The amount paid for auto insurance varies from policy to policy. Not all insurance companies assess pricing factors the same way. An auto insurance quote that you might get at one company might be different from another with the same coverage. The reason for this is that insurance companies consider many key factors to compute car insurance premiums. They determine policyholder’s risk, which implies how probable it will be that they will file a claim. So, the lower the risk, the less the premiums. Hence, closely reviewing these factors can help you better understand and keep costs down.
Factors that impact an auto insurance rate:
· Driving Record:
Your driving record includes your history of moving traffic violations and at-fault road incidents, and it is one of the major factors that determine your insurance rates. Therefore, insurance companies review your driving history for at least three to five years, conditional to your state of residence. So, if you have caused an accident or violated traffic rules, you should expect to pay higher for the insurance.
Also, if you have a far-reaching history of at-fault road incidents, traffic violations and DUI/DWI, you might have a challenging time hunting for an auto insurance policy. If insurance companies reject your coverage, you might end up having non-standard car insurance that is structured for risky drivers, and you may have to purchase car insurance from your state’s allotted risk pool.
Regardless of what your driving record is, you can immediately attempt to improve it. You can do this by following safe driving practices to avoid over speeding tickets and accidents. Though it may take some years, the more you maintain a safe driving record, it will help you enjoy better insurance rates.
Most car insurance companies use credit-based insurance scores when determining rates. Insurance scores might reflect the possibility of you making a claim.
· Coverage preference:
The coverage you select influences your auto insurance rates, but you should not be swayed with cheaper rates that you miss out on the coverage that you require. For instance, avoid purchasing the state’s minimum requirement if you require full coverage auto insurance, as having insufficient insurance may lead to a financial calamity.
Some of the auto insurance coverage options to choose from include:
o Liability insurance: This is the base of your auto insurance policy and is mandatory in most states. Hence, liability auto insurance compensates others for injuries and property damages if you have caused a road accident.
o Uninsured motorist insurance: This coverage is needed in a few states and optional in others. The uninsured motorist coverage pays for your medical expenses if you are hit by anyone who does not have liability insurance or has insufficient coverage.
o Collision and comprehensive coverage: These are two distinct coverages that are usually sold together. Collision insurance covers for auto repair bills if you encounter a car accident, while the comprehensive coverage reimburses for car repair costs, robbery, destruction, crash, fire, flood, and storms. If you have an auto loan or lease, you will be required to purchase collision and comprehensive coverage.
o Medical expense insurance: The medical expense insurance varies in every state, but typically covers for the medical expenses and other related costs if you are hit in a car crash. However, in a few states you might be required to purchase personal injury protection coverage.
· Additional coverage:
Many auto insurance companies offer additional coverage options like:
o Accident forgiveness: A few insurance companies might “forgive” an at-fault car smash incident. However, you generally must pay extra for accident forgiveness and there might be some boundaries, like forgiveness per policy every three years.
o Gap insurance: If you have an auto loan, gap coverage compensates the “gap” between what you owe on your loan and the car’s real value if it is summed in an accident covered by your policy.
o Rental reimbursement coverage: This reimburses for the rental car or replacement transportation when your vehicle is being repaired for an issue covered by your policy. However, rental reimbursement coverage is voluntary.
o Roadside assistance coverage: If your auto broke, roadside assistance covers the services like towing, battery kick-start, locksmiths, and flat tire repairs.
· Auto insurance deductibles:
The deductible amount will also account for your insurance rate. Hence, the deductible is what you pay from your pocket when you file a claim for vehicle repair bills. You can generally select deductible amounts that vary between $250 – $2500. So, the more the deductible amount, the less you will have to pay for the insurance premiums.
· Auto insurance history:
If you are a new driver and you are purchasing your first auto insurance policy, you might have to pay a higher rate. This is because the auto insurance corporates will not have enough info to assess your risk.
A “coverage gap” can also lead to higher rates when you purchase car insurance. This is the period when you don’t possess auto insurance. For instance, if your insurance company cancelled your coverage due to non-payment, insurers perceive it as a high-risk coverage gap which usually results in higher insurance premiums. If you don’t possess auto insurance, but want to avoid the coverage gap, you should opt for non-owner car insurance to maintain your coverage.
· Car type:
Your car type plays an important role in determining your auto insurance premiums. The companies review the past claims from similar cars to assess the repair costs, robbery rates, and compensations for comprehensive claims.
· Age and experience:
If you are a young and inexperienced driver, you are likely to pay higher car insurance premiums as there is a greater risk of car accidents. As per the Insurance Institute for Highway Safety, teenage drivers are more likely to be involved in car accidents than older drivers.
Insurance premiums are also influenced by the residence location where you are likely to drive your car. Insurance companies consider weather conditions, accident probability, and thefts to determine rates. Drivers who live in metropolitan areas tend to pay more for coverage than those who live in the suburbs due to higher rates of theft, vandalism, and car accidents. Other factors include medical care cost, vehicle repair cost, and the likelihood of car accident claims.
· Other factors:
Auto insurance companies usually consider other non-driving factors also when determining the premium rates like:
o House ownership
o Marital status
How can you save up on auto insurance?
If you plan to purchase a car insurance policy, here are some very useful ways to cut down your costs:
· Shop around: Every insurance company has its pricing system, and the ideal approach to finding the best rates is to compare quotes from several companies.
· Cut down your deductibles: You can save up money by selecting a higher deductible. If you are a safe driver that does not commit accidents, you should be confident in yourself. Be sure you can pay your deductible amount from your pocket if you want to file a car insurance claim.
· Defensive driving course: A state-endorsed defensive driving course can be helpful in two ways: first, in a few states it can help decrease any points you might have accumulated on your driving history, which can allow you to have affordable rates. Second, most insurance corporates offer discounts to the drivers who have completed the driving course and have sufficient driving experience.
· Request for discounts: You might be entitled to car insurance discounts like safe driver, good student, pay-in-full, car safety features, and multi-policy mark-downs. It is always a good idea to inquire with your insurance agent to review any possible discounts that you can get.
· Releasing unnecessary coverage: If you raise your deductibles or cut down your coverage limits, it can help lower your insurance premiums. You should discuss with your insurance agent regarding the pros and cons.