Car Insurance Shopping: Why Rates Can Go Up After You Buy

You find a great rate, purchase the policy, and when you get the
paperwork in the mail..."Hey, this isn't the rate I was quoted!"I
know, everyone has the same thought when this happens to them: 'it's a
bait and switch.' If I wasn't inside the industry, I would think the
same thing. They quoted you a rate, but the policy you got in the mail
shows a very different 6 month rate than the one you discussed with
the agent on the phone.No, don't go calling the department of
insurance just yet. It'll just be a waste of time... but why?Well, the
answer is simple. The company did not have all the information
evaluated by their underwriting department at the time you purchased
the policy, so they updated your rate.What?! Why didn't they have all
the information?There are several answers to this question, depending
on how you purchased the policy, what information was included on the
quote, and the particular circumstances which caused the increase. So
I am going to focus on the usual suspects.#1: The information input on
the application was incomplete.Insurance companies have a lot of
information available to them electronically, such as your driving
record, who is in your household, what insurance you have now, if your
car is financed, if you are a homeowner, and so on.Many consumers have
a tendency to rely on these reports too heavily, specifically their
driving history. Depending on the company you purchased your policy
from, they may or may not have received your Motor Vehicle and Claims
History Reports at the time you are buying the policy. Once the
reports are taken into account, if additional violations or claims are
found your rate will be adjusted accordingly.The assumption that all
reports have been collected at the time you buy your policy is the
number one reason for immediate rate increases after you buy.#2: The
information input on the application was incorrect.The other
possibility is that some information on the application was incorrect,
probably unintentionally.Most consumers are unaware of the impact each
question on the car insurance application has on their rate. Every
question is important, so if you aren't sure, don't guess. Something
that seems small, like how long you have been continuously insured,
can end up causing an increase when the insurance company verifies the
information through reports.The main pitfalls for consumers when it
comes to completing the application accurately are: driving record,
current insurance information, and including all relevant drivers.#3:
Important paperwork was not completed and/or returned on time.You are
not necessarily done signing up for your policy when you make your
down payment. There are a few choices you may have made when setting
up your policy that require you to sign a form. If you did not
complete these in an agent's office, the insurance company will mail
them to you in your application packet. If they do not receive them
back, they will change your policy. Common situations requiring
signature forms are certain coverage selections and exclusion of a
driver.The insurance company may also ask you to furnish proof for
certain things, such as discounts or your prior insurance (not all
insurance policies can be verified electronically). Be careful to
follow the instructions regarding what documentation is acceptable. If
they do not receive the proof on time, or what they receive does not
provide the correct information, your policy premium will change.These
rate changes do not happen immediately. You may not see these
increases for a month or two after the policy started due to the
paperwork processing time!So what can I do to be sure the rate I am
quoted is the rate I get?Input all your information yourself from the
start. Do not wait for the company to order reports for the
information. If you aren't sure about the answer to a question, don't
just guess, find out. It will save you a lot of time and headaches,
because you will be getting an accurate quote from the start.
Do not delay in completing and returning the paperwork sent by the
insurance company. If you complete it as soon as it arrives, you are
less likely to forget about it. So be sure to open all mail and emails
you receive from your insurance company. Some carriers allow you to
sign the paperwork electronically online.
Always choose a start date, also called your effective date, for your
new policy that is 10 - 14 days away. You will be making a payment
today, but the policy will go into effect a few days in the future.
Why? Because you have the opportunity to wait for the insurance
company to verify your information before canceling your old coverage.
So if your rate does change and it is no longer a good deal, you can
just cancel the new policy and keep the old. Plus, many companies
offer you a discount for shopping ahead. The more discounts, the
merrier! FYI: As long as you 'flat cancel' (meaning the coverage never
went into effect) the new policy before your effective date, you will
not be subject to cancellation penalties.
So I can't completely avoid these increases?Unfortunately, you cannot
for one simple reason: credit. Insurance companies interpret your
credit based solely on electronic reports. There is no way for you to
input this information on the application. So if the credit system is
down at the time you buy the policy, they will still order it and will
adjust your rate accordingly.