car insurance

The Pros and Cons of Refinancing an Auto Loan

Holly Johnson — Sun, 01 Nov 2020 17:32:44 +0000

Over the last decade, the rising cost of new and used cars have driven up the amount of the average car loan. To make up for this, auto lenders have started offering longer car loans that let consumers borrow more with a lower monthly payment.

The State of the Automotive Finance Market from Experian states the average new car payment worked out to $554 during Q1 of 2019 while the average used car came with a monthly payment of $391. Worse, the average new car loan worked out to $32,187 while the average used car loan was $20,137. Meanwhile, the average loan term was more than 68 months for new cars and almost 65 months for used.

It's never fun owing money on your car, but borrowing too much (or borrowing money for too long) can leave you wishing you had a different auto loan. This is especially true if your loan has a high interest rate because you had shaky credit when you applied.

If you're on the fence about refinancing your auto loan, it helps to know how this move could help you or hurt you. Here's everything you need to know.

Pro: You could secure a lower monthly payment

Depending on the details of your initial loan, it's possible refinancing your car loan could secure a lower monthly payment you can more easily afford. This can be important if you're struggling to keep up with your payment as it stands, or if you just need more wiggle room in your monthly budget.

With a lower monthly payment, it might be easier to stay on top of your living expenses and other bills. And if you plan to keep your car for the long haul, you may not mind extending your repayment timeline in order to lower your payment each month. (See also: Cutting Your Car Payment Is Easier Than You Think)

Con: You may extend your repayment timeline

Getting a lower monthly payment can be a boon for your finances, but don't forget you'll likely be stuck paying on your car loan for months or years longer than you would have otherwise. And this can create unintended financial consequences later down the road.

This is especially true if you're extending the loan on a used car that's already several years old. You could be stuck making payments on an older vehicle that breaks down and requires pricey repairs. This could be a double whammy for your finances later — even though refinancing saves you money on the front end.

Pro: You could get a much lower interest rate

Another potential advantage of refinancing is the fact you might be able to qualify for a lower interest rate. If that's the case, refinancing your auto loan could save you hundreds — or even thousands — over the life of your loan.

Imagine your current auto loan balance is at $15,000 and you have a 19 percent APR and 48 months left on your loan. From this point forward, you would pay an additional $6,528 in interest before your loan is paid off in four years.

If your credit score has improved, however, you might qualify for a new auto loan with a better rate. By refinancing into a new 48-month car loan at 9 percent APR, for example, you could reduce your future interest costs by more than half to just $2,917 while lowering your monthly payment in the process.

Con: You might pay more interest over the life of your loan

Before you take steps to refinance your auto loan, make sure you run the numbers with an auto loan calculator so you can compare your total interest costs. Securing a lower interest rate or lower monthly payment may be a better deal in the short term, but you may wind up paying more interest on your loan due to a lengthier timeline.

Pro: Tap into any equity you have

Refinancing your auto loan can also help you tap into any equity you have in your car. This can be a lifesaver if you need money for emergencies or simply want to consolidate debt at a lower interest rate.

Just remember that, as highlighted above, refinancing could mean more interest paid over time — even if you get a lower rate.

Cons: Refinancing isn't free

Finally, don't forget that refinancing your car loan typically comes with fees. These fees will vary depending on the auto lender you work with, but they can include an application fee, an origination fee, and an auto lien transfer fee.

Also, make sure to check that your initial car loan doesn't charge any prepayment penalties that will come into play if you refinance your loan.

Should you refinance your car loan?

Only you can decide if refinancing your car loan makes sense. It's possible switching to a new loan could save you money on interest and/or leave you with a lower monthly payment, but it's also possible a new loan will leave you paying more interest and more fees over time.

Make sure you run the numbers before you move forward, but only after comparing auto refinancing offers from at least three different lenders. By comparing multiple lenders, you'll improve your chances of ending up with a new auto loan that will leave you better off.

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This article is from Holly Johnson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Steps to Simplify Car Shopping in the New Year

Rod Griffin — Sat, 11 Jan 2020 03:03:53 +0000

The new year can be an opportune time to start looking for a new, or new-to-you car, as dealerships look to clear out previous model years. But shopping for a car isn't always as simple as showing up on the lot. There are a lot of decisions to be made between now and walking into the dealership: make and model, new or used, preferred features, type of financing to use, and the list goes on.

Before making that type of significant purchase, it's best to have a plan. Here are four steps to keep you focused and protect your financial health as you prepare to make your next vehicle purchase.

Step 1: Set a budget

Before you even begin to browse cars, it's vital to set a budget. One of the best ways to do this is to create a list that differentiates between your wants and needs in a car. If you're a commuter, you likely need fuel-efficiency, and while you may want the latest technology, like Bluetooth, it's not a necessity. Outlining your "must haves" can give you more control as you begin looking at costs, as you already know which items you're willing to forgo if it saves money.

As you look at different models, stick to cars your budget can handle, even if there was a sudden change in your financial situation, such as a job loss. The average new vehicle loan amount was $32,480 in the third quarter of 2019, according to Experian, while the average new car payment was $550. These amounts can give you a baseline as you look at your own budget to identify the total amount you feel comfortable borrowing, as well as how much of a monthly payment you can handle. (See also: 7 Easy Ways to Calculate Your New Car Budget)

Step 2: Ensure your credit is in good shape

About three to six months before you start seriously shopping for cars, make sure your credit is in good shape. Continue to pay your bills on time, and request a free credit report through Experian or by visiting annualcreditreport.com to check for fraudulent activity and to ensure all information is accurate.

Additionally, use the tools available to improve your credit, like Experian Boost before you hit the car lots. Experian Boost can increase your credit score instantly, and it gives lenders a more complete picture of your financial history, and your ability to pay off debt by looking at your on-time utility and telecom payments. (See also: 6 Money Moves to Make the Moment You Decide to Buy a Car)

Step 3: Shop around for the best loan options

More than 85 percent of new vehicles and 55 percent of used vehicles are financed. But financing isn't limited to a single type of lender. In addition to loan options offered at a dealership, it's a good idea to shop around for loans to see who has the best terms and rates available. Just because you put in an inquiry at one bank doesn't mean you can't look at another, but also consider looking at credit unions and traditional finance companies to find the best deal for your situation.

This is one area where your credit score can make a significant difference in what rates you're offered — the average interest rate for new vehicles for consumers who are in the "prime" credit tier is 4.21 percent, whereas for consumers in the "subprime" credit tier, it is 14.06 percent.

You can shop for a car loan without worrying about your credit score. Inquiries for auto loans are either counted as only one inquiry when they occur within a 30-day period, or may be excluded entirely from the calculation.

Step 4: If shopping for a used vehicle, get a vehicle history report

It's not surprising that buying a used car can be a significant cost savings. In fact, at $20,446, the average used vehicle loan last quarter was about $12,000 less than financing a new vehicle. When financing, that can mean significant savings in the amount of interest you'll pay over the term of your loan.

However, it's important to go into a used car purchase fully informed, so be sure to request a vehicle history report, like an AutoCheck report, before committing to the purchase. These reports include how many previous owners the vehicle had, or if there were any reported accidents. This can help you avoid surprises and give you a better idea of the value of the car. (See also: 8 Questions to Ask When Buying a Used Car)

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This article is from Rod Griffin of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Things That Affect Your Car Insurance Rates

Tara Struyk — Thu, 10 May 2018 08:30:16 +0000

If you've ever shopped around for car insurance, there's one thing you may already realize: Calculating rates is not an exact science. This is why you can get relatively different quotes from different insurers. It's also why you should shop around.

That said, your rate is also affected by a variety of factors — some of which you can control, and some of which you can't. You probably already know that factors like your gender, age, and driving record affect your auto insurance rates, so we reached out to a few experts to find out what other, lesser-known factors can affect your premiums. Here are a few.

1. The kind of car you drive

You can probably guess that if you drive a $100,000 sports car, you're going to have very high insurance rates. But there are a lot of other common details about your car that could affect your insurance rates.

