BUYING CAR INSURANCE FOR UNUSED JUNK CARS
May 19, 2010 10:19 AM   Subscribe

OUCH! I just learned the hard way that donating my junky used vehicle made my car insurance go up by 50%. Should I go buy another junky used vehicle just to lower my car insurance rates?

I had a broken 1994 car which was parked out back for years, last week I finally donated it to a junkyard. Deleted the "stored" vehicle from my car insurance, expecting that to lower my car insurance bill. Instead, they have increased all my other rates by 50%, claiming "Well, you lost the _Multi-Vehicle Discount_ on your policy, sorry". I'm slightly gobsmacked, yet cynically figure that they have droves of MBAs over there getting raises for inventing schemes like this.

To defeat, should I go buy someone ELSE'S junky used car for $10, and put that on the policy?!? Has anyone else run into this kind of problem, and what did you do besides grumble and pay up?
posted by shipbreaker to Travel & Transportation (24 answers total) 1 user marked this as a favorite
 
I'd shop for a new provider. If you have AAA, this is particularly easy.
posted by runningwithscissors at 10:23 AM on May 19, 2010 [3 favorites]


Just to be clear on this: you sold a vehicle and your total premium went up? Not just your premium per car, but total?
posted by pwnguin at 10:23 AM on May 19, 2010


Do you have renter's or home owners insurance with them? Having one of those policies with the same company might lower your rates.
posted by The Lamplighter at 10:29 AM on May 19, 2010


Seconding going through AAA. They offered me a free insurance review and basically cut my rates in half.
posted by lemniskate at 10:30 AM on May 19, 2010


Response by poster: Car 1 in storage for $40
Car 2 insurance $240
Total: $280

Deleted Car 1 from policy
Expecting to see Total $240
Car 2 insurance now $360
because
"you lost your Multi-Vehicle discount" !???
posted by shipbreaker at 10:31 AM on May 19, 2010


Has anyone else run into this kind of problem, and what did you do besides grumble and pay up?

Not this exact problem, but a couple of times I've had similar situations with insurance. In my case it was the same kind of thing they're telling you it is: a bizarre artifact of their complicated pricing algorithms that give stupid-seeming results under conditions they didn't think about when coming up with these. In your case, that would probably be the "stored car with super-low premium still qualifies you for multi-line discount" condition.

What I did was call back and ask to speak to someone with the authority to negotiate pricing. I explained to that person, calmly, the situation and the resulting strangeness in the pricing. They said they agreed it was strange, but that was how their pricing worked and I would just have to pay it. My response was that if they didn't give me some pricing that made sense given what I had been paying before, I'd cancel my policy and go elsewhere.

In one case, that was the magic phrase that got special pricing negotiated and I stayed with that company. In the other case where this happened to me, I ended up canceling the policy and getting a cheaper one elsewhere. I strongly suggest you shop around if they are unwilling to negotiate.
posted by FishBike at 10:45 AM on May 19, 2010


"Well, you lost the _Multi-Vehicle Discount_ on your policy, sorry". I'm slightly gobsmacked, yet cynically figure that they have droves of MBAs over there getting raises for inventing schemes like this.

Well, it's not really a scheme. They're encouraging families to move all of their business under one roof, rather than trying to shop around in hopes of finding someone that will, say, insure "Car 1 of 3" cheaper. It's also cheaper for them -- there's less paperwork, for example, to package three policies together with one bill, than to have three policies.

Now, that said, it sounds like there was a bit of a math quirk involved. It sounds like you had the junk car insured at the lowest possible rate, because it was being stored. I don't think this would have happened to two newer, daily-driver type cars.

It's always good to shop around regularly, as rates change frequently. If you qualify, I recommend USAA, which will aways have the cheapest rates, period, because it's a quirky company structure, making it essentially a non-profit.
posted by Cool Papa Bell at 10:47 AM on May 19, 2010


This Exact same thing happened to my aunt and uncle. I kept expecting to get to the part of the story where I realized they were making a mistake in their calculations or something, but no. And I don't remember the details, but I seem to recall his asking them the same question about getting another junker car, and somehow his rates wouldn't go back down to where they had been. Ridiculous!

He did find a better (if not as good as his old insurance) rate by shopping around.
posted by ldthomps at 10:54 AM on May 19, 2010


Car 1 in storage for $40
Car 2 insurance $240
Total: $280

Deleted Car 1 from policy
Expecting to see Total $240
Car 2 insurance now $360
because
"you lost your Multi-Vehicle discount" !???


