You understand the importance of car insurance and having the right coverage, but do you understand how car insurance companies come up with your rates? For many drivers, car insurance premiums are a mystery, especially considering the same person could pay drastically different prices for the same coverage from different insurance companies. That is because the cost of car insurance is not cut and dry. Instead, there are many variables that can affect premiums, which are typically personalized according to each individual. Continue reading to find out which factors can affect the cost of car insurance and what you can do to get a competitive rate.
Variables that Affect Car Insurance Costs
Car insurance companies collect information about drivers to assess the risk of insuring them against future financial liabilities and damages. They use information about the vehicles covered, the policy-holder, and the other drivers covered under the policy to determine how much to charge for insurance. Some of that information includes:
Claims information can be found in your CLUE report, which reveals information about any car insurance claims you have made over the past 5 to 7 years. The report gives insurers insight into how frequently you tend to file claims, as well as the types of claims you have filed. It even reports claims that may have been denied. A person with a history of multiple recent claims could be perceived as a higher risk to an insurer than a driver with one or no recent claims. Though you cannot change the past, you can take steps to avoid unnecessary claims – particularly those that include minor damages that cost less than your deductible.
Your financial history might seem completely unrelated to your driving ability, but some insurers closely correlate information in your credit report with your risk of filing future insurance claims. Drivers with a history of late payments, collections, or bankruptcies might be perceived as higher risk than those with excellent credit.
Driving History and Habits
What do you do when you get behind the wheel? A quick glance at your driving record can reveal any violations you may have been cited for in the past. Drivers with multiple speeding tickets, for example, might be penalized with higher rates than someone who has a spotless driving record. Insurers will also want to know information about your vehicle usage. If you drive less than 10,000 miles per year, you might qualify for a discount with some insurers. On the other hand, someone who has a long commute or drives mostly for business might pay more for coverage, since more time on the road usually translates to a higher risk of an accident.
Shopping for Coverage
The vast differences in car insurance rate quotes put the spotlight on the importance of shopping through an independent agent who can offer quotes from multiple insurers. Here at Pagel & Associates Insurance Agency, we help match drivers with policies that provide all the coverage they need at a competitive price. We also search high and low for money-saving discounts that help drive down the cost of coverage. For more information or to request your free quotes, contact our office today. We look forward to serving you soon.