Instead of simply looking at the overall price tag of auto insurance, vehicle owners should consider studying the six major components that insurers may use to help determine rates, as their driving lifestyle can have a major impact on policy costs.
Driving record may influence rates
Knowing that their policyholders are good drivers matters to car insurance companies, which is why an applicant’s driving history has a serious impact on rates. Motorists who have had multiple accidents or driving violations may have more expensive premiums, according to experts, while companies offer discounts to those with clean records.
Age may also have one of the biggest impacts on auto insurance rates. Teen drivers between the ages of 16 to 24 are traditionally the most expensive to insure because statistics show they have the highest risk of getting into a collision. Those in that age group are four times as likely to get into a car accident, according to the Centers for Disease Control and Prevention, which also reports motor vehicle crashes are the leading cause of death for teens. Experts say drivers are typically considered high risk until the age of 25, while those between the ages of 40 and 50 are usually considered the lowest risk and therefore, will receive lower insurance premiums.
Lifestyle matters
Car owners living in busy cities may also pay more than their rural or suburban counterparts. In its 2011 Car Insurance Rate Report, InsWeb reported that the largely rural Idaho had the lowest rate for a six-month policy at $436, followed Maine and Vermont. Moreover, J.D. Power and Associates reports that cities are considered high-risk areas since more accidents and cases of car theft generally occur.
Drivers with newer, flashy vehicles may also pay more for car coverage, because their vehicles may be more susceptible to theft or require expensive parts for repairs. However, insure.com reports that an automobile’s retail price is not the only factor that determines insurance rates. A model’s car loss history – meaning the number of claims that owners of the same vehicle have submitted – can also have a significant influence on premiums.
How much a policyholder actually drives can also affect auto insurance prices. Car insurers may use risk to measure rates, and the more a motorist drives, the higher risk he or she potentially has of getting into an accident. Motorists who put 10,000 miles or less on a vehicle each year may qualify for low-mileage discounts, a good option for automobile owners who take advantage of carpools or have short commutes.
Each policyholder chooses a different amount and combination of car insurance coverage, which directly contributes to the cost. While all motorists are required by law to own basic liability coverage, there are additional plans – such as collision and comprehensive coverage – that offer a wider range of protection for the policyholder in the event of an accident.
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