Having prior insurance is one of the most important rating factors for insurance companies. It shows companies consistency and responsibility. Since a driver is technically required to have insurance any time they are driving on a regular basis, prior insurance is also a great indicator of how recent someone’s driving experience is.
Why is prior insurance important to insurance companies? Someone without any current insurance is often assumed to be a new driver or a non driver and gets rated in that higher risk bracket because of that. Prior insurance also shows responsibility. Since insurance companies want customers that are going to stick around, they prefer customers that are going to get insured and stay insured. Insurance companies lose money when consumers sign up for insurance, only to cancel after they register their vehicles. This is why consistency is so incredibly important.
Another major concern for insurance companies is insurance fraud and the odds of selling a policy that will ultimately be used in an insurance fraud claim goes up considerably when someone has no insurance going into a policy. Imagine that… people that commit crimes are driving around without insurance? Who would have guessed! Just another reason to not get grouped into the “non insurance” crowd.
It is also important to note that many companies will not insure someone that isn’t currently insured. Simply having insurance or being on an insurance policy can dramatically improve the number of companies that will insure you and will create greater competition, which is always a good thing.
So how do you use this prior insurance stuff to your advantage? If you already have more than 5 years of continuous insurance, maintain it! Do not let your policy lapse! Even a lapse of a few days can have a significant impact on insurance rates, even with your current provider. If you go over 30 days, it is like you never had insurance before. That’s like tossing away free money!
It is also important to realize that there are ways to maintain your insurance, even without a vehicle. The easiest would be to go on someone else’s policy as a driver. By doing this you can maintain continuous insurance without much additional cost, if any to that policy. Often times asking friends and family to go on their policy can save you hundreds to possible thousands of dollars the next time you get insurance.
What do I do if I have no insurance right now? Get some! If you are buying a new vehicle, a first time driver, or just haven’t had insurance for a while, the best thing that you can do to lower your insurance rates is get on someone else’s policy. Once you are on a policy, you can now claim continuous insurance. Granted, this wouldn’t give you a long period of insurance, but it looks a lot better to insurance companies than nothing at all. Do this prior to purchasing a new policy and it can knock your rates down considerably, especially in higher risk insurance areas such as Florida, New York, Michigan, and Louisiana. It can also open the door for other insurance companies to insure you that wouldn’t had when you had no insurance. Again, the more competition you have, the better.
So what did we learn? Get insurance and keep insurance! I realize you may not like the idea that you are being “penalized” for not having a car, being a new driver, or whatever you want to call it. The reality is that insurance companies use millions upon millions of pieces of statistical data to determine the likelihood you are going to cost them money. Prior insurance is just one of many factors that play a part in the big picture, but it is an important one. Your goal when buying insurance should be to get as many of these rating factors to work for you as possible. By doing so, you can dramatically improve your auto insurance rates.
Your goal should be to get insurance and keep insurance as long as possible without any lapse of insurance coverage. Doing this will ensure at least this rating factor will work to your advantage.
