The Most Common Auto Insurance Scams

Posted on Jan 12th, 05:59 pm, under Auto Insurance 101

Have you ever been in a car accident? You may not have realized it then, but you may have been the victim of an insurance scam. All over the country, car accidents are set up and faked by experienced con men and fraudsters in the hopes of cheating insurance companies out of thousands of dollars in damages.

To guard against these scams, insurance companies spend millions of dollars every year. And the worst part is that it's not the insurance providers who shoulder the burden -- it's you, the honest consumer. Since there is no law that forces them to shoulder the burden, insurance companies pass the costs of fraud on to their customers by raising premiums across the board. 

Con artists usually rehearse their fake "accidents" carefully before they put them into action. Learn to protect yourself against auto accident fraud by familiarizing yourself with their techniques. Here are some of the most common scams:

1. The Swoop and Squat - In this scheme, the scammer's vehicle will suddenly swoop out in front of the victim's car and abruptly stop (or squat). An accomplice quickly moves alongside the victim's car to keep it from leaving the scene. Then, the passengers in squatting car will all claim injuries from the "accident", which will be supported by a chiropractor or doctor who is also in on the scam. 

2. The Fake Helper - This may happen to you after a genuine accident. If a stranger offers to help you with an accident's aftermath by suggesting a particular lawyer, doctor, or repair shop, beware -- it could be a trap. The doctor may give you fake treatment (or even none at all); the repair shop will probably inflate your repair cost; and the lawyer may even tell you to sue the insurance provider.

3. The Drive Down or Wave - This deceptively simple scam is easy to fall for. In a situation with a lot of traffic or one that involves merging lanes, the con artist waves the victim on, indicating that he's yielding the right of way. Just as the victim enters the lane, the con artist suddenly accelerates and hits the victim's car. When the traffic police arrive, he will state that he never gave the victim the right of way in the first place.

4. The T-Bone - This particular scam requires careful timing on the part of the fraudster. As your car passes an intersection, the fraudster will deliberately run into it with his car. Then, when the police arrive, accomplices posing as witnesses will tell the officer that you ran a red light. This is most effective when there are no genuine witnesses who can contradict the accomplices' fake accounts.

5. The Sideswipe - A scam that's insidiously simple to fall into. At intersections with multiple turn lanes, take care not to drift out of your lane when turning. A scammer in the lane next to you will speed up on purpose so that you hit their car. This can already be considered a sideswipe, and because you were the one who strayed outside your designated lane, the scammer has a claim against you and will often pursue this along with personal injury claims.

So now that you know about the most common techniques that scammers use, what do you do next? In the case of any accident, the best thing to do is get sufficient documentation. If your mobile phone has a camera, use it. Otherwise, keep a disposable camera in your glove compartment. Take pictures of all the vehicles involved. Have pen and paper handy, so you can record any important information about drivers, passengers, and witnesses. Read more on what to do after accidents here.

Make sure you take note of vital details. Were all parties involved wearing seatbelts? Did the injured parties act like they were injured as soon as they got out of the car, or only after the police arrived?

If you think that you're being scammed, or if you've witnessed fraud in action, call your insurance firm as soon as possible. And most importantly, don't forget to call the police! Don't let scammers convince you into leaving the authorities out of the matter. Finally, always drive responsibly in order to avoid accidents in the first place. 

A Closer Look at GAP Insurance, Part Two

Posted on Jan 12th, 05:57 pm, under Improve Your Auto Insurance Rate

We conclude our inside look at guaranteed auto protection (GAP insurance) this week. (If you missed our first article, you can read it here)

There are three general variants of GAP coverage:

The first is GAP insurance. You can only get this from licensed insurance agents and companies, though not all will offer them. Conversely, many other companies offer GAP insurance even if your auto policy is with another firm. If you want to get GAP insurance directly, check here)

Next, we have GAP waivers. This is essentially an agreement that you make with your dealer or lender to waive the difference between your actual car value (ACV) and your loan balance, should you lose the vehicle in an accident. Do note that this does not replace an actual insurance policy, and you still need one to back up your GAP waiver. You'll also have to pay interest on your GAP waiver if you add it to your auto loan.

Finally, there are GAP endorsements. This simply refers to an additional amendment or rider that is appended to your insurance coverage if your primary auto insurance policy doesn't yet cover the aforementioned gap. (Some insurance firms offer a similar-looking feature called loan/lease payoff coverage. Be aware that this will only pay out a fixed percentage of your ACV, and it is not equivalent to GAP coverage).

As we mentioned before, you should look into purchasing GAP coverage as soon as you buy a car. It's still possible for you to buy GAP coverage up to 12 months later, but sooner is always better. It's usually available on most new, used, and refinanced vehicles, but it can't be transferred to another car, loan, or person.

However, you won't be able to avail of GAP coverage on a loan of over $100,000, one with an annual percentage rate (APR) of over 12.5 percent, or one with a balloon payment. You also won't be able to get GAP coverage for vehicles you plan to use commercially, or those bought with a credit line or mortgage loan.

What you actually end up paying for GAP insurance depends on several variables. Unless you cancel it, your GAP coverage will last for the duration of the entire loan. 

When buying this form of coverage, watch out for dealers who try to convince you to buy GAP insurance the moment you purchase your car -- make sure you do comparison-shopping first to get the best price. In addition, some dealers tell you to buy GAP coverage even when your primary insurance plan already has it, thereby making you pay extra for something you don't need.

Like all types of insurance, GAP coverage is a form of protection that you hope you'll never have to use. If your car is stolen or destroyed early in its lifetime, however, then GAP insurance could potentially save you thousands of dollars and a lot of anguish. 

More Tips For Lowering Your Auto Insurance Premium

Posted on Jan 7th, 03:49 pm, under Improve Your Auto Insurance Rate

Last week, we gave you several tips on how to lower your insurance premium costs. Here are five more proven money-saving methods that all prudent buyers should consider:

1. Change your car.

What you drive affects what you pay (as we discussed before in a previous article). Insurance companies assess vehicles based on several factors, including price, crash test rating, repair costs, and even how often that particular model gets stolen. To lower your premiums, avoid buying newer vehicles, sports cars, luxury vehicles, and models that aren't near the top of the safety ratings (typically smaller cars). You can check safety ratings at the National Highway Traffic Safety Administration (NHTSA) website here. 

2. Use a car alarm or anti-theft device.

Show your insurance provider that your car is equipped with an anti-theft security measure, and you may get a discount. 

3. Lower your insurance levels.

Simply put, the more coverage you have, the more you pay. If you've got an older car, you might be able to save on insurance by eliminating collision and comprehensive protection. However, keep in mind that your state requires a minimum level of liability coverage, so check your state laws before reducing your insurance level. In addition, don't go too low; avoid going down to the minimum level, since you may find yourself in a bind if you actually get into an accident. Read more on how to optimize your insurance levels here

 4. Boost your credit score. 

These days, insurance companies are taking more things into account in their risk assessment, and they've started to inspect their customers' credit history. If your credit score is good, you might be able to get a more favorable rate. (Do note, however, that this is not allowed in California). 

5. Show your loyalty.

The insurance industry is highly competitive, and actually landing a customer costs insurance firms a lot of money in advertising. That's why they give lots of incentives to loyal customers who stick with them through the years. Most firms offer a percentage off your total premium each year you remain with them. If you stay with one company long enough, you'll probably be hard-pressed to find a better deal elsewhere.