According to Mark Nicholson, marketing director at auto marketing company Absolute Results Productions Ltd., these include the safety rating of your vehicle, its size and age, and even the likelihood that it might be stolen.

"Another factor some providers use is how much horsepower your engine has, because by their logic, it suggests that you're more likely to drive fast and are at greater risk of getting into an accident," Nicholson says.

This is why when you're buying a new car, it's a good idea to call for insurance quotes before you actually make your final purchase decision. If the new car you choose is considerably faster or sportier than the one you're driving now, that'll be reflected in a higher insurance rate.

For example, if you're considering a 4x4 SUV, you need to consider that a factor as well.

"Even if 90 percent of 4x4 SUVs will never be driven off-road, the insurance company will assume you'll want to take the occasional trek up a mountainside or fly down that dirt path through the woods. That's a higher risk, and you'll pay more for it," says Chris Burdick of Automoblog.net.

Even if you opt for a super-practical family sedan, you still might get stuck with high insurance premiums.

"You'd think that the more common the car, the less insurance will be, but that's not always the case," Burdick says. "For example, if you own a Honda Accord, it's considered to be one of the most stolen cars in the U.S. Same with the Honda Civic, Nissan Altima, Chevy Impala, and Toyota Camry. If you own a car that's stolen frequently, your insurance company will find that to be a higher risk and your insurance rates will go up accordingly."

Bottom line? Talk to your insurance company before you choose a new car to ensure that insurance rates for the vehicle you're considering are in line with what you're willing or able to pay. (See also: Here's How a Claim Will Impact Your Car Insurance)

2. Poor credit

Yup, they're watching you. In fact, your insurance company probably uses quite a few facts about you — both basic and personal — to calculate your car insurance rate. Some of the most common factors that will count against you and raise your rate include being under 25, being male, and having a poor credit score.

"We can see a difference in rate of 100 percent or more in premium increase for someone with poor credit," says Joe Espenschied, agency principal and owner at Insurance Brokers Group. "When we have a quote for someone with a clean driving history — but a very high insurance premium — it's due to credit."

At least credit (unlike age and gender) is a factor you can control. But there are other interesting details about your life that could impact your premium, too.

3. Homeowner status

Sophia Borghese, a consultant for Superior Honda in Louisiana, says that being a homeowner can impact your insurance rate, much like your credit score.

"Homeowners are lucky. It's thought that they do not have as many financial issues as renters. Because of this, insurance companies trust and reward them by not giving them the burden of high rates," Borghese says.

4. Marital status

Another personal detail many insurers consider is your marital status. Some insurers see married drivers as being more responsible than single ones. In fact, a 2004 study by the National Institutes of Health and reported on by DMV.org found that singles were twice as likely as married people to get into automobile accidents.

"The amount by which your rates drop can vary greatly based on your other circumstances, although men's rates tend to drop more than women's when they get married," says Steve Pritchard, founder of insurance comparison site Cuuver. "However, those who have a driving history free of accidents, and a clean driving record before getting married, could see their rates reduced by almost half of what they were paying before they tied the knot."

5. Your career

There's one more personal wild-card that could have an impact on your premium: your job. According to The Zebra's 2018 State of Auto Insurance Report, drivers with full-time jobs will save about $30 on car insurance over those who are unemployed, while active duty military and veterans will get a discount of about $50 over civilians. If you use your vehicle for work, you can also expect to see your rates go up.

6. How and where you drive

We all know that our driving records affect our insurance rates, but there are lots of other components of how and where you drive that can affect premiums as well.

The distance of your commute to work can affect your premium. After all, if you're on the road longer, you're considered higher risk. (Which is why you should definitely inform your insurance provider whenever your commute changes.)

Where you live and drive is also scored according to cases of vandalism, the number of claims and fraudulent claims in that area, cases of vehicle theft, and the occurrence of damaging weather, such as flooding or hurricanes.

But insurance providers are also moving beyond statistics and data about your past behavior to provide insurance based on how you are actually driving day to day. This involves installing what's called a usage-based insurance device into your car, which tracks your driving behavior.

"If you practice safe driving habits, don't frequently drive between 12:00 and 2 a.m., or use lots of high-traffic routes, you could qualify for up to a 30 percent decrease in insurance rates," says Anna Drake, the insurance producer at Insurance Shop LLC. Of course, if your driving habits are less than stellar, this type of policy could also drive your rates upward.

7. And then there's the "secret sauce"

While most insurance companies use some combination of the same or similar factors to calculate your insurance rate, there's no standard calculation.

"Each company compiles its own factors to find its own 'secret sauce' or 'ideal insured.' When the individual hits a company's sweet spot, it will reflect in pricing and coverage," says Janine Fixmer, an independent insurance agent at Agency Insurance LLC.

This why it's so important to shop around for the best rate and coverage, and to try to keep a handle on the factors insurance companies consider that you can control — such as your driving record, credit score, and the type of vehicle you choose to drive. (See also: 6 Mistakes to Avoid When Shopping for Car Insurance)

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This article is from Tara Struyk of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

What Kind of Auto Insurance Do Uber Drivers Need?

Holly Johnson — Wed, 21 Feb 2018 09:31:09 +0000

If you're scheming up a way to make extra money this year, it's likely you've considered driving for Uber or Lyft. There are few requirements to get in the door, after all, and you can work your own schedule. If you're over the age of 21, have a newer car, and have a clean driving record, you can apply to become a driver for Uber or Lyft and get started fairly quickly. (See also: How to Get a High Rating and Make More Money as an Uber Driver)

But that doesn't mean this side hustle comes without risks. Unlike other avenues to earning extra money, like freelance writing or picking up a traditional part-time job, driving people around in your car comes with real-life financial implications if you get into a crash.

So what type of insurance do you need to drive for Uber or Lyft? Generally speaking, your personal auto insurance policy won't cover you if you get into an accident while you're driving for Uber or Lyft. In fact, your auto insurer may be inclined to drop you from your policy if they find you haven't disclosed that you're driving for a ride-share service, notes NerdWallet.

Uber and Lyft offer drivers some coverage

Ride-share companies have initiated their own forms of insurance to cover drivers when their personal policies fail to provide coverage. That means it's secondary coverage — you'll first have to file a claim with your own insurance. And Uber's insurance comes with a $1,000 deductible, while Lyft's deductible is $2,500. But it's better than nothing.

Coverage levels depend on where you are in the ride-sharing process. If you drive for Uber, for example, you have different levels of coverage when you're waiting for a call, when you're on your way to pick up a rider, and when you have a rider in your automobile.

While you're waiting for a request

When your app is turned on and you're waiting for a ride request, you are covered by Uber for your liability to a third party if you're in an accident and at fault. Coverage is at least $50,000 in injury liability per person with $100,000 in total liability per accident. You also get $25,000 in property damage liability per accident, notes Uber. This does not include comprehensive/collision coverage or coverage for damages caused by uninsured motorists, however.

When you're on your way to pick up a rider

At this point, notes Uber, you're covered for three things: your liability to a third party for damages or injuries up to $1 million, any injuries caused by an underinsured/uninsured motorist, and collision and comprehensive coverage if you also have this coverage on your personal auto insurance policy.

Underinsured and uninsured motorist bodily injury coverage covers "any occupant of your vehicle in case of an accident where another party is at fault but does not have insurance or is underinsured," notes Uber. Hit and run accidents are also covered, and the total amount of coverage for bodily injury is once again set at $1 million.

The collision and comprehensive coverage offered during this period kicks in whether an accident is your fault or not and is limited to the cash value of your vehicle. A $1,000 deductible comes into play if you plan to use this coverage.

When a rider is in your car

You have the same type of coverage when carrying a passenger as you do when you're on your way to pick them up. In addition, however, the rider in your car is also covered.

Of course, when you're not driving for Uber and you're using your car for personal use, none of this coverage comes into play. During these times, you'll rely on your personal auto insurance policy for coverage in the event of an accident or injury.

Lyft liability coverage works similarly in that it's offered in different tiers based on where you are in the ride-share process. Coverage limits vary slightly, however, as do the types of coverage offered. Make sure you understand what your ride-share company's insurance policy offers and applicable coverage limits before you rely on it to cover your ride-share driving business.

