Auto Insurance Basics Archives - Page 2 of 16

March 26, 2019

What Determines the Price of Your Auto Policy?

What Factors are Considered in Determining the Price of an Auto Policy?

For most companies, some of the factors considered in the cost of an auto policy include:

Age and driving history of principal driver;
Age of any other drivers in the family who will regularly use the car;
How the car is used;
Claims history;
Make and model of the car;
Where you reside;
Coverage required; and
Your credit history.

Let’s dive into some details.

Principal Driver

Crash rates are higher for all drivers under age 25, especially single males. Insurance prices in most states reflect these differences. Also, drivers who cause crashes generally must pay more than those who have gone crash-free for several years.

Age of other drivers

Here, a classic question is, Are there any drivers under the age of 25?

How The Car is Used

That is, how often and how far you will drive. People who use their car for business and long-distance commuting normally pay more than those who drive less. The more miles you drive in a year, the higher the chances of a crash.

Claims History

If you’ve not been involved in accidents, or at least not involved in accidents that you have caused, you’ll have lower auto insurance premiums.

Make and Model of Car

Car insurance providers often offer discounts to customers who drive safer vehicles. Driving vehicles that rate highly in terms of driver protection and passenger protection, means discounts on insurance.

Where You Reside

Generally, due to higher rates of vandalism, theft, and crashes, urban drivers pay more for car insurance than do those in small towns or rural areas.

Coverage Required

The higher the deductible, the lower the monthly payment. Other issues that will arise involve collision/comprehensive coverage, minimum versus maximum coverage, and personal liability.

Your Credit History

It has been shown that certain credit information can be predictive of future insurance claims. Where applicable, many insurance companies use credit history to help determine the cost of car insurance. Maintaining good credit can have a positive impact on the cost of your car insurance.

Car Features

The cost of an auto policy can also be discounted if the vehicle has certain features. For example, the presence of anti-theft devices generally lowers the overall cost of auto insurance.

What Kind of Driver Are You?

Also, driver attributes can often lead to discounts. These include a “good driver” record and good student discount (for households with high school or college age drivers). “Accident forgiveness” options may also be available, along with multiple-policy discounts.

March 18, 2019

Why Does My Car Insurance Go Up When My Car Keeps Getting Older?

For good drivers, there is nothing more frustrating than getting a car insurance renewal and seeing the price go up when you have not had any claims. The first question that comes to mind is, “Why did my car insurance go up? I had no claims and my car is one year older!”

Some Coverage Basics

Now, the component of your premium that pays for physical damage claims to your car usually goes down with age. However, other coverages like liability might go up. However, there are a lot of variables that go into insurance premiums, and with auto insurance, it’s no different. If you look at it you’ll notice there are a lot of different coverages on your auto policy:

Bodily injury;
Property damage;
Un-insured motorist coverage;
Under-insured motorist coverage;
Medical payments;
Loss of income;
Funeral expense;
Loss of use;
Rental reimbursement;
And more.

These are all things that you are covered for on your auto policy. And remember – your car isn’t the only thing you’re being charged for on your policy. That’s because auto insurance covers far more important things than your car, as mentioned above.

So Why The Increase?

There are two sets of factors that can make the price of your car insurance increase. Knowing what could make your car insurance go up in price when you haven’t had any claims can help you save money.

When you understand the factors, then you are in a better position to negotiate the price and find an insurance company that will give you the lowest cost.

Factors within Your Control

The first set of factors that impact your car insurance rate relates to the things that revolve entirely around your personal situation, the things within your control. Here are some things that can make the cost of your car insurance renewal go up:

Your claims history and driving record;
History of convictions or driving violations-causing surcharges;
Change of address, placing you in a new area that may be more expensive in terms of insurance;
New drivers added to the policy or changes of the primary drivers of various vehicles on the policy;
Cancellation of home policy, or other policy causing you to lose the discount for having more than one policy with the same insurer;
Deletion of a vehicle from the policy (sometimes you get discounts for insuring more than one car);
If you delete your second car, the price of insurance on the first car might go up;
Change of employment (you may lose a group discount, a professional discount, or possibly have the distance to work change, making your rate go up); and
Medical conditions that increase your risk, or restrictions that cause reclassification to high-risk insurance due to convictions like drunk driving charges.

