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What affects the price of auto insurance? Recently, you may have seen your auto insurance rates jump up or you may just be curious what the reason is for the price of your auto insurance policy. Here are some of the main factors that companies look at when determining the price of your auto insurance policy. It’s best to carefully shop around for the best price and coverage to meet your needs.
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The cost of auto insurance varies by insurance company and by:
- What vehicle that you buy
- How many auto insurance coverages you buy
- The deductibles on the policy
Kind of car you drive
If you are buying or selling a car, you will need to reevaluate your auto insurance needs. Generally, the more expensive the car, the higher price that you pay.
Where you drive
Due to higher rates of vandalism, theft, and accidents, generally urban drivers pay more for insurance than those people in small towns and rural areas. See "What Vehicles Were Stolen the Most?” below.
How much you drive
People who use their car for business and long-distance commuting normally pay more than those who drive less. |
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Age, sex, and marital status
Accident rates are higher for all drivers under age 25, especially young men and single men. Auto insurance prices in most states reflect these differences.
Driving record
Drivers who cause accidents generally must pay more than those who are accident-free for several years.
Credit score
Many auto insurance companies take a look at your credit score when determining your rates. Your credit score is an indicator of your level of financial responsibility. A low credit score makes you more of a risk to the insurance company and may affect your rates.
What can I do to save money on my auto insurance?
If you're shopping for a car, consider how your choice will affect premiums. Some auto insurance companies increase premiums for cars more susceptible to damage or occupant injury, and lower rates for those that fare better than the norm. Ask about discounts for good students, insuring more than one vehicle, accident-free driving, and others. Consider joining a car or van pool, or finding other transportation to work. If you reduce your driving mileage enough, you may lower your premiums in effect.
Consider the following three questions with the help of your agent:
1. How high should my liability coverage limits be?
No one can predict exactly how much you would have to pay if you were to cause an accident. Ask yourself how you would pay for any damages exceeding your coverage limits. The higher your liability coverage limits are, the more likely your policy will be able to pay all of the damages.
2. How high or low should my collision and comprehensive deductibles be?
Higher deductibles, in effect, lower your premium, but increase the amount you must pay out of your own pocket if a loss occurs. Ask yourself how much you would be willing and able to pay on short notice in order to save on your premium.
3. Should I carry collision and comprehensive auto insurance coverage?
You may be required to carry collision or comprehensive coverage if your vehicle is leased or financed. Once you have paid off your car, and its value decreases, you might consider dropping these coverages to save money on premiums. Consider whether the savings would be enough to offset the risk of having to pay the entire cost of repairing or replacing your vehicle.
Are you eligible for an insurance discount?
Auto policies offer a variety of discounts that include:
- Multiple Vehicle
- Multiple Line
- New Vehicle Safety Device
- Accident Free
- Anti-Theft Device
- Defensive Driving
- Good Driving Record
- Good Student
- Driver Training
What is a deductible?
A deductible is the part of a covered loss that you have agreed to pay with your own money. If you file a claim against your insurance, you will pay only the amount of the deductible. When choosing a deductible, you must decide how much you would be willing and able to pay out-of-pocket, if you ever had to file a claim. Typically, higher deductibles mean lower premium prices.
Who does my auto insurance policy cover?
An auto insurance policy typically covers:
- You and your spouse
- Relatives who live in your home
- Other licensed drivers who have permission to drive your insured vehicle.
Types of auto insurance coverage
An auto insurance policy generally consists of several kinds of coverages.
All 50 states have different laws when it comes to auto insurance, so the following coverage descriptions are general information. They are not statements of contract.
Most Common Auto Insurance Coverages:
Liability
Auto liability coverage pays for the damage if you are legally responsible for accidentally injuring someone, or for damaging another vehicle or other property in an auto accident.
Auto liability coverage falls into two categories:
- Bodily Injury Liability - which covers medical expenses, pain and suffering, lost wages, and other special damages.
- Property Damage Liability -- which covers damaged property, and may include loss of use.
Liability coverage also pays legal defense and court costs. State laws usually dictate the minimum amounts of insurance required, but higher amounts are available.
Personal Injury Protection
This coverage pays the reasonable and necessary medical expenses for covered persons for treatment due to an auto accident.
It may also pay for:
- Rehabilitation
- Lost earnings
- Replacement of services (For example, child care if a parent is disabled.)
- Funeral expenses
Medical Payments
This coverage is available in most states. It pays medical and funeral expenses for covered persons when those expenses are related to an auto accident.
