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Being Poor Can Cost You Big on Your Auto Insurance

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If you’re single, a renter, out of work or haven’t owned a car in a while — even your perfect driving record won’t be enough to get a good auto insurance rate.

It’s no secret that auto insurers consider a lot more than just your driving record when they calculate your premium. New customers are routinely asked to provide personal details, such as whether they’re married or single, renters or homeowners, unemployed or employed, college- or high school-educated.

It is how you answer these personal questions — not your driving record — that can result in higher premiums, a consumer advocacy group argues in a new report.

In a study of five of the leading auto insurers in the U.S., the Consumer Federation of America found drivers with a good driving record pay 59% more — or $681 per year on average — when their answers to these personal questions point to a lower income status (e.g.: people who answer that they are single, out of work, or have only a high school education). The CFA has long studied how economic status can be tied to higher auto insurance premiums.

For this report, they used the online quote features at Geico, State Farm, Farmers, Progressive, and All State. They created four driver profiles to test — two men and two women, each pair including a high and low socioeconomic status — and requested quotes from each insurer in 15 major cities.

All four drivers shared characteristics in common. They each had a stellar driving record, with no prior accidents or traffic violations. They were each listed as 30 years old living at the same address in each city tested.

Where the two test groups (we’ll call them Group A and Group B, for simplicity’s sake) differed was in how they answered the personal questions on each quote request. In group A, one woman and one man were married homeowners with executive level jobs, a master’s degree and three years with the same insurance company.  In group B, the man and woman were single renters with high school degrees, and neither had owned a car in the last six months.

When the insurance quotes rolled in, an obvious trend emerged: across the board, Group B drivers were hit with higher premiums. On average, Group B drivers were quoted an average annual premium of $1,825. On the other hand, the married, home-owning, college-educated drivers from group A were quoted $1,144 per year.

Source: Consumer Federation of America
Source: Consumer Federation of America

GEICO and Progressive turned out to be the most costly option for drivers in Group B, charging premiums that were 92 percent and 80 percent more expensive, respectively, than premiums for Group A. In one extreme case from the report, GEICO quoted a man living in Minneapolis, Minn. from Group B two and a half times as much as the man from Group A – $1,840 per year compared to $528. The difference between premiums GEICO quoted for a low-economic status and high-economic status woman in Minneapolis was even more staggering — $2,158 vs. $528, amounting to a 300% upcharge.

MagnifyMoney reached out to all five insurers included in this report for comment. Each declined to comment.

James Lynch, senior actuary for the Institute, which represents the interests of insurers in the U.S., said insurers use personal information like marital status and education for a simple reason: they are highly predictive of whether a potential customer will cost the insurer in the future.

“Driving record is an important factor but it’s not the only predictor,” he added, noting insurers use upwards of 20 different factors to assess rates.

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Get the best auto insurance rate possible

Short of state regulator intervention, auto insurers will be able to assess risk in their customers however they see fit. It’s up to drivers to do their due diligence in order to get the best rate possible. Even then,

Start with your state’s insurance department website. Since insurance is regulated at the state level, Hunter recommends checking your state’s office of insurance website to find out what average premiums are like in your area. This website should also list a number of reputable insurers you can contact for quotes. Take those names and check them out on the National Association of Insurance Commission’s database, which maintains a history of service issues and complaints.

Never accept your first offer. Asking several different insurers for auto insurance quotes is an important yet often overlooked part of the shopping process. As the CFA found in this report (among others), premiums can vary widely by state by state and insurer by insurer.

Let your good driving speak for you. Some auto insurers today offer usage-based tracking technology that allows them to see just how often and how well (or, how poorly) you drive. This technology can be a boon to good drivers who have low annual mileage and aren’t hit with any traffic violations. You’ll likely qualify for insurance discounts. It is entirely optional to allow your insurers to track you, as it obviously requires you to forfeit some privacy while on the road.

Have a question for us? Send us a note at info@magnifymoney.com 

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Mandi Woodruff
Mandi Woodruff |

Mandi Woodruff is a writer at MagnifyMoney. You can email Mandi at mandi@magnifymoney.com

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The Dreaded Netflix Price Hike is Coming — Here’s What You Should Know

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The honeymoon will soon be over for Netflix’s most loyal subscribers. When the online video streaming service began raising the cost of its standard streaming plan in 2014 — first, with a jump from $7.99 to $8.99 monthly and, later, a jump to $9.99 monthly — existing subscribers got a break. They were able to keep their $7.99 or $8.99/month deal while new members paid the higher price point.

Since May, however, Netflix has been slowly rising membership costs for those early adopters to the current price point of $9.99/month for a standard membership. This summer, some 22 million subscribers — nearly half its total subscriber base of 45 million — will see their subscription costs rise. Netflix is undoubtedly hoping most subscribers won’t notice the few extra bucks on their monthly bill. Even so, an estimated 480,000 users will decide to cancel their plans, the company said.

