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Buying Auto Insurance: What to Consider
Although auto insurance is one of the most common insurance purchases made in the US, many people do not fully understand why the rates vary company to company. Every company has a different formula that they use in order to determine what the insurance rate will be. While factors like driving history and the type of car you drive are important other factors like credit scores are also sometimes considered. It is always going to be easier for someone with a clean driving to get discount auto insurance compared to someone who has had a few accidents but that still does not mean that both of those people are getting the best possible rates on their coverage. In order to get an idea of how to get lower premiums , it is important to understand how they are set.
Factors Used By Insurers to Set Rates
1. The Basics- Insurance companies will always take a set few things into account, your age, gender, where you live and your driving history. These things can not be changed but do play a large role in determining your premium.
2. Credit Reports- In the current economic climate, many people's credit scores have dropped. This practice of checking credit history is growing within the industry as it is another factor that helps the company determine if you will be able to pay. This is taken into account as the companies tend to see those with lower scores as having worse credit management and may have issues paying and they may also make more claims. If your score has fallen and your insurance rates gone up, it may be of use to look for a company that does not factor this into their equation.
3. ”Little Red Corvette”- Some cars simply catch the eye. While to many this is the point of buying a luxury or sports car, it also attracts thieves. If the insurer sees an increased risk of theft then they will reflect that thought in your premiums. Driving a 4 Door Honda Accord compared to Corvette or other sports car is of course always going to be cheaper as the cars come with less of an added risk.
4. Safety First- Over the last few decades we have seen a massive increase in auto safety technology in terms of design as well as devices. If a car is a safer it will have lower insurance premiums as if an accident occurs the odds of the person being severely injured are much lower. Anti-Theft features also lower premiums as there is a greatly reduced chance of the car going missing and thus less chance of a large claim being made on a stolen car.
5. Discounts on Multiple Policies- If you have more than one of insurance policy through a company there are typically discounts associated with that. It is also possible that the company may offer discounts if you have more than one type of insurance with them (life, health, auto, home,etc).
6. Driver's Courses- Many people are mandated to take these courses after getting a large ticket. This mitigates the increase that occurs with your policy due to the points on your license. Some insurance companies also offer discounts if you take these courses on your own. These courses statistically lower your chances of getting into an accident and are always welcomed by insurance companies.
All of these factors combine together and create your insurance premiums. If you are looking to lower your premiums with your current company, these areas are the ones that can be altered in order to help lower them. In doing so however, it is important to realize that just because you have been with your current company for several years does not necessarily mean they are giving you the lowest possible rates. As the formulas for determining change on a frequent basis, it is useful to look into your policy annually to see that you are getting the best coverage and the best rate for yourself.
This article was written by Barbara Waltz of a renown insurance blog and insurance quote comparison guide.
