Money Management

Accidents can be shocking, making it difficult to think. Read on for how to respond to getting into a car crash. 

The car came out of nowhere. I swerved. The brakes engaged, but it was too late. With a thump, my Toyota collided with the larger vehicle. Sweating, I stomped the car to a stop. I stared at the wheel, shocked. It was in this state of mind that I exchanged info with the other driver.

Needless to say, I forgot everything I was supposed to do in the event of an accident. Here’s what I wish I knew as I scrambled to get my documentation together for insurance.

What items you need to have on you

If you get into a car accident, you must exchange auto insurance information with the other driver. Here’s what you should have on hand:

A phoneYour insurance card + driver’s license

You need the phone to take notes and photos. Chances are, your adrenaline is pumping, making it difficult to think. You may want to call a friend and have them walk you through the necessary steps. I called my mom, who walked me through the process step by step.

You’ll need your insurance card to show to the other driver. Consider taking a photo of this, just in case you lose it. I misplaced mine and had to coordinate with my brother for a picture of my insurance information. It wasn’t a big deal, but I felt bad making the other driver wait.

What you need to do

So, you’ve been in an accident. You’ve pulled over somewhere safe, and you’re pretty sure you don’t require immediate medical attention. Once you’ve confirmed the other driver is okay, you can start collecting information for your insurance claim.

Here’s what you need to exchange:

Insurance information: Your insurance card should be enough. Ensure you get the other driver’s name, insurance company, and policy number.Contact information: Exchange names, numbers, and addresses.

Once you have the other driver’s insurance and contact information, you can document the details of the accident. Take photos, write down their license plate number, and detail how the accident happened before you forget.

Feel free to call a friend or family member to walk you through the process. I called my mom, told her I’d gotten into an accident, and asked her to write down the details. Plus, chatting with someone familiar calmed me down and helped me think clearly.

Insurance covers the cost of repairs

After filing the claim, I turned the car into a shop for repairs. The damage seemed small — a dent on the rear door, some scuffing. The bill came out to a whopping $4,318.02! That’s enough to empty out my emergency fund and then some.

My car insurance policy covered 85% of the repair fees. Other than the $500 deductible, repairs only cost me the money I spent on public transportation while my car was in the shop. Without insurance, I would have paid thousands of dollars more.

In some cases, auto insurers will raise your rates in the event of an accident. Unfortunately, my rate will go up. I’ll be shopping around for new insurance and comparing rates.

TL; DR: Exchange insurance and contact information. Document everything, and take photos of the damage. The more information you have, the quicker your claim can move forward. A proper claim filing can save you thousands in repair fees.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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A no-fault accident doesn’t reflect your driving skills, so why does it affect your car insurance premiums? Read on to find out more. 

A few years ago, I was involved in a hit-and-run car accident that destroyed the back bumper and trunk of my Kia Rio. Fortunately, I had uninsured motorist coverage and received a settlement check large enough to replace the car. At the time, I thought my car insurance costs would stay the same, as the accident wasn’t my fault and didn’t reflect my driving. But I was wrong — very wrong.

When I got my new car, I asked my insurance agent to find the best coverage. They gave me a great rate, lower than what I was paying before. But during the application process, they asked if I had gotten into an accident recently. When I told them about the hit-and-run accident, they returned with a new rate — slightly higher than the first one.

That frustrated me. After all, how could an insurance company charge me more after an accident I didn’t cause? Doesn’t that seem a bit unfair? Turns out, I’m not the only one who has found themselves in this situation, nor did I realize at the time how this one no-fault accident would stay with me.

Car insurance companies don’t like to lose money

Let me say this — not every driver will see an increase in their car insurance premiums after a no-fault accident, and even if they do, the change likely won’t be significant. In fact, according to the Zebra’s 2022 State of Car Insurance report, a no-fault accident causes on average a 2.6% increase in your annual premium, or about $40. That’s significantly less than an at-fault accident, which could increase your premium by 36.7% or $561.

One big reason a no-fault accident causes insurance to go up is if the driver is filing under uninsured motorist coverage. Even if your driving was immaculate before the accident, your insurance company is still responsible for paying the claim. To compensate for this unexpected cost, it may shovel some of the burden onto you.

The situation might change if you file a claim with the at-fault driver’s insurance company. In this case, your insurance company isn’t paying the claim and it may not change your premium after the accident. That said, a no-fault accident could stay on your driving record for three years or more. And, as in my case, this could still affect your premium costs, even if you get insurance from a different company.