Factors Beyond Your Control

The second set of factors relates to your car and the insurance company: the factors “beyond your control”. In general, here are the factors that are beyond your control that may make your premium increase:

Liability Claims

Liability claims paid out by the insurance company for the entire volume of the clients they insure can impact their general liability rates. If the previous year(s) showed a steady increase in the amount they have been paying on claims and defense costs as part of this coverage, the insurance company may make rate adjustments. This is entirely beyond your control.

Increased Claims in Your Area

Collisions, vandalisms, or increased claims in your area. Sometimes due to changes in traffic patterns, weather patterns, or if areas become more congested over time, or a variety of other factors, an area may start to see increased claims. When an insurance company starts to notice these patterns in an area, they may adjust the rates accordingly.

Car Theft Rates in Your Area

An increase in car theft rates in your state or area, or for your car in particular. The way to determine if it is related to your specific car is to ask your agent if your vehicle rate group has increased since last year, and get their insight into the matter.

Mistakes

Mistakes – yes, insurance companies can sometimes make mistakes. Never assume that the rate you got is the best rate or that it is necessarily correct. There are computer and human errors that can occur, so it is always worth reviewing the factors with your representative when you’re in doubt.

Fees

Changes to the payment plan fees or structure on your insurance plan. Sometimes insurance companies change the financing rates or add new service charges that you may not have noticed. Take a look at your payment options and make sure you choose one that best meets your needs. Some companies offer zero financing, and others can charge up to 5% or more. This can impact your actual annual insurance cost.

March 11, 2019

The Effect of the Color of Your Car on Your Car Insurance Premiums

Is It true That a Red Sports Car Costs More to Insure Than a Black Sports Car?

Nope. The color of your car has nothing to do with the cost of insurance. Whether your car is red or any other color is not a determining factor in calculating your auto insurance rate.

Factors that do determine your insurance premium include:

The year;
The make;
The model;
The body style;
The age of your vehicle;
Your driving record;
How often you drive your car; and
The drivers listed on your policy.

In most cases, your insurance company doesn’t even know the color of the car you are driving. Insurance companies know your vehicle identification number (VIN), but the color of your car is not included in a VIN.

So Why the Connection?

The myth that red cars pay more for car insurance may be based on the premise that a red sports car is flashier than a black one and might attract the attention of local law enforcement if you’re driving a bit too fast. Some argue that red cars are more likely to be ticketed because of their arresting, bright color.

Others point out that because red cars have historically been associated with sports cars, speed racers, and higher accident rates, car insurers now penalize all red-car lovers everywhere due to statistical “facts.” However, getting speeding tickets almost certainly will increase your insurance costs. To date, no conclusive study has been done in the U.S. to prove or disprove any suppositions about car color and its effect on safety.

There are statistics that show that that red cars and flashy sports cars tend to get more tickets than other vehicles. However, that’s because those drivers are taking more chances behind the wheel than those who drive other colors, and they will pay more for car insurance because they will have more tickets on their driving records. So, the determining factor here is not the color of the car, but the person’s driving record.

Red Cars More Expensive

Red cars do cost more to buy, but not necessarily to insure. LeaseTrader.com recently analyzed the effect of color on only the price of cars. “We found the color red had the highest average monthly listing price for virtually all makes and models, roughly 9 percent higher than any other color,” says John Sternal, vice president of marketing and communications at LeaseTrader.com.

Custom Paint Job

The paint that affects your insurance rates is a custom paint job, but even that shouldn’t add too much to your premium and should only include a nominal fee. The color of your car might even make it less likely to be stolen – in which case, a red car might even help you. Car makes that are frequently stolen cost more for comprehensive coverage.