Ride-share or commercial insurance

There are times during the ride-sharing process when your company's insurance may not be enough. For instance, Uber's insurance does not include comprehensive/collision coverage or coverage for damages caused by uninsured motorists while you're waiting for a ride request. You may also decide you want higher coverage limits than your company offers.

In those cases, consider buying separate insurance to fill in your coverage gaps. Insurance companies such as Allstate, Farmers, and Geico have begun offering individual ride-share policies that cover drivers for services such as Uber or Lyft while they're on the job, but these policies aren't available in all states. If you can't buy ride-share insurance in your state, another option is commercial auto insurance, but unfortunately, commercial policies are often prohibitively expensive ($3,000-$5,000, according to the Money magazine website) for Uber or Lyft drivers trying to turn a profit.

If you live in a state where ride-share coverage is offered, buying this type of coverage — or adding it to your personal policy — is probably your best bet. Fortunately, auto insurance for ride-sharing isn't overly expensive (typically $6-$20 a month). Geico Insurance, for example, offers ride-share coverage in most states (AL, AZ, AR, CT, CO, DE, DC, FL, GA, ID, IL, IN, IA, KS, LA, ME, MD, MN, MS, MO, MT, NE, NM, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, VT, VA, WA, WV, WI, and WY) and can cost as little as an extra $150 per year on top of your personal auto policy, according to NerdWallet.

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This article is from Holly Johnson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Hidden Costs of a Luxury Car

Toni Husbands — Tue, 23 Jan 2018 10:00:06 +0000

You've seen the commercials: an oversized, red bow atop a shiny new luxury car in the driveway. You can all but imagine the new car aroma wafting while an exuberant recipient jumps for joy in his or her jammies.

Luxury cars make a statement. They say something about the owner's arrival into a land of accomplishment. They stand out in a sea of moderately priced alternatives. Heck, they just look better. But, they can also have you scrambling to stay on top of your finances.

Even if you've absorbed the sticker shock and accepted that a new luxury car will cost you more than the comparable non-luxury model, there are other hidden costs that can transform that new car smell into a rotten stench of budget overrun. (See also: 10 New Car Costs the Dealer Is Hiding From You)

Everything costs more with a luxury car. Do your homework before signing on the dotted line.

Insurance

Insurance is one of the not-so-sexy must-haves that every buyer must reckon with after leaving the car lot. As you would expect, a fender bender with your shiny new luxury mobile will cost more to repair. The insurance company will pass the cost along in the form of higher premiums.

Just how much your insurance costs rise depends on your new car. Let's compare a top-of-the-line Toyota Camry to an entry-level luxury model, the Mercedes C300. A fully loaded Camry in Chicago tops out at $33,000 according to TrueCar.com. Slide into an entry-level C-class Mercedes, standard frills only, starting with a $40,000 price tag.

A quick search on InsuranceQuotes.com shows that as a married woman in her 40s, I would pay $1,500 annually for the typical Toyota Sedan insurance premium. By comparison, I would fork out a whopping $2,689 a year to ensure my new hot Mercedes. That's an additional $1,189 a year, an 80 percent increase, to ride in style.

Gasoline

Fuel costs are another ongoing expense to calculate when considering a luxury car. Luxury cars, with their massive engines, are built for performance, not fuel economy. That's why premium fuel is required to keep these marvels humming. The national average for regular gas prices is $2.48 per gallon, according to AAA. That average jumps to $3.01 for premium prices.

In Illinois, we have the honor of paying even more for gas. Premium prices are currently an average $3.37 per gallon, while regular fuel costs around $2.62 per gallon. So my fuel costs on average per year will cost $1,800 annually for the Mercedes vs. $1,500 a year to drive a Camry, according to a calculator on FuelEcomony.gov.

Maybe you're not bothered by an additional $300 in fuel costs. We're not done yet.

Maintenance and repairs

Repairs will also cost you more for luxury models. The parts are more expensive. Technicians have to be specially-trained to work with the complicated gadgets. Even if you opt for non-dealer mechanics, repairs will undoubtedly add to your cost of ownership as the car ages. Non-luxury cars need maintenance, too, but repairs and upkeep are cheaper.

Toyotas are famous for their new car care programs. Toyota purchases include ToyotaCare, which covers factory-scheduled maintenance costs for the first two years or 25,000 miles. Your oil changes, tire rotations, and brake inspections are covered.

Mercedes, on the other hand, offers a prepaid maintenance package starting at $769. According to MBUSA.com, the Mercedes-Benz website, the package will save you 30 percent on routine maintenance costs over three years compared to paying as you go. This one-time fee covers the car for three years or 30,000 miles.

Once these new car protections expire, the difference between maintenance cost grows. YourMechanic.com ranks the cost to maintain all of the major car brands. Mercedes, not surprisingly, is one of the most expensive cars to maintain — right after BMWs — at nearly $13,000 over 10 years. A Toyota should cost only $5,500 to maintain over 10 years. In annual terms, the Mercedes costs $750 more than the Toyota to maintain. (See also: 6 Cars You Can Drive (Almost) Forever)

Depreciation and taxes

No one walks into a dealership and wonders how much depreciation will impact their cost of ownership. Maybe we should. This hidden cost impacts your car's resale value. Luxury car values continue to drop after standard car depreciation rates tend to level off. (See also: 3 Reasons Why You Should Never Buy a New Car)

The higher cost of maintenance and repairs has a lot to do with that. Think about it. Someone buying your used luxury car is taking on an expensive bill with their new-to-them car purchase. It will cost you more, in terms of lower resale value, to sell your car when you're ready to upgrade.

Kelly Blue Book has a handy tool that will allow you to compare a car's depreciation as a portion of the total five-year cost of ownership. Our Mercedes in this example would lose $27,000 by year five, versus a $16,700 loss for the Camry.

In the end, you may still decide you want the cush Mercedes over the practical Toyota. Either way, go into your decision with your eyes wide open about ongoing costs and total cost of ownership. (See also: Could You Put Away a Million Dollars by Driving a Used Car?)

Sales taxes are another consideration. State taxes vary based on your location, but given the higher purchase price of the Mercedes, you'll pay more taxes on it, too.

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This article is from Toni Husbands of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Mistakes Parents of Teen Drivers Make

Dan Rafter — Wed, 29 Mar 2017 08:30:12 +0000

The day your child gets their driver's license is a big day for your teen and a nerve-wracking one for you. It's natural to worry about the safety of your kid on the open road. And picturing your young driver merging into busy highway traffic might cause you plenty of sleepless nights.

Adding a teen driver to your auto insurance policy will also bring a hit to your finances. A study by InsuranceQuotes.com released in the summer of 2016 found that the average family adding a teen driver will see yearly insurance premiums rise by an average of 79 percent.

Here are six mistakes to avoid if you don't want your insurance premiums to skyrocket the day they get that long-awaited license.

1. Not adding your teen driver to your policy

You might think there's no need to do it right away, as they're only allowed to drive to school and back, or to other local spots that aren't far from home. But your teen doesn't need an hour commute each day to require the financial protection of an insurance policy. According to an accident survey conducted in 2012 by the NHSTA, 52 percent of car accidents occur within a five-mile radius of home. You never know what can happen once your kid heads out on the road. Make sure they are covered before you hand them the car keys.

2. Letting them drive too soon

Just because teens can start driving at 16, doesn't mean that your child needs to be behind the wheel at such a young age.

Maybe your teen isn't ready to start driving at 16. Maybe it makes sense to wait an additional year or two before they start taking driver's education courses.

Having your teen wait can actually make financial sense. The InsuranceQuotes.com study found that teen drivers have a lower average hit on your auto insurance premiums the older they are. Waiting until your teen is 17, for instance, could reduce your policy's rate increase.

3. Buying them a new car

It's exciting to hand the keys of a shiny new car to your new driver. You might also justify it by thinking it's safer (newest technology and all). But an expensive new car is also more expensive to insure. Does your teen really need the thrill of driving an impressive car, or can that feeling be saved up for the time when they work hard to pay for one themselves?

