Where does your car live?

Insurance is a slightly unusual contract because it depends on good faith

. That's your honesty in telling the insurer everything it needs to know to assess the risk, both when you apply for the policy and then while the policy is in force. Obviously, it's not practical for the insurer to come visit whenever you buy a car so you have to disclose all the relevant facts. If you are less than honest or fail to tell the insurer when there's an important change, the insurer is entitled to cancel the policy when the mistake is discovered, e.g. when you make a claim. This can turn out expensive because, if the insurer cancels the policy, you are left with the bill. So what should you tell the insurer? If in doubt, send an e-mail every time something important changes. That's not you fitting replacement parts, but it would include any modification you make to make it go faster.

What's this about the car's address? Well, this is one of these unfair issues. In all states except California, the ZIP code where you keep the car overnight is a key factor in setting the rate. So, if the car lives in a high crime area where it's more likely to be stolen or vandalized, the premium will automatically be higher. The same happens if your area has bad road design or poor maintenance, and there's a high accident rate. This is unfair because insurance should be all about your skill as a driver. And this is not ignored. The rate will rise or fall depending on whether you are an experienced driver with no claims as opposed to a young driver with multiple tickets. But, for the starting point, it's quicker and easier for insurers to group everyone together by ZIP code. There's a potential set of discriminations at play here because some "high crime" areas are associated with different racial groups. Unfortunately, these vague legal issues are never allowed to interfere with the way the insurers assess their risks.

So, if you have some choice about where you live or store your car overnight, check out the ZIP codes by getting different car insurance quotes. You might find significant savings if you find a place to live in a "good" ZIP code area. This can mean paying slightly more rent or a high mortgage to avoid paying more to insure the home and car. Equally, you might have to pay a storage fee to garage your car at a different address. In all instances, the addresses must be genuine. If you dishonestly declare an address simply to get a lower premium, this is potentially a criminal offense. Not that the police prosecute this type of white collar crime very often. It's left to the insurer to cancel the policy. If the insurer is not at risk of loss, and you have no policy to claim on, that's usually sufficient penalty. Car insurance is deceptively simple to deal with. Buy a car, pay a premium, drive it away. When you do this, remember all the power is with the insurer to cancel the policy.

Where does your car live?

By: David Mayer

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