How to know when your Netflix bill goes up:

The company will alert subscribers by email, so keep an eye on your inbox.

Do you have to pay the higher price point?

No.

If $7.99 is all you have budgeted for streaming per month, don’t worry. Netflix is still offering a plan at $7.99 per month. However, at that rate you will only able to stream on one screen at a time. Paying $9.99 per month will allow streaming on up to two screens. Netflix’s premium subscription, $11.99 per month, will allow streaming on up to four screens.

If you’re a loyal Netflix user, it can still be a great value. Sharing online streaming subscriptions can be a smart, simple way to save on the cost of at-home entertainment. If you’ve got a couple of roommates who can split the bill, you could actually only be out of pocket a few bucks a month for unlimited access to Netflix’s catalog.

Good news: You’ve got plenty of other options

Amazon Prime. If you’re already an Amazon Prime member, you automatically have access to its video streaming service, along with other perks like free 2-day shipping. The cost of a Prime membership is $99 if you pay annually, which might sound steep on its face but really works out to $8.25 per month — less than what you’d pay for a standard $9.99/month Netflix plan. Just be sure you actually pay for Amazon Prime annually because opting into the monthly payment will run you $10.99 and therefore cost an additional $32.88 per year. Unless you’re a loyal fan of Netflix’s original series like Orange is the New Black and House of Cards, it probably doesn’t make much sense to pay for both Amazon and Netflix.

Hulu. For $7.99 a month you can stream all you want but you’ll have to deal with commercials. Hulu Plus offers commercial-free viewing for $11.99, on par with Netflix’s premium subscription plan. However, whereas you can stream on up to four screens under a single Netflix subscription, Hulu only allows you to stream on one screen per subscription.

HBO Now.  HBO now offers its streaming-only service, HBO Now. It costs $14.99/month and includes total access to the HBO shows and movies cable subscribers enjoy. Just be prepared for a glitch every once in awhile — fans of highly popular shows like Game of Thrones have been known to crash the service when too many users log in to stream at once.

 

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Mandi Woodruff
Mandi Woodruff |

Mandi Woodruff is a writer at MagnifyMoney. You can email Mandi at mandi@magnifymoney.com

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6 Ways to Find College Scholarships

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As the cost of college continues to soar, scholarships have become an essential part of college payment plans. Scholarships covered 17% of the average college bill, according to Sallie Mae’s most recent How America Pays For College report, with an average scholarship haul of $8,843.

Scholarship dollars varied widely, however, based on the type of school attended. Students at a four-year public or state university received, on average, $6,469 in scholarships, compared to $16,527 for students at four-year private universities.

Nonetheless, free money can certainly make a dent in your college tab. And knowing where to look for them is key to the process. Here are a few hints:

1. Search online sites

Scholarship matching websites are still a great source of scholarship information. There’s the U.S. Department of Labor’s scholarship search tool, as well as sites such as Fastweb, The College Board and Cappex. Each site’s search tools are a little bit different, but in general, you’ll be filling out an online questionnaire on everything from your ethnic background to gender to intended major, and seeing what scholarships match your criteria.

2. Skip paid services

“The results will not be better than the free services,” says Mark Kantrowitz, financial aid expert and publisher of Cappex. “The free services update their databases in real time, while paid services license a database that is updated once a year or once a quarter. If you have to pay money to get money, it’s probably a scam.” Kantrowitz recommends searching at least two free sites to give you the confidence that you’ve found all the scholarships for which you’re eligible. However, you can consider certain one-time fee apps like Scholly, which costs $2.99 for a one-time purchase in iOS and Android and helps you aggregate scholarship opportunities.

3. Check the financial aid office

The school you plan to attend may have scholarships available that aren’t listed elsewhere. Give the school a call—either as an incoming student or once you’re attending—and ask for information.

4. Look locally

Your school guidance counselor should know whether there’s any money to be awarded from groups in your area to graduating seniors. Your librarian might also be able to point you toward information on local awards. “Look for small local scholarships on bulletin boards outside your guidance counselor’s office, and near the jobs and careers section of the local public library,” Kantrowitz says. “Also look in the coupon section of the Sunday newspaper, where some national scholarships are advertised.” Groups such as your local Rotary, Kiwanis, and Elks clubs are good places to check, as well as your church.

5. Ask your parents

Do your mother or father work for a company that offers scholarships? If they’re not sure, have them check with their human resources department. Companies such as Verizon, Intel and Siemens offer awards to employee children and dependents, and 11% of employees overall offer this kind of benefit, according to the Society for Human Resource Management’s 2015 Employee Benefits report.

6. Keep applying

Scholarships aren’t just for incoming freshmen. In fact, while freshmen received an average of $5,793 in scholarships, according to Sallie Mae’s most recent numbers, seniors received a whopping $20,292. It pays to keep researching as you work your way through school.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Kate Ashford |

Kate Ashford is a writer at MagnifyMoney. You can email Kate at kateashford@magnifymoney.com

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