4. Forgetting about the good-grade discount

Teen drivers will receive a discount on their insurance rates if they are considered good students. The theory is that better students tend to make for safer drivers. Typically, teens with B averages can expect some sort of good student discount.

If your child does get good grades, don't forget to report them to your auto insurer. The discount for good grades is a solid one, and usually ranges from 5 percent to 15 percent off.

5. Failing to enforce the rules

Teen drivers generally face greater restrictions than other drivers. These restrictions vary by state, but your teen might not be allowed to drive past a certain hour in the evening and might be restricted to a certain number — and age limit — of passengers.

It's important for parents to enforce these rules. If teen drivers are caught violating their driving curfew or with a car full of teen friends, they will get a citation. And that citation will boost your already higher insurance premium.

6. Not checking pay-as-you-go programs

Many auto insurers now offer pay-as-you-go insurance programs. Under these programs, you insert a small electronic device into your car's onboard diagnostics system. The device then tracks how many miles you drive and how long you drive. Some insurers also track the speeds at which you drive and how often you slam on your brakes while driving.

If your statistics show that you don't drive too many miles, you might be eligible for a low-mileage discount. You might also qualify for additional discounts if your insurer determines that you generally drive at safe speeds.

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This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Why Your Credit Score Matters in Retirement

Dan Rafter — Mon, 30 Jan 2017 10:00:08 +0000

You've left the working world and are ready to enjoy your retirement years. So, you might be forgiven for thinking that your days of fretting over your FICO credit score are over.

Guess what? They're not. Your three-digit credit score matters even in your retirement.

Lenders of all kinds, not to mention credit card providers, rely on your FICO credit score to determine how well you've managed your credit in the past. Having a low score can hurt you financially, even after you've left the days of commuting to work behind you.

Why Scores Matter

Your FICO credit score — you have three, one each maintained by the credit bureaus of Experian, Equifax, and TransUnion — is a key number throughout your adult life. Lenders rely on these scores to determine if you can qualify for loans. And if your score is low, even if you do qualify, you'll pay higher interest rates.

Generally, lenders consider a FICO credit score of 740 or higher to be an excellent one. Scores under 640 are generally considered weak by lenders, and will leave you with higher interest rates on the money you borrow.

As you make your way through adulthood, lenders will check your scores as you apply for auto loans, mortgages, or credit cards.

When you retire, the odds are high that you will no longer be applying for mortgage loans. However, this doesn't mean that credit scores will no longer play a key role in your financial life.

The Best Credit Cards

If you want to qualify for the best credit cards, including ones with the most generous rewards programs, you'll need a high FICO score. Financial institutions only pass out their best credit cards to those customers who've proven that they have a history of paying their bills on time.

Having a high credit score is how you'll prove to banks that you are financially responsible. And if you want to qualify for the best credit scores during your retirement, you'll take steps to make sure that your credit score is strong in your 60s, 70s, 80s, and beyond.

A New Car

Maybe you plan to buy that dream car after retirement. If you can't pay for it in cash, you'll need an auto loan. And if you want to qualify for an auto loan with the lowest possible interest rate, you'll need a strong FICO credit score.

Auto lenders will check your credit score when you apply for financing. So make sure that your score doesn't take a dip after retirement.

Auto Insurance Rates

If you buy a new car, you'll need auto insurance, too. Guess what? Auto insurers rely on a variation of your credit score to help set their rates. Again, you'll want the highest possible credit score if you expect to qualify for the most affordable auto insurance.

Auto insurers use something called a credit-based insurance score to set rates. If this score is strong — and your driving history is good — you'll usually qualify for lower insurance rates. Your credit-based insurance score doesn't factor in your job or income. But it will rise if you pay bills such as your credit card payments and mortgage on time every month. It will fall if you miss payments, make payments 30 days or more late, have too much debt, or have accounts that have been sent to collections.

Refinancing to a Lower Monthly Payment

The goal is to enter retirement without having a monthly mortgage payment. That doesn't always happen, though. And if you are still paying off a mortgage loan when you enter your after-work years, you might want to someday refinance that home loan to one with a lower interest rate. Lowering your rate will give you a lower monthly payment. That extra cash each month could be important once you're living on a fixed income.

To qualify for a refinance, and for the lowest possible interest rate to make such a move financially worthwhile, you'll again need a high credit score. If your FICO credit score is 740 or higher, the odds are good that you'll qualify for an interest rate low enough to make refinancing a smart financial decision.

The lesson here is obvious: You can't put worrying about credit scores behind you just because you've entered retirement. The best move is to continue taking the steps that help guarantee a strong credit score — paying your bills on time and keeping your credit card debt low — even after you've left the working world.

This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Is Pay-As-You-Drive Auto Insurance Worth It?

Andrea Cannon — Mon, 09 Jan 2017 10:30:23 +0000

Don't drive much throughout the year? Your wallet may be in luck, in more ways than one. Pay-as-you-drive car insurance plans (also known as usage-based car insurance plans) can provide a money-saving solution for drivers who don't drive often. Each month, your rate will vary based on how much you drive. The less you drive, the more you'll save.

How Does the Plan Work?

These unique auto insurance options work a bit like pay-per-minute cellphone plans, where you're only charged for what you use. In order to accurately determine how much you're driving, you will receive a small wireless device that plugs into your vehicle's OBD-II port. This will alert your insurance company to how many miles you drove, so they can determine your monthly bill.

Who Qualifies?

Pay-as-you-go insurer Metromile estimates that if you drive less than 200 miles per week, you can save money with their pay-per-mile insurance plans. They also found that if you drive less than 5,000 miles a year, you could pay 40%–50% less than you would with a traditional insurance plan. In fact, they estimate that 65% of drivers are overpaying for their insurance. These types of plans are especially beneficial to drivers who don't drive very often and people who are paying high insurance rates due to their age or credit history.

How the Pricing Works

Once you enroll, you will pay a low monthly base rate, plus a charge per mile of driving. Through Metromile, if you drive more than 150 miles per day (or 250 per day in Washington), you won't be charged for the extra miles above the cap, which means you won't overpay on a long trip. Other factors can also affect your rate, including age, vehicle, and driver history.

How Much Can You Save?

Many drivers will limit their coverage in order to save money when they don't drive often. However, this can end up costing you more in the end if you do get in an accident. Instead, a pay-as-you-drive plan can provide the coverage you need and save you money every month.

Some insurers claim that you will save anywhere from 20%–50% on your premium, and certain providers will even offer an immediate discount just for installing the tracking device to your vehicle's onboard diagnostics port. You can get an accurate idea of how much you can save by comparing your current auto insurance costs to what you would spend using a simple plan, like those that Metromile offers.

As an example, we will use Metromile's estimate of $46 per month, which includes a $30 flat monthly rate and 500 miles driven x $0.032 per mile. According to the National Association of Insurance Commissioners, the national car insurance average rate is just over $900 per year for a single driver. Compared to the $552 per year that you would spend on pay-as-you-drive plans, you'll save about $350 per year if you drive 500 miles per month, on average.

Who Offers It?

Progressive, Allstate, State Farm, Travelers, Esurance, Nationwide, The Hartford, Safeco, American Family, and GMAC are some of the bigger insurance companies that offer these types of plans, but many have additional stipulations. For instance, Progressive also monitors what type of driver you are by also collecting information about how hard you brake, how much you accelerate, and your driving patterns. Insurance companies like Metromile only monitor how many miles you are driving.

Is It Right for You?

Along with deciding whether to sign up for this type of plan, you will also need to find the right insurance provider. Sites like carinsurance.com can help you determine what type of discount you can expect, what's measured, and what's available in your state.