How to cope with higher insurance costs after a no-fault accident

If you notice a change in your car insurance after a no-fault accident, I would suggest shopping around for different rates. Since insurance companies have slightly different ways of determining premiums, drivers might find a better price with another company, especially companies known for offering low rates to drivers with recent accidents.

It’s pretty easy to compare rates on your own — just request quotes from the best car insurance companies — but if you don’t have time, you could also hire an independent insurance agent, someone who doesn’t work for insurance companies but can still help you find great rates for your situation.

Our best car insurance companies for 2022

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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A poor credit score doesn’t affect your ability to drive, so why does it impact your car insurance costs? Read on to find out. 

From mortgage rates to credit card applications, credit scores wield a lot of power in our financial lives. Sometimes, in fact, they influence things that at first glance don’t even seem related to your history of borrowing money — like car insurance.

While, yes, credit scores have little to do with your ability to drive, many car insurance companies look at your credit when determining your premiums. Numerous studies have backed up the correlation between poor credit and the number of claims filed per year, which supports the idea that if you’re a responsible borrower then you’re likely responsible on the road, too.

Whether or not that’s true in every case, credit scores are certainly one factor many car insurance companies look at. But it might be shocking when you realize how much weight these three-digit numbers can hold.

Drivers with poor credit pay double for car insurance

Drivers with poor credit scores pay an average of $3,622 for car insurance nationally, while those with excellent credit pay $1,703. That means, drivers with poor credit are paying more than double ($1,919, or roughly 112.7% more) for car insurance than what drivers with excellent scores are paying.

In some states, the difference is even more significant. For example, in Connecticut, drivers with excellent credit pay on average $2,001 for car insurance, while drivers with poor credit pay 143.4% more ($2,869) for an average of $4,870. Meanwhile, drivers with poor credit in New York are paying on average $5,685 for car insurance, while those with excellent scores are paying $2,132 — a discount of about 62.5%.

In contrast, the difference in some states isn’t as wide, such as in Indiana, where drivers with excellent credit pay $1,232 on average, while those with poor credit pay 88.6% more ($1,092) at $2,324. And in a few states, it’s actually prohibited to use credit scores to determine car insurance premiums at all, such as in California, Hawaii, Massachusetts, Michigan, and Washington.

How to get cheap car insurance when you have poor credit

Paying more than double for car insurance because of a poor credit score isn’t fun, especially if you’re a safe and responsible driver. Fortunately, there are a few ways you can try to get a lower rate.

One is to shop around for car insurance companies and find out which will offer you the best rate for your coverage. Focus especially on those companies known for offering decent rates to people with poor credit. You could also try usage-based coverage, which gives discounts for good driving, or try a pay-per-mile insurance plan.

Even if these options resulted in lower premiums, you would save even more by improving your credit score. It’s easier said than done, but bringing up your credit score from poor to fair or good could go a long way in lowering your premium. If possible, pay down credit card debt and keep credit card usage to no more than 30% of your total credit.

One way to build credit is to get a secured credit card. These cards require an upfront deposit — usually about as much as the card’s credit limit — which serves as collateral if the cardholder defaults. They’re less risky for credit card companies, which makes them good credit-builders for those with poor scores. It could take some time to build up your score, but with good credit card practices, you could improve your credit over time and end up paying less for car insurance.

Our best car insurance companies for 2022

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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If you have an unexpected emergency and no emergency fund, you have a few choices to handle it. Read on to learn what to do. 

Life is full of little bumps in the road, so it is inevitable that you are going to face an emergency expense at some time in your life.

When that happens, only about 68% of adults would have the funds to cover a $400 surprise expense with cash or cash equivalents, according to 2021 data from the Federal Reserve. And, the number of people who could pay cash for something unexpected dwindles the higher the surprise cost becomes.

If you find yourself facing an unexpected purchase without the money in your savings account to pay for it, what exactly should you do? Your options depend on your situation, but here are some possible approaches to coming up with the cash.

1. Sell items you don’t need

One of the best things you can do is to try to raise the money by decluttering items in your household. If you can list unused items on Facebook marketplace, Craigslist, or eBay, you may be able to generate the funds to deal with your emergency without having to borrow and commit yourself to future budget problems as you pay back the debt.

2. Borrow from friends or loved ones

If you cannot raise the money through selling things you don’t need, asking loved ones for a little financial help could also be a good option to avoid interest charges. However, there are some big caveats to this.

You need to make sure you’re comfortable asking for this kind of assistance, so you’d only want to approach a close friend or family member who you think would be willing to help. You also want to be absolutely sure you can pay back what you’ve borrowed — and quickly — so you don’t put strain on the relationship.

