coverage. The reason? She had taken Welbutrin to treat a brief bout of depression. Another client, who had taken Nexium to cure her Acid Reflux, was denied insurance from one provider. The next insurer approached agreed to write a policy … with an exclusion, meaning that, should the Acid Reflux return, the client would have to pay for it herself.
According to Maybaum, any excessive use of what’s deemed to be a non-essential prescription drug can cost you an extra $500 to $1000 per policy per year. As such, you may want to take two aspirin and call the doctor in the morning.
For more about current health insurance options, check out MainStreet’s health care coverage here!
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Taking up a dangerous hobby
Dangerous hobbies, such as scuba-diving, rock climbing or sky diving, can cost you an additional $250 to $500 a year for life insurance, according Maybaum. Danise adds “the same goes for ‘risky’ occupations and travel to dangerous parts of the world.” In fact, your daredevil status may cost you a policy entirely so you may want to also trade in that motorcycle.
Looking for hobby that’s going to cost you less? Check out MainStreet’s list of fun and affordable hobbies for some options.
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Getting Unnecessary Genetic Tests DoneThey may be more readily accessible today, but that doesn’t mean you take advantage of over-the counter genetic testing … or have any other unnecessary medical tests completed.
“In fact, a person seeking individual health insurance would be well-advised to request that family members also avoid any major medical testing, especially tests with a genetic component such as cancer, Alzheimer’s and Huntington’s Disease.” Maybaum advises. “Even medical tests of close relatives can be used by insurers as a basis for charging higher premiums or denying coverage altogether.”
Unnecessary genetic testing with a diagnosis of disease, including also multiple sclerosis, heart disease, diabetes, chronic respiratory disease and kidney disease, can add $750 to $1250 per policy a year.
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Adding to Your BackyardBuying a trampoline, putting in a diving board or installing a water slide can all cause a prospective homeowner’s insurance policy to be denied. And, your proximity to a coastline may entice providers to add on a 35% surcharge, according to Sicilian.
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