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This article is from Andrea Cannon of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Money Leaks You Need to Plug

Mikey Rox — Thu, 15 Sep 2016 10:30:05 +0000

Want to tighten your budget, but can't figure out where you can save money? Look for leaks in your budget — places where money is slowly but surely leaking out. Here are seven places to start:

1. Insurance on Old Vehicles

Have cars or trucks sitting in your garage, driveway, or backyard that rarely or never get road time? Or maybe you're paying insurance on other types of vehicles — like boats or motorcycles — that have become permanent fixtures on your landscape. If this situation sounds familiar and you're still carrying insurance on these vehicles, it's time to make a decision. Either cut the insurance and put a tarp over the machine(s) for preservation, or put it up for sale so you can make a few bucks.

2. Bank Fees and Out-of-Network ATMs

Many checking and savings accounts have maintenance fees related to a minimum balance, and if you don't keep that minimum in the account, you'll be charged the fee — and you may not even realize it. For instance, last year I upgraded my savings account to a higher-yield savings account that pays more interest, but I recently took out a large sum of that savings for a down payment on a home. Unbeknown to me, the new savings account charges a $12 monthly fee for not keeping a minimum balance of $10,000, which I was quick to flag, and I reverted back to my previous account until I've replenished my savings to accommodate the higher-year account's requirements. Now, $12 a month may not seem like a big deal, but if you let it go too long, it really adds up. It's worth calling your bank or sitting down with an in-bank representative to discuss your accounts' requirements and to ask about what types of accounts best suit your needs.

Another way you can plug money leaks from your account is to avoid ATMs that charge a fee for use. I've seen service fees upward of $10 at some ATMs, and that's not counting the fee that your bank may also charge — my institution's is $2.50 per transaction — every time you use an out-of-network ATM. If you need quick cash (like for a night out, for example), try to remember to go to your home back earlier in the day or stop by a convenience store, like Rite-Aid or 7-11, and use the cash back option if you're on the go.

3. Unused Memberships and Subscriptions

Over the past several years, the availability of membership and subscription services has skyrocketed thanks to our increasing attachment to mobile devices. Services like Spotify, Netflix, Hulu, and more extract their monthly fees from our bank accounts, and that can be dangerous if the price is not justified by the amount we use a particular service. If you lost your interest in an existing subscription, cancel it. This also applies to traditional month-to-month memberships too, like your gym. If you're not using them on a consistent basis, put them on hold until you get back on track or end them so you're not paying for rather pricey services you're not receiving.

4. Credit Card Interest and Late Payments

Avoiding credit card interest and late payments should be a top priority when you're trying to stop hemorrhaging cash. Maybe you can make up the difference by plugging up the other money leaks listed in this article. But, if that's not feasible or if you fall short, consider picking up a side gig, like pet sitting using services like Rover.com and Dog Vacay or driving with Uber or Lyft. I personally do both, and the money I've made from these "extracurriculars" has helped me pay off bills and put a substantial amount of money in my savings account.

5. Mobile Data Overages and Outdated Plans

Many of my friends complain about never having enough data and subsequently having to pay for overages. It's annoying for them because either they have to suck up the cost of going over, or cut back on their data usage, which becomes quite prohibitive after a while. In addition, if you've had the same mobile plan for a while, now is a good time to call your provider to see what savings are available. Last year, I called my mobile provider to inquire about my plan, which had remained the same for about 10 years, and I was happy to come off the call with about $8 in savings per month moving forward.

6. Wasted and Spoiled Groceries

I know far too many people who have pantries packed to the brim with boxed and canned goods that are many years old — and many years past their expiration dates — who continue to purchase even more boxed and canned goods every time they visit the supermarket. It's pure nonsense.

First step, clean out your pantry! Throw out what's expired and the things you know you're not going to eat (or deliver the still-edible goods to a local food pantry), then bring whatever's left to the front of the pantry to be consumed immediately. Next, stop buying items for which you don't have specific plans; this also includes perishable foods. If you not sure when you're going to eat something, why are you buying it? Just in case? Just in case is how you spend way more than you need to at the supermarket. Make a list, check it twice, and stick to it when you next go grocery shopping.

7. Vampire Energy Consumption

Is your air conditioner constantly running — even when you're not home? Do you treat the heat the same way in the winter? TV left on? Dryer turned to high? Faucets dripping? Everything plugged into outlets even when they're not in use?

Every time you quietly answered yes to those questions, it costs you money. To curb your energy consumption, make sure everything is off when you leave the house. Also, unplug non-daily-use electronics and appliances — like that nightstand lamp that you never use — so they're not eating up electricity for no reason. And for goodness sake, fix water and air leaks around the house so you're not almost literally throwing money out the window or down the drain. Be mindful of other ways you may be consuming more energy than you need to, like turning off porch lights, adjusting the temperature in your fridge and freezer, cleaning air filters, and using more efficient cycles on the dishwasher and washing machine if a lower setting will get the job done.

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Tell If a Car Service Plan Is Worth It

Carrie Kirby — Mon, 18 Jul 2016 09:30:37 +0000

Considering the purchase of an extended warranty for a vehicle can lead to serious mockery from the frugal. Everyone knows that dealerships tack large markups to these policies, extracting hundreds of extra dollars from customers. Consumer Reports warns that more than half of people who buy an extended warranty never use it, and even the minority that do use it end up, on average, spending more on the warranty than they save on repairs.

But suppose you are able to purchase a warranty at a low markup over the dealer's wholesale price? Should you buy a warranty if it's a great deal?

I recently found myself in this position after getting offered a price on a Toyota Extra Care Vehicle Service Agreement so low that a friend who worked at a different dealership urged me to snap it up. But still, I worried. Because even at a good price, coverage that I never used would still be money down the drain.

I wished for a crystal ball that would tell me whether the used car I was buying — a late model Highlander Hybrid — would ever need the services covered by this plan. Seeing the future is impossible, of course. But with some digging, I found resources that helped me make an educated guess by answering the following questions.

How Long Would the Warranty Cover My Car?

The dealer was offering me an eight-year, 100,000-mile warranty, which sounded like a lot of coverage. But when I looked closer, I realized that the mileage limit was based on the odometer's mileage, not the miles I drove. Since the car already had about 60,000 miles on it, that meant this warranty would cover 40,000 miles of my driving. And since the certified preowned car came with a free one-year warranty, the VSA, if I bought it, it would kick in on year two. Assuming that the car would hit 100,000 miles after four years of driving, this meant that the supposed eight-year policy would really cover me for about three years. I used this information to calculate the cost per year.

If you're not sure if a vehicle you're buying is already covered by a warranty, you can check by calling a dealership of that brand, or by getting a VIN-based report from CarFax or CarMD.

What Is the Rate for the Car I'm Buying?

When buying a VSA, it's like betting against the company that your car will break down. Of course, the carmaker and dealership know more about the car's reliability record than you do, so it's a bet that's stacked against you. However, it would help to know how likely it is that you'll need to repair your car during the warranty period, and fortunately, that information is available.

One step you can take is to consult the reliability rating of your car's make and model on ConsumerReports.com. My particular car got high marks in this area, which was a strike against buying the warranty. In surveys, Consumer Reports has found that owners of more reliable vehicle makes tend to be less satisfied with their purchases of warranty plans.

You can get more specific by ordering a Vehicle History and Title Report from CarMD, a company that sells a diagnostic tool that plugs into the car to tell you why the check engine light is on. You can order a report by typing the VIN into CarMD's site, and in addition to useful information about the car's history, CarMD will draw upon its large database to tell you whether a check-engine light repair is expected within the next year. CarMD showed me a report for a car with the same make, model, and mileage as the one I was buying, and the report indicated that no such repair was expected in the next 12 months.

That was another strike against buying the VSA.

What repairs can cause that light to go on? About 85% of the systems in the car, says CarMD spokeswoman Kristin Brocoff.

"It's not just a handful of parts. The car's check engine light can alert you to anything as small as a loose gas cap and serious as engine failure," she said.

What Are Car Repairs Likely to Cost Me?

CarMD can help answer this question too, using data from repair shops nationwide. The vehicle history includes a five-year cost of ownership estimate, which includes fuel, maintenance, repairs, insurance, and depreciation. For my vehicle of choice, Brocoff broke down the $50,433 cost listed on the report, and revealed that repairs over the next five years are expected to run $1,689.18, or $337.80 per year. This was more than the per-year price of my warranty, so, if all those expected repairs were covered by the warranty I was offered, maybe I would come out ahead by buying the warranty.

