No one enjoys getting stopped by a cop for speeding.
It's embarrassing. It also defeats the purpose of speeding in the first place. You sit by the side of the road, twiddling your thumbs, watching the minutes tick by. This is the opposite of "speeding" to your destination.
Plus the ticket. According to U.S. Highway Patrol data cited by Statistic Brain, Americans pony up $6 billion for speeding tickets every year -- an average of $150 per violation.
And your insurance company wants its cut as well.
Costly Rules of the Road
A recent study by Bankrate (RATE) subsidiary insuranceQuotes.com reveals how much you can expect your insurer to ding you for violating traffic rules.
Crunching insurance data on a hypothetical 45-year-old married, college-educated, employed female with a clean driving record and excellent credit, driving a 2012 sedan when caught for speeding, IQ discovered that a single moving violation can raise a driver's insurance premium by as little as 21 percent (for speeding 15 mph or less over the limit) -- or by as much as 82 percent, for speeding to such an extent as to constitute "reckless driving."
Other violations and the financial hit examined by IQ include:
Seat belt violation -- 5 percent hike to insurance premium on average.
Driving solo in the HOV lane -- 18 percent.
Failure to signal a turn or lane change -- 19 percent.
Tailgating -- 19 percent.
Driving drunk -- 93 percent.
These higher rates can stick around for as long as three years after you get caught.
Surprisingly, these rate hikes aren't even the worst news. The really bad news may be this: The insurance companies appear to be using traffic violations as an excuse to hike rates -- perhaps even more than necessary.
For years, we've been telling you about how insurance companies have been hiking rates in response to a weak stock market and low returns on their bond investments. Insurers depend on the profits from investing their premiums to raise money to pay out insurance claims down the road. When those investment gains don't materialize, though, the insurers must raise money by raising premiums.
%VIRTUAL-article-sponsoredlinks%From the insurer's perspective, this makes sense. But from a consumer's perspective, it does appear that the insurance companies may be going a bit overboard.
As recently as one year ago, a similar study of insurance costs by IQ found that, for example, exceeding the speed limit by less than five miles per hour usually bumped insurance rates up only 5 to 10 percent. Even a 30 mph violation resulted in no more than a 15 percent hike in insurance premiums.
InsuranceQuotes.com notes that there's no direct, apples-to-apples way to compare these two reports. Last year's survey, for example, was derived partly from polling speeding ticket recipients about their experiences and partly from data provided by the nonprofit Insurance Information Institute. However, they went straight to the source for this year's report, mining data that carriers filed with state insurance commissioners and provided to Quadrant Information Services.
But still, quirks and caveats aside, the magnitude of the difference in fines cited in the two reports suggests there's been a sizable increase in rate hikes imposed for traffic violations over the past year.
How to Dodge the Bullet
Go back to driver's ed. insuranceQuotes.com senior analyst Laura Adams has one suggestion: "Drivers who commit moving violations can take safety classes to improve their skills and remove blemishes from their records. Many of these courses are offered online and can be completed in just a few hours." Importantly, these defensive driving classes can also take away an insurance company's excuse for hiking your rates.
Shop around. Just because one company thinks your speeding ticket should cost you more money doesn't mean everyone will want to put their hand in your pocket. Indeed, in exchange for winning a new customer, another insurer may be happy to overlook your offense. While you're at it, consider your coverage.
Double down. If you love your current insurer, you may not have to switch. Michael Cicero, a veteran municipal prosecutor in Ohio, points out that you can sometimes avoid rate hikes for minor offenses when you have bundled coverage (e.g., homeowner's and auto insurance from the same company). This spreads the risk to the insurer among multiple areas, diminishing the importance of any one. Plus, because the insurer is is getting more business from a bundled policy -- and wants to keep you as a customer -- you may have an easier time getting the company to forgive a ticket and keep your auto premiums the same.
Of course, the easiest way to avoid all of this is to obey the rules of the road. When you're tempted to speed, ask yourself if it's worth the price of a ticket and a hike in your insurance premium.
Motley Fool contributor Rich Smith and the Motley Fool has no position in any of the stocks mentioned.
14 Money Mistakes to Avoid in 2014
Are Car Insurers Gouging Us Over Speeding Tickets?
Interest rates are low, but that's no excuse to accept 0.01 percent interest rates on your savings. Just a little shopping can find you many FDIC-insured savings accounts paying as much as 1 percent in interest, usually with no fees and easy availability to your money through electronic funds transfers. Compared to the near-zero rates that uninsured money-market mutual funds and other alternatives pay, high-interest savings accounts are a much safer way to save.
