Car insurance companies underwrite policies that assess the risks granted to each insurance applicant. During this process, the person is grouped into a category, such as high-risk, low-risk, teen or elderly driver. If these risks associated with the applicant are deemed to be too high, coverage for the application may be denied outright. After calculating the results, the insurance company offers a rate based on the driver’s perceived risk.
1. This is also known as driver rating
Insurance companies use this rating as a way to measure the cost of insuring a particular person in the event of a claim and the likelihood that claims will occur again in the future. This is often referred to as the financial liability of the insurance company. The advice is to keep a safe driving record and avoid traffic accidents and it will go a long way towards getting cheaper auto insurance.
2. Not all insurance companies rate drivers the same
Many providers use the same general metrics but their algorithms that ultimately determine rates are very different. Accident frequency is one of the biggest factors that all insurance companies use in calculating premiums. When a person files a claim, insurance kicks in and accidents can cost many thousands of dollars, especially if there is a fatality. The more claims a person submits, the higher the risk in the eyes of the carrier and the more likely they are to file a claim in the future. Thus, higher rates are charged to those drivers who are at risk. To keep prices low, avoid accidents and filing claims and you’ll save a lot of money on car insurance. If you have had accidents in the past, don’t worry.
3. Major Contributing Factors Affecting Auto Insurance Rates
* Driving Record: Car insurance companies will take a closer look at the number of citations and accidents you have been involved in.
Keep a good driving record and watch your rates go down.
* The location where you live: If you live in a city, you can expect to pay more than you would if you lived in a rural area with much less traffic.
* The car you drive: This is a very big factor in determining prices. New and expensive luxury or sports cars have the highest insurance rates. On the other hand, used cars that are safe and cheap to repair have some of the lowest coverage costs. Get a boring used car and save on coverage.
* Marriage status: Married people pay less for car insurance because they are considered more responsible.
* Your age: Drivers under the age of 25 can expect to pay about twice the cost of car add-ons. The sweet sport for the lowest rates is between 32 and 62 years old.
4. Apply for all possible discounts
A great and smart way to save on car insurance is to apply for multiple discounts. If you have more than one car, consider getting a combined or multi-vehicle discount. You can also take the Safe Driving course and save around 5%. Other common deductions are the good student, the military, and even the teacher.
5. Shop direct on the web for the cheapest prices
The Internet has literally taken over the world. It also saved millions of people’s car insurance money. Buying auto insurance online is smart because you can find first-hand quote rates that most brokers can’t match.
