Multi-Vehicle Discount — Things You Have To Know
You’ve been told that you can reduce your auto insurance rate with a multi-vehicle discount. Yes, this is true. But while this is true, you might actually have been fooled to pay a lot more even with the “discount.” Let’s get deeper into this…
You’ll pay only $900 if a merchant gives you his $1,000 at a 10% discount. But if another seller displays his product for $800, then even if you don’t get a discount, you’d still pay less.
If an insurer has very low rates for, say, an “A” car, that does NOT guarantee a low rate for your “B” car. Here’s why…
Insurance companies base their underwriting process on factors that will help them give you insurance, handle administrative costs and turn a profit. Ranking high among the many factors used in the underwriting process is a company’s claims history. For the purpose of this discourse, we’ll define it as those who made claims within a profile for a given period.
It’s possible that a company had a good experience with policyholders who have “A” cars. But at the same time, they might have had far more claims than projected by policyholders who drive “B” cars. Such an insurance company could easily maintain their rates for “A” car owners while adjusting (upwards) rates for “B” car owners to reflect their loss history as a company.
What if another insurer did NOT have such an unpleasant experience with “B” cars? They’d likely have a lower rate. Therefore, it’s suggested that you first get and compare quotes from other insurers before you can really settle for that multi-vehicle discount.
Don’t forget: A discount only means they’ve lowered their own price. It does NOT necessarily mean they offer the cheapest rate.
Moreover, remember I said that there are many factors that are considered during the underwriting process? Each insurer has a different relevancy weighting for each of these factors. The end result is: Similar policies will have a big difference in rates.
You’ll, therefore, do well to shop around first if you intend to insure a second or third car. This will help you ensure that you’ll really pay less with a multi-vehicle discount from your present insurer.
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