Another way CarMD can help you predict your car's future is its regularly updated Vehicle Health Index reports, which are free dispatches on the cost and incidence of repairs for all cars. For instance, the 2016 VHI says that the typical "check engine light" repair in my region, the West, costs $403.42. Knowing that, I know I would have to get hit with at least two such repairs that were covered by my warranty to make the coverage pay off.

Will the Warranty Even Cover the Expected Repairs?

Up until this point, things have looked good for buying the warranty, because the data predicts that I'd spend a few hundred dollars a year on car repairs. But this is where things get head-scratchy. Some potential repairs would be covered by two other warranties that would come free with my car, and those that aren't might not be covered by the VSA, either.

Like many certified used vehicles, my car came with a limited powertrain warranty, which covers "major engine, transmission components, and all internally lubricated parts," up until my odometer hits 100,000 miles, i.e., for about the same amount of time as the VSA they want to sell me. Because it's a hybrid, Toyota is required by law to also provide a warranty for the hybrid battery, covering about the same period. So, only repairs that don't involve the powertrain or the hybrid battery could potentially be covered by the VSA. Then, of course, the VSA has a specific list of components it covers, and anything not listed there would cost me out of pocket.

How do you know what parts are most likely to break? Again, I got help from CarMD's 2016 Vehicle Health Index, which told me that the most common check-engine-related repair for all cars was replacing the oxygen sensor (average cost $250), followed closely by replacing the catalytic converter ($1,153!), and replacing ignition coils and spark plugs ($390 for both). Searching for these repairs on the list of items covered by Toyota's powertrain warranty and the Toyota Extra Care Platinum VSA, I found the O2 sensor listed on neither, the catalytic converter and ignition coils listed on the VSA, and spark plugs listed on neither. The high cost and high ranking of catalytic converter replacement was definitely a point for buying the warranty; then again, even at the second most likely repair, this job only accounted for about 7% of all car repairs. And despite all the data I'd read, I could not really predict how likely it was that my car would need a new catalytic converter during the warranty coverage.

After investing multiple hours researching the likelihood of needing the offered VSA, I came to the frustrating conclusion that buying it or not buying it was basically a toss up.

My educated guess based on my research is that my car may need one or two of the smaller covered repairs during the coverage period, but that the out-of-pocket cost would be close to what I paid for the warranty. On the other hand, reading CarMD's reports made me feel more secure that the odds of a really expensive repair hitting me in the next few years was probably not very high.

One actionable thing I learned from this experience is that if you opt to buy a VSA, you should absolutely not pay the first price offered by the dealership. My dealership's finance guy first offered me the plan at twice the price he eventually ended up offering it at. All it took to cut the price in half was telling him that I didn't want to buy it.

Have you purchased a similar warranty on your vehicle? Share your experience with us!

This article is from Carrie Kirby of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

9 Ways Life Is Wonderful When You're a Good Driver

Carrie Kirby — Tue, 17 May 2016 10:30:09 +0000

This post brought to you by Progressive. You could save $598* when you switch to Progressive.

Are you the mom who always gets asked to drive on school field trips? Do you take pleasure in feeling yourself come to a complete stop at intersections? Can you recall many instances over the years when your defensive driving prevented an accident?

If your answer was yes, then you know the pleasures of being a truly excellent driver. If no, keep reading to learn more about how the care you take behind the wheel can pay dividends that you may not even be aware of.

1. You and Your Loved Ones Are Safer

Let’s get the obvious out of the way first: Bad driving is responsible for 94% of car crashes. By avoiding poor decisions such as speeding or driving drunk, and avoiding distractions and being vigilant about driving defensively, you make it much less likely that you or a loved one will be injured in a car crash.

2. You Pay Less for Car Insurance

In order to qualify for the lowest insurance premiums, you need a clean record without crashes or tickets. Ask for a good driver’s discount or other perks like accident forgiveness when negotiating rates and if you do get a moving violation, get rid of the point by attending traffic school before it affects your premium.

3. You’re Healthier

Engaging in aggressive driving, commonly known as “road rage,” has been shown to have a negative effect on your health. As you inevitably get into conflicts with other drivers, your stress levels will rise, to the detriment of your immune system, your cardiovascular system, and your emotional wellbeing.

4. You Spend Less at the Pump

Speeding doesn’t actually save much time — going 10 miles faster on a 20 mile trip gets you there all of three minutes faster. But slowing down can save you a lot of money.

In one case study, a speedy driver saved about four minutes an hour — at the cost of $46 more in gas each month.

5. You Learn Life Lessons

Good driving habits just happen to be the same behaviors we need to do well in life, so why not practice them during your commute?

The blog Driving in the Real World points out that all safe driving tactics have their big-picture equivalents. For example, it’s a good idea to keep a safe distance between yourself and other cars on the road, just as it’s a good idea to give yourself a time cushion to avoid being late for work. And when other people behave badly, whether it’s on the road or at work, it’s safer and healthier to just let it go.

6. You Have Better Employment Prospects

There is a long list of jobs that a ticket for reckless driving may disqualify you for, including police officer, mail carrier, babysitter, and (of course) commercial driver. If you’ve been convicted of driving under the influence, things could be even worse, especially if you are or want to be a pilot.

7. You May Have a Better Credit Score

Higher insurance premiums aren’t the only way reckless driving can cost you. There are financial costs involved for receiving a citation, getting a DUI, and of course getting in an accident, especially if your insurance plan has a high deductible. Fail to pay any of these bills on time, and there goes your credit rating.

8. Your Kids Will Become Safer Drivers

Teens who report that their parents are not safe drivers are more likely to get tickets or have crashes themselves, a survey found.

9. You Have Better Dating Prospects

This might surprise you, but a survey by the Institute of Advanced Motorists ranked road rage and texting while driving as the most offensive things someone could do on a first date. Apparently, singles value the prospect of staying alive until that goodnight kiss.

There’s no more excuses not to be a good driver when the benefits are clear. Safe driving!

*National average annual car insurance savings by new customers surveyed who saved with Progressive in 2015.

This article is from Carrie Kirby of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Kinds of Insurance That Aren't Worth It -- And What to Do Instead

Damian Davila — Wed, 08 Apr 2015 11:00:10 +0000

Forewarned is forearmed, an old adage goes.

Being prepared for the unforeseen is always wise, but some insurance companies may actually be cashing in on our fears of unpredictable events. Don't waste money on insurance you don't need — or by doubling up on coverage you already have. (See also: 14 Things Insurance Agents Don't Want You to Know).

Here are six kinds of insurance that aren't worth their cost (and a few coverage alternatives, just in case).

1. Rental Car Insurance

You shouldn't pay twice for the same thing. Depending on your car insurance policy and your credit card, you may already be covered for rental car insurance.

First, most primary auto insurance policies extend to rental vehicles up to your policy limits. For example, your liability insurance would pay for damages caused to other cars or properties. Review your insurance policy to get a clear picture of your coverages and policy limits. In case of questions, talk with your insurance agent or contact your primary auto insurance's customer service line.

Second, many credit cards offer secondary coverage for theft or damage to the rental vehicle. Secondary coverage means that after filing a claim with your primary insurance, the secondary insurance picks up fees, such as deductibles, loss-of-use charges, and towing costs. (See also: 13 Awesome Credit Card Perks You Didn't Know About)

What to Do Instead

To skip rental car insurance, stick to cars that meet the coverage limits and requirements of your primary car insurance and credit card. For example, some cards won't cover rental cars over $50,000 in value or with rental periods of over 30 days.

2. Extended Warranty

When you drop a couple grand on that brand new laptop, you don't even hesitate to accept that extended warranty insurance. But if you'd read the fine print on your credit card terms, you would have found out that you were already covered. Most credit cards offer extended warranties for an extra year.

Consumer Reports indicates that when breakdowns occur during extended warranty periods, the average repair cost for appliances is about the same as the average price for that warranty. This means that you're better off sticking with the free extended warranty from your credit card.