I think it's just an artefact of you having one car with a super-low premium and the insurance company giving you a 30% (or there abouts) discount for insuring multiple vehicles through them.

Imagine you had two identical cars that each cost $360 to insure separately. If you insured them together and got the discount, it would mean a total cost of:
2 x 360 = 720
720 x 0.7 = $504

In that case if you sold one car your premium would go down from $504 to $360. It just happens that there's a loophole where you can insure an extra pile of junk to qualify for the discount and make a decent saving.

should I go buy someone ELSE'S junky used car for $10, and put that on the policy?

Phone the insurance company and ask them.
posted by EndsOfInvention at 10:55 AM on May 19, 2010


I've run into similar issues with multi-policy discounts. The 10% discount that was taken off my car insurance for having two policies was actually greater than the cost of my renter's policy. So dropping the renter's policy would raise my total cost.
posted by smackfu at 10:55 AM on May 19, 2010


Yep, you're lucky that they were willing to give you the multi-car discount when you didn't have complete insurance coverage on the one you had in storage. It just so happens that the discount amount you were getting cost more than the price of insuring that car.

Shopping around for better rates is never a bad idea, because you don't owe your current insurance company anything, but if rates are comparable, I wouldn't punish them by taking away your business just because they stopped giving you a really nice benefit that you stopped qualifying for.
posted by scarykarrey at 10:59 AM on May 19, 2010


I don't do cars insurance and don't know how rates are calculated but it looks to me like the risk was spreaded between the two cars, it is virtually impossible for you to drive both cars at the same time; most likely they assume each car was parked half of time so the one with the higher premium was under half of the risk. Now that you only have one car, that one car carries all the risk as you drive it 100% of the time, in consequence, increase on the rate.
posted by 3dd at 11:01 AM on May 19, 2010


Get renters/homeowners insurance from the same company you get the car insurance from. You can get multi-policy discounts that way.
posted by ijoyner at 11:27 AM on May 19, 2010


Would this be State Farm, World's Biggest Assholes?

At any rate, shop around.
posted by drjimmy11 at 11:35 AM on May 19, 2010


I'm curious about what insurance company you're currently using. Any reason you can't share that info?
posted by amtho at 11:37 AM on May 19, 2010


That happened quite a few times when I was an insurance agent. The second car wasn't always a stored car, either. I actually argued with a policyholder for 2 hours one day over this issue. He eventually went out bought a junk car, and got his rate back down.
posted by SuzySmith at 11:37 AM on May 19, 2010


I work for an insurance company that writes auto insurance.*

This happens. It turns out that when you own more than one car, one of two things is true. Either:

1: You don't drive both all the time, because there's only one of you, or
2: You're married.

Both of these are significant actuarially and associated with lower total risk. In the former case, owning two cars isn't twice as risky as owning one, because you're probably not driving all that much more than you were before. Getting an extra car doesn't add any hours to the day. In the latter, being married is positively correlated with risk aversion, which insurance companies like. In both cases, they're getting more business for the same amount of work spent acquiring and managing the policy, so it makes sense for them to pass on this cost savings.

But the reason it happened here is because the premium on your stored car was so low. Using those rates as an example, consider the following hypothetical for two cars not in storage:

With two cars:
Car 1: $240
Car 2: $240
Total: $480

With one car: $360

You'd bel saving money that way, and even if it's not as much as you may have thought you would, it's still $120 a month. So the only reason your total premium went up is that the car getting you the multi-vehicle discount also happened to have a basically nominal premium.

You may consider shopping around a bit, but I think you may also just have to resign yourself to eating this one. I'm currently paying $490 for one car--clean record but generous limits--and $360 sounds about as cheap as you're likely to get for any reasonable amount of coverage.

This is just one of those weird artifacts of insurance rating which occasionally bites you in the ass. Your carrier is probably aware of the problem, but it doesn't happen often enough for them to do anything about it, especially since every other carrier is doing the same thing.

In short: that sucks, but there's a reason for it, and you're probably stuck with it.

*It's commercial auto, but I've also worked for a personal lines carrier.
posted by valkyryn at 11:40 AM on May 19, 2010 [1 favorite]


This is definitely a "go fuck yourself, I'm changing insurance companies" scenario.
posted by willpie at 11:45 AM on May 19, 2010


scarykarrey: "I wouldn't punish them by taking away your business just because they stopped giving you a really nice benefit that you stopped qualifying for."

