Changing Auto Insurance Rates: What to Know
How Auto Insurance Premiums Are Calculated
Insurance is simply a matter of evaluating risk. The insurance company’s goal is for the total premium they collect to at least cover all their claims and expenses. Sophisticated analysis tools are used. Although each company has their own proprietary weightings and formulas, common rating factors include:
Location – insuring a vehicle in a congested metropolitan area such as New York City is riskier than a rural area.
Driving record – history repeats itself. Someone with a history of accidents or tickets will pay more in premium.
Financial history – a favorable credit history has a direct correlation between auto insurance risk.
Gender and marital status– statistically, men are higher risk than women, and married drivers are better risks than single drivers.
Type of car and coverage limits – a brand new Porsche will have higher premiums than a 10 year old economy car. Low deductibles and high dollar limits on your policy will pump up the costs. If you love red cars – go for it! Contrary to popular believe, color is not a rating factor.
Age – young drivers are insurance company’s worst nightmare. Their driving inexperience shows up clearly in accident statistics, therefore drivers age 16-25 will be assigned a higher rating factor.
Will buying a new car increase my auto insurance premium?
Probably, because the higher the value of the car, the greater the potential loss is for the insurance company.
Collision insurance kicks in when your car either hits or is hit by something. If you are leasing or financing the car, it’s a requirement. The finance company wants to make sure the car that technically belongs to them is protected.
How to Get Cheap Car Insurance When Buying a New Car
The vehicle's risk level is a factor to consider when buying a new car. The Insurance Institute of Highway Safety (www.iihs.org) regularly publishes car safety ratings.
You can also consider putting your car and homeowners insurance with the same company to qualify for additional discounts.
Carrying the highest deductibles possible will drive your costs down, but remember you are on the hook for that amount if your car gets in an accident.
How to Cut Costs, Without Changing Insurance Companies
The best advice is to maintain a squeaky clean driving record. Talk to your agent for other suggestions. They might recommend:
• If you have medical coverage through a group or individual policy, drop medical from your auto insurance
• Change your driving patterns so you are on the road less. Consider carpooling.
• If your car is older, self-insure the collision coverage