Collision
This coverage helps pay for damage to a covered vehicle caused by:
- Collision with another vehicle
- Collision with an object
- A vehicle rollover
A deductible is required.
Comprehensive
This coverage helps pay for loss of or damage to an insured vehicle, not caused by a collision or vehicle rollover.
Examples of this type of damage or loss include:
- Fire
- Wind
- Hail
- Flood
- Vandalism
- Theft
- Hitting an animal
You may have to pay a deductible.
Uninsured Driver
This coverage pays for damages when a covered person is injured in an auto accident caused by a driver who does not have liability insurance. In some states this coverage may also pay for property damage. This coverage varies by state and depends upon policy provisions.
Underinsured Driver
This coverage pays for damages when a covered person is injured in an auto accident caused by another driver who has insufficient liability insurance. Application of this coverage varies by state and depends upon policy provisions.
Rental Reimbursement
This coverage pays for renting a car when your auto is disabled due to an auto accident.
Daily allowances or limits vary by state or policy provisions.
Emergency Road Service
This coverage pays for having your auto towed due to a breakdown. Towing limits vary by state or policy provisions.This information is only a general description of the available coverages and is not a statement of contract. All auto insurance coverages are subject to all policy provisions and applicable endorsements.
There are four main factors that can keep auto insurance rates down. See if you fall into any of the following categories. If you do, you may be able to save money on your car insurance regardless of the value of your vehicle.
- If you are looking to buy a car, consider buying a car that "looks good" to auto insurance companies. For instance, insurance companies know what kinds of cars are prone to problems. They also know what kinds of cars are most often stolen. If you haven't purchased your car yet, find out what cars make this "good list" among auto insurers.
- Most insurance companies offer discounts for a variety of reasons - for example, good students, having more than one car insured and accident-free driving are all worth a discount. Ask auto insurance companies about specific discounts that may be available to you.
- Consider carpooling or using public transportation to get to work. The less you use your car, the less your insurance will cost you.
- Auto insurance companies are not happy to insure accident-prone drivers, so the safer you drive, the less you will have to pay for auto insurance.
Don't be afraid to ask your auto insurance company about any discounts they offer. It could save you quite a bit of money.
This, of course, will affect the auto insurance rates that you pay on your vehicle.The Insurance Institute of Highway Safety has released its analysis of 2005-07 model cars that were most reported stolen during 2008. Large SUVs and trucks dominate the list, especially the high-end, loaded kind with plenty of bells and whistles.
#1 -- Cadillac Escalade ESV 4-door 4WD
Heading the list is the Cadillac Escalade ESV four-wheel drive model with 15 theft insurance claims per 1,000 sold.
#2 - Ford F-250 SuperCrew 2WD/4WD
Next comes the Ford F-250 SuperCrew pickup, in either two- or all-wheel-drive guises, scoring an average of 13.1 claims.
#3 -- Cadillac Escalade 4-door 4WD
Then it all goes horribly wrong again for Escalade drivers; the standard all-wheel drive model is rated at 11.3.4 –
#4 -- Dodge Charger
The Dodge Charger sedan (11 claims) comes in at No. 4 before another Ford pickup joins the list.
#5 -- Ford F-350 SuperCrew 2WD/4WD
This time it’s the F-350 SuperCrew, in two- or four-wheel-drive guises, racking up 10.7.
#6 -- Hummer H2 SUT 4-door 4WD
The first of two Hummers, the H2 SUT (a sport-utility-with-a-pickup-bed vehicle) gets 10 claims.
#7 -- Dodge Magnum
The Dodge Magnum rolls into seventh place with a wagon at 9.9.
#8 -- Hummer H2 4-door 4WD
Then it’s Hummer No. 2, the straightforward H2 SUV (H2 models are the biggest trucks Hummer makes; they also use 6.2-liter V-8 engines), with 8.7 claims to its name.
#9 (tie) -- Dodge Durango 4-door 2WD/4WD
Yet another Dodge makes the list. The Durango SUV’s vital statistic here is 8.1. The IIHS doesn’t break this down to models with V-6 or V-8 engines, however.
#9 (tie) -- Honda S2000 convertible
Tying with the Durango is the Honda S2000, the company’s little sports car (also with 8.1). It doesn’t have the kind of space and practicality that most of the others here enjoy, nor the thirst, but it is a whole ton of fun to drive. And it holds its resale value really well.
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