While there are some pitfalls to this approach, it can be faster and easier than pursuing a loan from a lender and allow you to avoid making your emergency even more expensive due to interest.

3. Use a 0% APR credit card

If you can open a new credit card that offers you a 0% introductory APR on purchases, you may be able to use that card to cover your emergency expenses. If your 0% rate lasts for around 12 to 15 months, which is typical, then you may be able to avoid paying interest on your emergency by paying off the card before interest begins accruing.

There are some risks to this option too. If you don’t pay off the card on time, you could get hit with a high interest rate. You will also be committing yourself to the future obligation to make the credit card payments each month, which could add to your financial hardships later. It can also take time to get a credit card and you can’t always charge everything, so this may not be an option for everyone.

4. Consider a payday alternative loan

Finally, you could consider something called a payday alternative loan, which many credit unions offer and which could potentially be a lifeline in situations where you really need money and don’t have access to cash or affordable credit. These loans typically allow you to borrow between $200 and $1,000 for a small fee — well below what a payday lender would charge you.

By exploring each of these options, you may be able to find the money you need for an emergency without derailing your financial security going forward. Once you get past the current emergency, it’s also a good idea to start putting some money into an emergency fund for the next one. It’s inevitable that surprise expenses will keep cropping up. You don’t want to keep finding yourself in the same stressful situation of being unable to pay for them.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Graduating college brings all kinds of new opportunities and challenges. Here are four money moves that can make navigating the future a little easier. 

Graduating from college is an exciting milestone, but it also brings its share of unique challenges. For many, it’s the first time they’re wholly independent, responsible not only for their daily needs but their finances as well.

Everyone’s lifestyle and priorities are different, and it might take some time to find the approach that works best for you. But if you hope to set yourself up for a comfortable future, here are some tasks to consider adding to your priority list.

1. Build an emergency fund

Building an emergency fund should be everyone’s top financial priority. This provides you with a valuable safety net you can draw upon if you wind up out of work, injured, or filing an insurance claim. Chances are, you’ll experience at least a few financial setbacks during your life, so the sooner you check this off your to-do list, the better.

It’s up to you to decide how much to keep in your emergency fund, but aim for at least three months of living expenses. Then, you can build up to six or 12 months of savings if you’d like. Don’t forget to periodically review the amount in your emergency fund and adjust it as needed. You may need to add more money over time if your living expenses increase.

Keep your emergency fund in a high-yield savings account where you can access it as needed. Though it might be tempting to try to grow it through investing, this could come back to bite you if you experience an emergency while the value of your investments is down.

2. Build a credit history if you don’t already have one

Many young adults already have credit cards or have taken out loans, but there are still some who haven’t. Some may even be reluctant to open a credit card for fear of taking on debt. But there are also a lot of upsides to doing this.

There’s a good chance you’ll want to borrow money at some point in your life to purchase a home or a car or fund some other large purchase. And if you want your loan application approved, you have to show lenders you’ve managed borrowed money well in the past. Banks and credit unions are often reluctant to work with those who have never borrowed money before because they have no way of knowing if you’ll keep up with the payments.

Opening a credit card and charging a few small items to it each month and then paying the balance in full will help you demonstrate that you can handle this responsibility. You can try applying for a rewards credit card, but if you aren’t having any luck, you may need a secured credit card. These cards are targeted at individuals trying to build a positive credit history.

3. Create a budget

Budgeting probably doesn’t top anyone’s list of favorite activities, but it’s important to come up with one. It will enable you to see where your money is going and where you might be spending too much. It can also help you achieve your long-term goals more quickly.

Start by tracking where your money goes each month. You don’t have to go the arduous way of creating spreadsheets and doing mental math. These days, there are plenty of budgeting apps that can sync with your financial accounts and track a lot of your financial behavior for you.

Once you know about how much money you have going in versus coming out each month, you can decide how you want to use anything left over. You probably want to allocate some to spend on yourself right now, but you may also want to begin saving for your long-term goals.

4. Begin saving for retirement

Retirement can feel a long way away when you’re just starting out in your career, but it will sneak up on you faster than expected. And given that many workers estimate they will need close to $2 million to retire comfortably, it makes sense to get started right away.

If your employer offers a 401(k), this is a good place to begin, especially if your company matches some of your contributions. You can also open an IRA and stash some money here. Even if you’re only able to set aside a few dollars a month, that’s something to be proud of.

Some of these items may come easier to you than others, but try to find some time to address those things you haven’t done already. And if financial constraints prohibit you from doing some of the above tasks, like saving for retirement or building an emergency fund, start by brainstorming ways to increase the money you have coming in.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Kailey Hagen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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