What to Do Instead

Just remember that to qualify for the extended warranty from your credit card company, you need to put the entire purchase amount on the card.

3. Collision Coverage for Old Cars

Talking about car insurance, here is another one that may be unnecessary.

Let's imagine that you own a car with a Kelley Blue Book value of $2,500 and that your collision coverage is $500 per year.That's 20% of your vehicle's value for one year of coverage! If you were to wreck your car and receive a total loss settlement, the most that you would receive is $2,000 (assuming a $500 deductible). Is this worth it?

This is a bad deal no matter how you see it. It gets even worse as the collision deductible gets higher, or the vehicle's cash value gets lower. Depending on your financial situation, dropping collision coverage for your old car may be a good idea. On the other hand, never drop your auto liability insurance.

What to Do Instead

Take what you would use on collision coverage and put it in a savings fund for your next car purchase.

4. Specified Disease Insurance

If you have a family history of a particular genetic disorder or are at risk for a terminal disease, you may lose sleep over the potential financial blow that might be coming someday. Most specified disease insurance writers claim that this kind of policy is worth it because it will cover expenses not reimbursed by your primary health insurer, such as out-of-pocket medical costs, child and household help charges, and experimental treatment expenses.

The reality is that you may be already covered. The Affordable Healthcare Act ensures that most insurance plans cover the health care that cancer patients and survivors might need. Current legislation requires that all plans sold in health care marketplaces must cover essential health benefits, including screenings, treatments, and follow-up care of cancer and other types of diseases. If you're concerned about a specific disease, find out your available options for coverage through your state's health care marketplace.

What to Do Instead

Get peace of mind through a comprehensive plan that covers your illness and skip the specified disease insurance.

5. Life Insurance for Children

This is a very sensitive topic. As a father of two handsome and smart boys, I will do everything in my power to provide them health, stability, and wellbeing. Buying life insurance for children doesn't make sense because they are not the main breadwinners in the family. In most scenarios, your children are your dependents, not the other way around. (See also: How and Why to Buy Life Insurance)

Life insurance for children would only make sense if you're dependent on your young children for income. Even under these circumstances, some parents may feel uncomfortable signing up their children for life insurance.

What to Do Instead

If you're concerned that you wouldn't be able to cover the potential funeral expenses of your children, then create an emergency fund savings or investment account to cover those expenses. That way, you're covered in case of need and you have a head start for a potential college savings fund for your children. Consult your financial advisor to determine which is the right choice.

6. Private Mortgage Insurance

Private mortgage insurance, better known as PMI, is meant to cover any money owed to your lender in case you default on your mortgage. This insurance is not meant to cover you at all. PMI is required by law for homebuyers with down payments less than 20% of the sale price of the property. (See also: Why You Don't Need Mortgage Life Insurance)

There are three reasons why PMI isn't worth it:

The average PMI payment ranges from 0.5% to 1% of the total loan value. The small percentage can be deceiving. In 2014, the average U.S. mortgage debt was $155,192. Assuming a 1% PMI, the average PMI payment in 2014 was about $1,551. That money would be better used as a contribution to your retirement account or payment to credit card debt.

PMI payments may not be tax deductible. Families with over $109,000 adjusted gross income ($54,500 if married filing separately) per year can't deduct PMI payments on their tax declarations.
PMI may be cancelled. Under the Homeowner's Protection Act, you can request your lender terminate your PMI when your loan value reaches 78% of the original market value of the secured property. Keep in mind that there are several requirements, such as no junior liens and no dramatic market value swings. Plan ahead, work on improving your credit history, and make mortgage payments on time within the last two years, so that your lender doesn't come up with any "buts" to your request.

What to Do Instead

Save up for a 20% down payment on your property and skip private mortgage insurance altogether.

For those with a high credit score, another option for avoiding PMI may be available: an 80-10-10 piggyback loan. Under this type of loan, a bank offers you a mortgage for 80% of the home value, and a second mortgage or home equity line of credit (HELOC) for 10% of the home value. This way you're able to come up with a 20% down payment but only with 10% out of pocket. Consult your local bank to determine your eligibility for a piggyback loan, find out terms (e.g. some banks may offer 80-5-15 or 80-15-5 piggyback loans), and figure out if a piggyback loan is right for you.

What are some insurances that you wished you had never signed up for?

This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

14 Things Insurance Agents Don't Want You to Know

Damian Davila — Mon, 23 Jun 2014 09:00:05 +0000

Ignorance is bliss.

The less that you know about how insurance works, the happier insurance agents are. As friendly as geckos, generals, cavemen, and ducks may look on TV, you shouldn't forget that insurance is a multi-billion dollar industry. These companies are out there to make money. It is the job of insurance agents to make as much as they can, too.

Here are 14 things that insurance agents don't want you to know.

General Tips

Let's start with some tips that apply to several types of insurance.

1. Non-Smokers Pay Less

Non-smokers pay less than smokers for any type of insurance, including car insurance, home insurance, and life insurance. If you don't see a non-smoker discount listed on your policy, call your company and ask about it. Usual discounts for non-smokers range from 5% to 15%.

2. Quick Settlements Are Often Not the Best Deal

A quick settlement offer is never a good sign. This means that you are entitled to a payout, but the insurance agent is aware that if you look into it, you could get more. Remember that insurance companies are for-profit, so don't fall for those "get on with your life" and "put this tragedy behind you" comments. Take the time to carefully review a settlement offer before you accept it.

3. Payouts Can Be Extremely Slow

The airline insurance industry is an example of how slow insurance payouts can be. Lawyers are speculating that the litigation for Malaysia Airlines flight MH370 could take five years, with some families waiting up to 10 years for compensation. Airline insurance litigation in the U.S. can be complex as different states have different caps on damages for victims, so lawyers battle to file suits in states that benefits their clients. For example, in 1949 an Eastern Airlines plane was cut in half. One half fell in Virginia, where then the cap was set at $15,000, and the other on Washington, D.C., where there is no cap.

4. Low, Low Premiums Can Hide Real Costs

Some insurance agents present you a quote so low that you won't believe your eyes. The reason that the quote is so low is that you would be opting for high deductibles and low coverage limits. These cookie-cutter policies may not only be a bad fit for you, but also end up costing you a lot in case of a claim.

To avoid falling for a low-ball price and inappropriate insurance, compare apples to apples by requesting a quote for a policy with the exact same features. Take a second look at any quote that is way below the price of the others.

Car Insurance

Don't fall for cute mascots and look deeper into the coverages for those policies.

5. Credit Score Is a Major Criteria

Not used by just money lending institutions, credit scores provide insurance companies a look at your credit history as a predictor of potential payouts. The FTC also agrees that credit scores are effective predictors of risk for auto insurance policies. This is why insurance agents request your social security number — so that they can pull up your credit report.

Despite the validation by the FTC, this practice has been labeled as discriminatory by many consumer advocacy groups. Those struggling with debt or starting to build their credit history are hit with another big bill. This is why the states of California, Hawaii, and Massachusetts have prohibited car insurance companies from using credit-based insurance scores. (See also: How to Improve Your Credit Score)

6. If You Move or Change Insurance, You Get a Refund

It is a good practice to pay your car premiums in a lump-sum payment because you prevent insurance agents from tacking on a "convenience fee" to smaller payments. However, this doesn't mean that they have all of your money for good. They have to earn it. Your lump sum payment covers several months, so if you have to move to another state, the insurance company owes you a refund for the unused months.

Make sure to check the fine print on your policy before cancelling. Some companies may have an early termination fee or require a 30-days notice. Also, plan to have new insurance already in place when the old one is done.

7. "Optional Coverages" May Be Necessary

Insurance agents have to meet sales quotas. Sometimes they may suggest to leave certain "optional coverages," such as underinsured motorist coverage, to lower your quote and get you to sign.

