Six months to a lower premium.

Written by Ryan Lowell on November 29, 2010 & Posted in Insurance

Dear Ryan,

I bought my first car and tried to get insurance, and even with a clean record it was very expensive. They told me it was because I didn't have insurance for the last six months. Why does that matter?

Regina W. Raleigh, NC

Regina, I feel your pain, but rest assured it is a temporary problem.

Your insurance company wants to properly rate your risk. They want to know how many claims you have filed or caused, how many tickets you have received, and how responsible you are. Tickets are easy to look up, but claims are not.

Insurance companies keep a huge data base of claims history, and your new company will want to research your claims history. Unfortunately, if you caused three accidents in cars you borrowed from three different family members, the claims would not show up under your name. Instead, they would be filed under the three policies they were paid out under. Unless you got a ticket, there would be no way to tie you to those claims.

Because your claims history can't be verified, you are being placed in a riskier group than your driving record would suggest, and your premiums are higher than you might have expected. It is a temporary problem, though, and once you have been insured continuously for six months, you can easily reduce your premiums by shopping around a bit.

The last time I was in your position, it was right after college and I had owned motorcycles instead of a car. They didn't count motorcycle coverage towards my six months of continuous coverage. When I bought my car, I had to pay $432 every six months for my insurance. Six months later, I switched companies and got better coverage for $272. Your savings may vary, but you should see a significant improvement, provided you keep a clean driving and claims record.

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