I received a call recently from a prospect looking for auto insurance that was a male, 20 years old, had 4 tickets in the last 2 years and 1 accident, and he lived in the city of Rochester and wondered why he was paying so much for his auto insurance.  He obviously didn’t understand that insurance premium rates are based upon your driving record.  Insurance companies reward you for having good driving habits and penalize you if you don’t. 

If you look at this prospect he is getting whacked for a number of reasons, first being his age.  At 20 years old he is still a new driver.  Once he turns around 24 he will start to see his rates decrease.  Second he is single, insurance companies give better rates to married couples because actuarial data has proven that married drivers are more responsible. 

Also being such a young age and having his driving record isn’t boding well for him.  Even if you take a defensive driving course to have points removed from your DMV report, your insurance company will still surcharge you for them.  Insurance companies assign their own points to your violations.  Having 4 tickets within 2 years not only results in him paying more, but it also excludes him from even applying to some preferred companies.

He is also getting charged a higher rate because he lives within the city of Rochester, not that the city of Rochester is a bad place to live, but insurance costs may be higher in the city compared to some of the surrounding towns and counties.  Insurance companies rate based on where you live, they have statistical data the proves that some areas where people live have more frequent or higher dollar claims. 

Now all of these factors make sense on why he would be paying a higher rate, but what most people don’t realize is that he may also be paying a higher rate because of his credit score.  Most insurance companies will run a insurance score which is based off of your credit score.  With this new rating factor companies are able to have many more tiers of rates than they did previously. 

Some companies will have over 100 different tiers to rate someone based on their insurance score, then once you take into consideration the rest of the factors like where you live, driving record, age, marital status and the car you drive, there are an infinite number of rating combinations.  I always think it is funny when people will ask me how much it will cost to insure their vehicle and think that I can tell them off of the top of my head.  There are so many factors that go into the rates that you can’t estimate accurately the premium without putting all of the information into the insurance companies rating software.  Everybody has their own individual rate for their car insurance.  Also, the prices can vary greatly from one company to the next as well.

Did you know that the NYS DMV requires you to pay an assessment in addition to any fines, fees, penalties, or surcharges that you may have to pay and it’s for a 3 year period? 

You must pay the driver responsibility assessment if any of the following incidents occur:

• you receive 6 or more points on your NYS driver record during a period of 18 months
• you are convicted of an alcohol-related traffic violation in NYS
• you are convicted of a drug-related traffic violation in NYS
• a DMV hearing determines that you refused a chemical test in NYS

The amount of the assessment depends on the type of violation and the total of your driver violation points.  If you are convicted of a traffic violation that is alcohol or drug related, or if you refuse a chemical test the annual assessment is $250 for 3 years.  If you receive 6 points on your driving record during a period of 18 months, the annual assessment is $100 for 3 years.  If you receive more than 6 points on your driver record during a period of 18 months the annual assessment is $25 for each point that is more than the original 6 points. 

This assessment is in addition to the fine for the actual traffic violation.  Not only are you getting hit with a traffic violation fine, but they’re whacking you with a 3-year assessment on top of it.  It can turn pretty costly to break the rules of the road in NYS!

Unfortunately, you are not able to reduce the amount of the assessment by taking a DMV-approved accident prevention course.  The accident prevention course will reduce your insurance premiums and reduce the total of your driver violation points, but will not eliminate the assessment. 

If you are looking to save some money on your insurance premiums, NYS has recently approved an on-line accident prevention course, visit

http://www.newyorksafetycouncil.com/?lgr=bc53ca64-8740-de11-9e2f-00c09f3f0f12

For more information on the driver responsibility assessment you can visit http://www.nydmv.state.ny.us/drp.htm

PIP is an important coverage on all auto insurance policies and it is particularly important to self-employed individuals.  PIP stands for Personal Injury Protection and this is what people commonly refer to as “no-fault”.  When you are injured in an auto accident and you have medical bills your PIP coverage pays for those bills.  People call it “no-fault” because it doesn’t matter who is at fault in the accident each persons policy covers their own medical bills. 

Now why is this coverage particularly important to self-employed individuals?  Because PIP will also provided coverage for loss of wages due to an auto accident.  If you are self-employed and have looked into disability insurance you know how expensive it is and difficult to obtain.  PIP won’t provide you as extensive coverage as a disability policy, but it will offer you at least some protection for loss of wages if you are in an auto accident.

The standard PIP coverage will provide coverage for 80% of your monthly wages up to $2,000/month.  $2,000 won’t get some people very far to cover their monthly expenses.  What most agents don’t point out is that you can purchase additional PIP coverage, which not only increases the amount of medical bills that will be covered, but can increase your monthly loss of wages to $4,000.  So how much does it cost to buy this increased coverage?  Around a whopping $15 per car per year! 

$4,000/month of wage replacement isn’t a lot for some people but it’s a heck of a lot better than $2,000/month.  If you are self-employed and not able to work because of a car accident, you know that your business will suffer and your income could drop significantly.  PIP can help bridge the gap between your earnings prior to the accident compared to after.