What Determines the Price of Your Car Insurance Policy?
By Malds Menzon Jr.
Special To USInsurance.com
An average person will keep his or her car for about 15 to 20 years. Within
that time span there is a very high possibility of an accident occurring. This
makes car insurance one
of the best investments available. Despite the relatively high premium payments
that have to be made, it can potentially maintain ones financial stability if an
auto-related
accident occurs.
The premiums are one of the biggest considerations when getting a auto insurance plan
but these can be reduced if properly planned for. A premium is basically the
amount that you are required to pay in order to maintain your policy. This
amount scales with a lot of factors and it is important to know what these are
in order to cut the cost that one has to pay.
Factors that will affect your premiums:
The factors that
affect ones premiums are generally related to the risk that the insurer has to
bear. Basically, the riskier the circumstances are the higher the insurance
premium. Inversely, this formula will tell us what we need to do in order
to reduce the premium. For so long as an applicant and his or her car looks
“safe” in the eyes of the insurer, the cost of the policy will be lower.
Listed below are the main factors that an insurance company
will look at. It is best that applicants for a policy know what these are, in
order to personally assess their risk factor and find ways to lower it.
What car you drive – the price of a policy will be higher if the car being
insured is an expensive one. The insurer will also look into the “risk” factor
of the car. Things they will be considering are:
• Is it easy to damage?
• Are parts difficult to find?
• Is it a new or
old model?
• Is it prone to theft?
• Is the car security good?
• Has it
been modified? (This tends to add a lot to the premiums.)
What type of insurance you buy – Companies usually offer
discounts for bundled insurance or for ones that cover more items. So if you’re
insuring more than one car or getting other types of insurance from the same
company they might have a discount on the premiums.
Deductibles – It is a staple for insurance
companies to reduce or increase your premiums based on the deductible you
are willing to pay. So a higher deductible means lower premiums.
Applicant’s profile – The insurance company will also look
at your age, marital status and sex. There are some statistics that show younger
drivers to be more prone to accidents especially younger men. So it might seem
arbitrary but they have the numbers to back it up.
If you belong to the categories they consider risky there isn’t much you can
do about it.
Frequency of use – Another factor is how often you drive
your car. The more you use the car the greater the chance that you will be
involved in an accident.
Where you live and where you work – The location of your
home and office will also affect the price of the policy. Urban areas are
generally a lot more prone to damage and theft.
Driving record – Premiums will be higher for people who have
already been in accidents. However there are some companies that will forgive
the first accident so check with the insurer about this.
Credit history – A bad credit history will affect an
insurer’s assessment of your application. This will generally increase the
premiums because it creates doubt on your ability to pay them.
Other considerations – Some insurance companies will reduce
the cost of the policy for government employees or for those who work for the
military. Others might also look at school records for student drivers.
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