One of the most important techniques for reducing the cost
of your automobile insurance is to reduce the number of violations and
accidents on your driving record and to make sure your driver's license is
valid. This chapter will explain how the automobile insurance point system
works and how violations and accidents on your driving record can affect the
premiums you pay for automobile insurance coverage.
Insurance companies use many factors to determine your automobile insurance premiums, but one of the factors that can most dramatically affect your rates is violation and accident information that the insurance company obtains from your motor vehicle report and CLUE report.
Most insurance companies assign points for violations and accidents and assign a factor for each point value. The number of points assigned to each driver on an insurance policy does not necessarily correspond directly to the number of points assigned for the violations and accidents by the Department of Motor Vehicles of your state.
Your insurance company may weigh violations or accidents more or less heavily than the Department of Motor Vehicles.
Your insurance agent should be able to give you a table showing how the insurance company assigns points for violations and accidents.
This will give you an idea of how your insurance company rates your policy based on traffic violations and motor vehicle accidents. If your agent does not have access to this information, keep in mind that these tables are public record and can be obtained from the Department of Motor Vehicles of your state.
Here is an example of how your motor vehicle report and CLUE
report can affect your premiums for automobile insurance: Let us
suppose two drivers are the same age and gender, drive the same
type of vehicle, and live in the same rating territory. The first driver
has a clean driving record, with no violations or accidents for the past
three years. The second driver has incurred two speeding tickets and
had one at-fault accident in the same time period.
Both drivers apply for insurance through the same insurance
company. Let us suppose that the total policy premium for each driver
is $400 for a six-month policy term before information from driving
records and CLUE reports is factored in.
The first driver would have a total policy premium of $400, because
there are no violations or accidents to factor in. Since the second
driver has two violations and one accident on his or her driving
record, the insurance company would determine the point values for
both occurrences before calculating the final policy premium.
Suppose that the insurance company charges one point for speeding
tickets, three points for at-fault accidents, and that the company adds
a factor of 10 percent for each point - that is, the premium increases
by 10 percent for each point derived from information on a driver's
motor vehicle report or CLUE report.
The insurance company would assign a total of five points to the
policy for the second driver - one for each of the speeding tickets and
three for the at-fault accident. Thus, the total policy premium of $400
for the second driver would be multiplied by a total point factor of 1.5.
This driver would pay $600 for the same coverage as the first driver.
With a few occurrences on the second driver's records, this driver will
pay 50 percent more than the first driver.
If you have a clean driving record, you will obtain a substantially lower
policy premium than a driver with a few blemishes on his or her
record. Of course, there is no easy way to repair this if you already
have a few violations on your record. The best way to save money if
you already have violations or accidents on your record is to be
honest with each insurance agent or company from which you obtain
a quote. If you are not sure how many violations or accidents are on
your driving record, take the time to obtain a copy of your motor
vehicle report and your CLUE report before you begin the process of
obtaining quotes for automobile insurance coverage. This will help to
ensure that you are giving accurate information to each insurance
agent and help you obtain accurate quotes.
Making sure each insurance agent knows about every accident and
violation on your driving record is the only way to effectively compare
quotes and obtain the best coverage at the lowest premium rates.
Many drivers do not tell agents about violations or accidents, thinking
the insurance company will not find out about these occurrences. You
will find, though, that even if an insurance company is willing to issue
an automobile insurance policy before obtaining motor vehicle reports
and CLUE reports, the company will substantially raise your rates or
even rescind your policy (cancel it back to inception, as if the
insurance policy had never existed) once it receives the reports if you
do not disclose all of your violations and accidents on your
The good news about violations and accidents is the majority of
insurance companies consider information only less than three years
old. Once information on your motor vehicle report and CLUE report
is more than three years old, these insurance companies will remove
the points associated with that information from your policy at
renewal, resulting in a lower premium rate for your automobile
Working to improve your driving record is one of the best ways to
reduce the amount you pay for automobile insurance over the long
term. Make sure you pay attention to posted speed limits, obey stop
signs and traffic signals, and avoid activities that lead to accidents,
such as eating, smoking, or other distracting activities, while
operating a motor vehicle.
Some states will allow you to remove a certain number of points from
your driving record if you attend a defensive driving course after
incurring a motor vehicle violation. This course lasts only one day and
is sometimes just a few hours. If your state has this type of defensive
driving course available, it may be worth the time so that you can
reduce your automobile insurance premiums. If you choose to take a
driving course to remove points from your driving record, be sure to
provide your agent with a copy of the certificate you receive on
completion of the course so your rates can be adjusted.