The following post was written by staff writer Peter.
Insurers use different factors to set the cost of your insurance. The amount you are charged by an insurance company is most often a reflection of how likely you are to make a claim – and how expensive that claim may be. Different insurers have different ways of treating these factors. Therefore, it’s always a good idea to shop around. The Internet is filled with helpful sites like CoverHound, which allow you to compare auto insurance prices quickly so you know the types of policies that are available to you. But even as you compare and contrast different insurance rates, you’re still likely to be asked why and how often.
Below we’ll highlight some of the main factors that come into play when comparing auto insurance quotes.
According to Opposing News and Forbes, men pay an average $15,000 more for auto insurance, with high school boys being the most affected. Your age is among the most significant factors insurers look at. Young drivers have less experience at the wheel compared to their older counterparts and this makes them more susceptible to being involved in an accident. In effect, this means drivers aged between 17 and 25 pay the highest premiums. The sad news here is that this is one factor you cannot change.
Some occupations require you to spend more time in your car, maybe even requiring you to carry important work equipment or park it in high-risk areas. So if you’re a scrap dealer or racecar driver, you’re probably paying more for auto insurance than a nurse, teacher or accountant.
The statistical nature of insurance pricing requires occupations that look similar to have some noticeable price difference. For instance, a company’s director may turn out paying more insurance rates compared to a director of a company. This is why you should always be as accurate as possible while describing your occupation.
The kind of car you drive has a large bearing on the insurance rate you pay. However, the angle behind the type of car you drive is determined by:
- Value: The more expensive your car is, the more it will cost to replace in case of an accident or theft. Pricier vehicles might also need more money to repair, especially when they are rare or with non-custom parts. But don’t assume just because your car is inexpensive that it will be cheaper to cover. Insurance covers more than the damage to your own car. It protects other road users likely to be affected by accidents you cause.
- Power: The more speed and horsepower your vehicle has, the likelier you are to get involved in an expensive accident in insurer’s eyes. This translates to higher insurance costs.
- Modifications: If modifying your car to get more power out of it, inform your insurer. This is likely to increase your premium, but choosing to remain quiet on the modifications may make your cover invalid when making a claim in future.
- Desirability: A particularly desirable car attracts higher premiums because your insurer may consider you more susceptible to theft. You can improve your car’s security to offset this – or just get an ugly car.
Where you live also has a bearing on your car insurance cost. If you live in an area where risk of accidents is greater, you will pay more. The same applies if you live somewhere vehicle crime levels are high. The cost of insurance may even vary between postcodes that are nearby. For example, a car that is streets away from you may have significantly higher prices due to its proximity near a dangerous stretch of road.
Your Car Usage
You may pay more for coverage when you use your car mainly for commuting, since you’re driving more on busy roads. Annual mileage is also another factor. The more you drive, the higher your chances are of getting involved in an accident.
Driving Record and No-Claims Bonus
Ever made any claims? Are there any points on your license? These are significant factors during the calculation of your car insurance, according to the DMV. As you apply for insurance, details of any claims you have made in the past five years will be required. Even if you were never at fault, any claims on your record are likely to push your premiums up to some extent. If you have no claims for a year or longer, you should get some no-claims bonus. Many insurers will accept up to five years of no-claims bonus, which will help reduce your costs.
The more voluntary excess you agree to, the less your insurance will cost. This is because you have voluntarily shouldered a greater amount of risk. Potential payouts will be reduced and low-value claims are probably uneconomical for you anyway.
Alternatively, if you have no voluntary excess chosen, insurers will pay the full amount when you make a claim after deducting compulsory excess. Meaning your premium will become higher.
Type of Cover
There are three car insurance coverage levels:
- Third party-only
- Third party, fire and theft
Third party-only is the most basic protection level, whereas comprehensive adds more levels to your coverage. You would think that the higher the coverage level you go for, the more expensive your premiums are likely to be. However, this is not always the case, so spend some time and check exactly what you are getting for the price. With a bit of forward planning you can now keep your insurance rates as low as possible and enjoy the full benefits that come with having the proper coverage for your car in the event of an accident.