This guy's new quote costs more than my brand new car's insurance. Price shopping seems pretty much a given, and you will have to have a credible alternative to get a reasonable rate. You may have to ask to cancel a policy to convince your current insurer your alternative is real. So before you call up to negotiate with your insurer, get a quote you know is cheaper than what's being currently offered. The negotiation range is then between what you had before and what you have been quoted elsewhere.

Negotiation is pretty much all an agent does. The insurer outsources claims adjusting, and centralizes call centers and actuarial services, leaving agents time for long lunches, golf breaks and high stakes negotiations. $360 might not sound like much but most people roll over their insurance without revisiting things like the value of the car, the deductible etc (hence the ads everywhere trying to convince you it's time to price shop again). So 1 hour's negotiation over 100 dollars in a policy could add up to a thousand over the lifetime of the car. You'll notice this thread contains one example where the agent spent two hours in negotiations.

Valkryn's point about risk seems moot in the garaging scenario you're presenting -- the insurer would have to assume your car is not actually garaged in order to divide the risk between cars, or that your spouse is driving it.
posted by pwnguin at 11:59 AM on May 19, 2010


I said I wouldn't punish them if the other rate quotes the OP gets are comparable to the one they're currently getting with their insurer. I'm not sure what sort of insurance you're talking about, but speaking as someone who has previously worked for a personal auto insurance company (as opposed to commercial), I can tell you that agents do not have the power to negotiate rates. Underwriters make decisions as to what rate classes policyholders qualify for, and other than adjusting coverages and making sure that all of the rating information on a policy is correct (drivers, usage, marital status, etc.), there is nothing that can be done at the agent level to change rates.

If you're talking about insurance BROKERS, that's a whole different ball of wax. They shop around for your rates, and get you the best deal. That's not negotiation, that's shopping. SuzySmith's comment about arguing about a rate wasn't a negotiation, it was that person giving the policyholder information and letting them know that they couldn't change their rate unless their situation changed, which it did when they bought another junker to put on the policy.
posted by scarykarrey at 12:08 PM on May 19, 2010


In the former case, owning two cars isn't twice as risky as owning one, because you're probably not driving all that much more than you were before. Getting an extra car doesn't add any hours to the day.

I'm going to set aside your argument that owning two cars implies marriage and lower risk. Can't the application just ask if you're married? If not, then this might outweigh the other factors and explain the rate difference described. But let's assume that it doesn't.

The total risk for owning two cars cannot be less than the total risk for owning one car. The argument in italics above would justify the total rate, r3, being less than the sum of the individual rates for insuring the two cars, r1+r2. Fine, r3 probably ought to be less than r1 + r2. But it still makes no sense for it to be less than either r1 or r2 alone.

In other words, owning two cars doesn't imply fewer hours driving. Even if you think two hours extra per month in giving car washes, it's certainly not going to justify the extreme rate reduction that the OP describes.
posted by amtho at 12:44 PM on May 19, 2010


1: You don't drive both all the time, because there's only one of you, or
2: You're married.


He said OR. If there is only one person, only one of the two cars can be driven at the same time, OR you are married, and even though both cars can be driven at the same time, married folk are more risk-averse drivers.
posted by nomisxid at 12:50 PM on May 19, 2010


amtho, the rates are calculated based on the assumption that both cares are being used normally. So when you've got a situation, like this one, where one car is getting normal use but the other isn't, you get weird results.

The reason is that the rate structure isn't really sophisticated enough to accurately price the situation where you've really only got one car, you're just garaging one. The rate system treats that like you've got two "real" cars, giving the full discount to both of them. So when you take away the garaged vehicle, which wasn't benefiting all that much from the discount because the rate was so low anyways, you take away the multi-vehicle discount from the entire policy, which probably shouldn't have been there to begin with.

Insurance rating rules can be pretty complex, but the rates themselves involve really, really simple math. The sort of proportional assignment of risk and discount across non-similar vehicles is simply beyond the ability of a system like this one to adequately contemplate. Hence this sort of occasional weirdness.
posted by valkyryn at 1:15 PM on May 19, 2010


Owning two cars cannot lower the risk of YOU being in an accident. But it DOES lower the risk of either one being in an accident, because they're both driven less.

Therefore, if one of them is a junker, it WILL lower the total amount the insurance company is likely to pay out for replacement values.

Average the two replacement values based on the amount you drive each one, and you'll find the resulting likely payout is less than if you drive one new car all the time.

So, if you sell the junker, you put all the risk towards the new car.

(Third party liability costs stay the same however)
posted by blue_wardrobe at 8:53 AM on May 20, 2010


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