Question: I was unemployed for a year before landing a job as a salesman that required a lot of time away from home. That led to my wife and I getting divorced last year. It was painful — emotionally and financially.
Yesterday, I got my auto insurance renewal , and it went up almost $100! I called my agent, and he said it was because I got divorced! I asked why, and he gave me some dense excuse about “correlations” and “risk pools.” I’ve been with the same company for decades, but I thinking of switching. Is this guy for real?
— Andrew in New Mexico
Howard Dvorkin CPA answers…
While homeowner insurance and health insurance are more expensive and more complex, nothing is more difficult to figure out than auto insurance — precisely because the rules are so mushy.
Auto insurers are intentionally vague about the formulas they use to calculate your rates, but in researching your question, I uncovered this: It seems divorced people wrack up more traffic violations than married people.
A study from insurance website EverQuote shows divorcees have almost two violations per 100 drivers, while married people have one. Is this why your rate went up, Andrew? Hard to tell.
“There are many factors that determine how much drivers pay for car insurance, and there isn’t always clarity for the consumer into what moves their premium up or down,” says Andrew Ressler, an EverQuote vice president. “This study really only just begins to scratch the surface of many of the variables involved in providing auto insurance quotes.”
Bottom line: Ressler is an expert in the field, and he can’t even tell you what goes into a rate calculation. However, another factor might be your new profession.
The same study shows that sales people who visit clients — also known as “outside sales” — have 6.4 traffic violations per 100 drivers. That’s near the top of the list. At the bottom is architect at only 3.1. (Interestingly, “clergy” is at 4.3.)
There are nine factors insurers do consider, ranging from education level to even your ZIP code. Why does it matter where you live? For one thing, Debt.com produced a map showing which states have the most auto thefts.
So what can you do? Your instincts are good, Andrew: It costs nothing to shop around for a lower rate, and it’s easy to do online. One easy way to save is called usage-based auto insurance, which means you install a device in your car so your insurer can track your driving habits — from how much you drive to how fast you drive. It’s certainly not for everyone, but I just want you to know how many options are out there.
Have a debt question?
Email your question to firstname.lastname@example.org and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.