Knowing What Goes Into The Pricing For Your Auto Insurance Policy

Written By: Cristina Gonzales on September 27, 2010 No Comment

Car insurance is essential for anyone who drives and who owns or leases the car they drive. If you are a newbie to the scene, you’ll need to buy auto insurance before you can take your car out on the road.

Lots of insurance, which to choose?

The first thing you should do is to figure out what kind of car insurance you need. For example, if your car is new or worth a lot such that it’s going to cost you a pretty penny to replace it, you probably want collision and/or comprehensive insurance. Collision insurance pays for damage to your vehicle if you have a collision with another vehicle or an object. Comprehensive insurance will pay for damage to the insured vehicle that doesn’t happen as a result of an auto accident. So, for example, if your car has hail damage, comprehensive insurance will pay for its repair (after you pay your deductible, as applicable).

If your car is older, simple liability insurance will probably do, and it’s going to save you a significant amount of money on premiums. Liability insurance won’t cover any damage to your car, but it will cover you for property damage or bodily injury to the other party if you’re involved in an accident and are the one at fault.

Saving money on auto insurance

Auto insurance rates vary among companies, but they are particularly impacted by factors not necessarily related to driving. The location you live in is going to impact how much you pay for your car insurance. For example, if you live in a city, you’re going to pay more than if you live in the country. That’s because vandalism and accidents are much more common in the city than they are in the country. How old you are will impact car insurance rates, too. Younger drivers generally have more accidents than older drivers do, and male drivers are involved more accidents than female drivers are. As you get older, gender differences become less important. If you are a male and keep yourself accident free, you should find yourself paying pretty reasonable rates by the time you’re about 25 or so.

There are also things you can directly control when you’re trying to manage auto insurance costs. Let’s take a look at a few of them.

Drive “safe” — a safe car

Auto insurance companies give breaks to people who drive “safe” cars. auto insurance companies know which cars are most risky, either because they are targets for theft or because of safety issues. Do some research and find out which cars auto insurance companies deem “safe,” and “low risk,” and then choose among those.

Be a good driver

No matter how old you are, if you’re a good driver you’re going to pay less for insurance then you will if you’ve had a lot of traffic tickets or accidents. So, be a good driver, pay attention to traffic laws (including speed limits), and you should save significantly on your insurance rates.

Go easy on the driving

It’s not always possible to avoid driving, but the less you drive, the less you’re likely to pay for insurance. Carpool when you can, use public transportation to get to work, bike or walk short distances, et cetera.

Discounts matter

Many insurance companies offer discounts for multiple policies, “good student” discounts, or “good driver” discounts. If you don’t see this information advertised, ask.

Do your homework

Finally, do your research. The Internet has made it very easy to compare quotes among a variety of companies. A few clicks of the mouse could save a significant amount of money. Compare policies side-by-side before you buy, but do choose the appropriate policy with the lowest cost.

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