How auto insurance companies come up with your premium can seem like a complicated formula. In truth, it is. However, that formula is based on some very simple principles. Auto insurance premiums, like most premiums are determined by what type of risk factors you, the insured, have and what level of coverage you choose. Some of your risk factors are within your control, and some are not. Having an understanding of the risk factors that determine your quote will help you get the best coverage at the best price.
An auto insurance quote is made up of different types of coverage. Liability coverage, comprehensive coverage, and collision coverage are the three main types, but there additional types of coverage available. Liability coverage covers the damages you are responsible for because of an accident. Most states require all drivers to have a minimum amount of liability coverage by law. Collision coverage covers damage to your vehicle if an accident occurs, and comprehensive coverage covers damage to your vehicle that is not accident related. Both collision and comprehensive coverage are optional but strongly recommended. You should never settle for the minimum coverage required by law. The more auto insurance you buy, the cheaper it is. That means you can get a lot more coverage with just a small increase in your premium.
A number of different risk factors go into determining how much you will need to pay for auto insurance. Gender, age, occupation, driving record, type of vehicle, and where you live are just some of the factors considered. Based on past accident and theft statistics, companies use these factors to determine the probability that you will file a claim. For example, if you have a clean driving record with no speeding tickets, companies feel like you are less likely to have an accident. Therefore, your quote will be lower than someone who has one or more speeding tickets. In the same turn, it costs more to insure types of vehicles that are prone to accidents and theft.
There are a number of strategies that can help you get a lower auto insurance quote. For one, you can shop around. While most companies use similar methods to determine premiums, there is a lot of competition for your business in the industry. Premiums for the same coverage can vary by hundreds of dollars from one company to another. You can also ask for discounts. Many companies will reduce your premium if you purchase another form of insurance such as homeowners or life insurance from them. Likewise, if you have anti-theft devices or additional safety features on your vehicle you may also qualify for a discount. If you need to lower you premium further, consider getting a higher deductible. Paying your premium in fewer installments can also save you money.