Banks still try to get customers to pay more for less, with one recent threat to charge fees for basic deposit accounts if the Federal Reserve cuts interest rates further. But many online banks not only offer fee-free options on their checking and savings accounts but also pay interest, and many have extensive fee-free ATM networks or reimbursement arrangements. If your bank follows through on threats to raise fees, taking your business elsewhere is your best move.
Bankrate reports that the average credit card charges around 16 percent in interest. That's a guaranteed money-maker for the banks that issue cards, but a big loser for those who carry balances on their cards. With many cards offering promotional interest rates as low as 0 percent, using them to get rid of high-interest cards is a no-brainer move and can help you pay your debt down faster.
Mistakes on your credit history can keep you from getting a loan that you want to buy your next home or car, but they can also have consequences you'd never imagine. Increasingly, insurance companies, apartment rental agents, and even prospective employers order copies of your credit report to see if you're financially responsible. Be sure to take advantage of your free credit check at the government's annualcreditreport.com website to make sure the three big credit-rating agencies have everything right before mistakes come back to bite you.
Payday loans have gotten more tightly regulated recently, but banks and other financial institutions still offer ways to let you get quicker access at your cash -- for a hefty fee. Resorting to short-term money fixes can land you in even more problematic situations down the road, because those solutions often create debt spirals from which it's hard to emerge unscathed. Set up an emergency fund instead and be prepared in advance for the money woes that life throws your way.
Interest rates have risen during the last half of 2013, with a typical 30-year mortgage carrying a 4.5 percent interest rate. But many homeowners still carry higher-interest mortgages from before the financial crisis. Now that home prices have risen, you might be able to refinance for the first time, and many homeowners have used lower rates to cut hundreds from their mortgage payment or shift to a shorter-term 15-year mortgage to pay off their debt faster.
Too many people never update their insurance coverage to deal with changes in their coverage needs, whether it comes from changes in family status for life insurance, health conditions for health-care or long-term care insurance, or even what types of property you own for homeowners' insurance. Don't wait for disaster to strike; check with your insurer or agent to see if your current coverage meets your needs.
In the past, investors had to pay hundreds or even thousands of dollars just to make a simple stock purchase. Now, though, the rise of discount brokers, low-fee index funds and exchange-traded funds, and freely available investment news and advice have made it silly to spend large amounts to get access to the financial markets. If you're still paying your broker too much to invest, look into alternatives that can help you avoid cutting serious money out of your retirement nest egg.
Everyone likes a tax break, and one of the best ones for you to use involves making contributions to a tax-favored retirement account. By putting money in an IRA or 401(k), you can reduce your current taxable income and save on your taxes while also preparing for the future. With 401(k)s, your employer might even chip in a bit on your behalf. Even when times are tough, finding even small amounts to save can put time on your side and make a big difference down the road.
Many investors found out the hard way this year that bonds aren't as safe as they thought, with some major bond funds posting double-digit percentage losses in 2013. Despite those losses, bonds still carry substantial risk in 2014, with many calling for imminent interest-rate hikes that would erode their value further. Even now, bond rates are so low that they don't compensate you much for their risk.
If you pay full price for just about anything these days, you're paying too much. The rise of deep-discount stores has led to falling prices at stores and shopping malls. Moreover, online tools like coupon sites, daily-deal offers, discounted gift cards, and cash-back credit-card deals can cut your costs as well. With all these tools, you won't find many situations in which you have no chance of getting a bargain on the items you want.
In the past, many young adults focused on getting into as strong a college as they could, figuring that their degree would pay them enough to make up for the costs they incurred. With college graduates facing a more challenging job environment than ever, smart students are thinking about college costs before they make a decision on a school. By maximizing financial aid and looking at lower-tuition schools with nearly as strong educational quality, you can avoid creating a big debt hole that you'll struggle with for years into the future.
If you don't have a will, a power of attorney for financial and health-care matters, and an advance directive to tell medical professionals whether you want certain life-preserving measures taken if something happens to you, then you're putting your family at risk. Many people don't have even these basic estate-planning documents, but getting them in place is easier and less expensive than most believe. Get your affairs taken care of in 2014 and save your loved ones some big future hassles.
Resolving to be more financially astute and to avoid common mistakes will help you get your finances in order more quickly. These tips should give you more money to help you meet all your financial goals.