For example, residents of California, Colorado, Georgia, Illinois, Ohio, and Louisiana are not mandated to get coverage for underinsured drivers. Still, it is a good idea to get it. Across the U.S. about one in seven drivers is uninsured. But in some states, such as Florida, Oklahoma, Mississippi, New Mexico, and Tennessee, the estimated percentage of underinsured motorists is 24% and above.

If you are the sole breadwinner in your family, does it make sense to risk the chance of a huge, unexpected bill?

8. You Don't Have to Speak to the Other Guy's Claims Adjuster

Just like in those cop dramas, "you have the right to remain silent and everything you say may be used against you in a court of law." In the case of a car accident, the claims adjuster from the other party might claim that she "must" have your recorded statement or "requires" your medical records.

Don't cave in to these requests, unless ordered by a court or other authority, because the claims adjuster is trying to gather evidence against you. Even your most innocent comment could be twisted as an attempt to delay or deny your claim.

9. "Captive Agents" Cannot Offer You the Best Deal

For the next 30 seconds, write down all the car insurance companies that you can think of. Once the time is up, count how many you got. Three? Five? Ten?

Here is some food for thought: There are about 100 car insurance companies in the U.S. By only looking up the quotes from two or three companies, you're decreasing your chances of getting the best possible price for your insurance. On top of that, an insurance agent from a company can offer you only options that that company sells. Don't fall for their online comparison tables because those quotes are not accurate — they are just estimates. The final price can only be achieved by considering your credit score, driving history, and other factors.

The easiest way to cover the most ground is to work with an independent insurance agent. She represents several insurance companies, so she is not limited to offer you products from a single company.

10. Rental Car Insurance May Be Unnecessary

Check what your policy has to say about car rentals. You may be surprised that your car policy may provide sufficient coverages. Also, some credit cards offer rental car insurance when using them as form of payment.

Before you rent a car the next time, make sure to have read the contracts from your existing car insurance and credit card(s). Remember that personal auto insurance often doesn't cover rentals for business use.

Home Insurance

Home sweet "appropriately insured at the right price" home.

11. Force-Placed Insurance Is Expensive

While home insurance is necessary, it doesn't need to be prohibitively expensive. Some banks will try to issue you a Force-Placed insurance, which is very expensive and provides the bank a kickback from an insurance company. This practice is not only unfair to the homebuyer, but also illegal in the eyes of the Consumer Financial Protection Bureau.

Make sure to read all letters from your lender because they have to provide a written notice in case of a Force-Place insurance policy. If the bank is trying to force you into a insurance policy, find an alternative policy that meets the required coverages (e.g. hazard insurance, replacement cost) but at a lower price. If you are able to find an appropriate policy, contact your lender to cancel the forced policy immediately.

12. Little Known Home Insurance Coverages

Your home insurance policy may be stronger than you think. Here are some lesser-known coverages:

If you're out of power for several days due to a natural disaster and your refrigerator is full of food that goes bad, you may be able to claim compensation.
Your children's property is protected by your homeowner's insurance as long they are living in campus dorms.
Home updates required by law, such as a storm cellar, may be covered by your home insurance.

Check your home insurance policy for more details. (See also: 8 Surprising Things Covered by Home Insurance)

13. Private Mortgage Insurance Can Be Removed

The Homeowner's Protection Actrequires homebuyers, who finance more than 80% of a new home's value, to purchase Private Mortgage insurance (PMI). This is an expense that you have to keep for several years. The good news is that once your loan-to-value ratio is close to 20%, you can request your lender to remove PMI from your mortgage.

Here is an overview of requirements:

No second mortgages on your home
Current on all payments by the anticipated cancellation date
No late payments within the last two years
Good credit score
No dramatic market value change of home

Finally, here is a type of policy that is so easy for insurance agents to sell that it deserves a mention of its own.

14. Disease-Specific Insurance

The slight mention of AIDS and cancer are enough to send a shiver down anyone's spine. This is why policies for these diseases are an easy sell for insurance agents. By preying on your fear, they get you to hand over cash for something that you may never use.

If you have a health plan or life insurance, you may be already covered for these diseases. By duplicating the coverages, you're just wasting money. If a specific disease runs in your family, get a comprehensive health plan that includes treatment for that specific disease.

What are some other things insurance agents don't want you to know?

This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Best Money Tips: Ways to Lower Car Insurance Rates

Ashley Jacobs — Wed, 02 Oct 2013 10:00:03 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found some great articles on ways to lower car insurance rates, the best mobile apps for personal finance, and traits common of most millionaires.

The Top 10 Cheapest Cars to Insure

Sabah Karimi — Thu, 15 Dec 2011 10:48:16 +0000

If you’re thinking about buying a new vehicle, make sure you’ve done your homework about average auto insurance rates. According to Insure.com, the most expensive car to insure in 2011 was the Mercedes SL65 AMG, a sporty, two-door convertible that has the highest chance of getting in a car crash. Insurance companies are more likely to lower your insurance rates when they trust your chances of getting into a crash — or having your car stolen — are very low. This is why SUVs, minivans, and other non-sporty vehicles continue to rank at the top of the “cheapest cars to insure” list year after year. (See also: The Joy of Buying a New Car: 9 Car Buying Tips)

Insure.com gathers data on national average annual premiums for different makes and models and ranks them based on premium price. For 2011, the top ten cheapest cars to insure were:

1. Chrysler Town and Country

The average annual premium for this vehicle was just $1,091.80 in 2011. The popular family minivan has been around since the late 80s, and the latest models have advanced safety features and high safety ratings.

2. Toyota Sienna

With an average annual premium of $1,100.66, this is another family minivan with high safety ratings, and the third generation Sienna was the first to receive a “Top Safety Pick” award from the Insurance Institute for Highway Safety.

3. Toyota Sienna LE

This is one of the trim levels available on the Sienna minivans, and it boasts a V6 engine with all-wheel drive. More control and power means increased safety on the road. The average annual premium was just $1,108 for this version of the Sienna.

4. Honda Odyssey LX

The fourth-generation minivan available in 2011 boasts a larger body and lower roofline. It also has ventilated front disc brakes and six-speed automatic transmission for a smoother ride. The average annual premium for this vehicle was $1,115 in 2011.

5. Nissan Murano SL

Probably the sportiest crossover vehicle you’ll find that commands low insurance rates, this stylish ride offers plenty of comfort and a full range of advanced safety features. The average annual premium was $1,127.89 in 2011.

6. Jeep Wrangler Unlimited Sport

This SUV boasts 40% more horsepower and 10% more torque than other Jeeps on the road, but still has the classic Jeep styling. It’s one of the best 4x4s on the market, and the average insurance rates are just $1,131.27.

7. Honda Odyssey EX

Another minivan to consider for those family outings and road trips, this reliable vehicle tops the “safe” list for many insurance companies. The average annual premium was $1,138.16 in 2011.

8. Toyota Sienna V6

The V6 engine versions of the Toyota Sienna are also a top choice for insurers, since these models promise more power and control among other minivans of a similar size. The average annual insurance premium was $1,143 in 2011.

9. Ford Escape XLS

This SUV is a popular alternative to the standard minivan and is also among the most affordable to insure. The average annual premium in 2011 was just $1,150.

10. Toyota Highlander

If you’re only interested in foreign vehicles, consider purchasing the Toyota Highlander. While it may be a gas guzzler, it’s also among the more attractive alternatives to a minivan, and it’s loaded with deluxe amenities and safety features. The average annual insurance premium was $1,154 in 2011.

Getting the Lowest Insurance Rates

When you’re looking for the lowest insurance rates, stick with the practical, less-flashy vehicles, and you’ll probably be looking at a lower-than-average insurance premium. Don’t forget you can also reduce insurance costs by purchasing a vehicle that has extra safety equipment and anti-theft devices installed. If you’re getting your car insurance coverage with the same insurance company that you have homeowners insurance with, you might also qualify for a discount.

Keep in mind that all insurance companies will take the type of vehicle you drive, your driving history, your credit score, and other factors into account when calculating your premium. The above averages from Insure.com are estimates for the average driver and the actual insurance premium you end up paying could be higher or lower based on where you live, how often you drive, and several other factors.

This article is from Sabah Karimi of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: