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What Affects The Cost Of Auto Insurance?

What Affects The Cost Of Auto Insurance?

Auto insurance can make up a significant portion of monthly expenses and many consumers wonder what factors affect the cost of auto insurance the most. The goal in understanding how auto insurance costs are calculated is to determine what changes can be made to make the most significant impact in reducing monthly premium payments. If consumers understand how an insurance company arrives at a premium price then they may be able to make changes or negotiate a lower monthly payment.

Much like a credit history on a credit report demonstrates an individual consumers financial responsibility, a driving record provides similar information for insurance companies. Speeding tickets, moving violations, DUIs and other driving black marks are clear-cut proof of immature or dangerous driving habits. In the real world, you'll often hear parents tell their children if you want to be treated like an adult then act like an adult. This goes for driving as well in that if you want to make low insurance premiums than drive like a responsible adult and not like a reckless teenager with a wanton disregard for others safety. Insurance companies use black marks on driving record when determining car insurance rates. If negative marks appear on a record it can result in higher premiums for up to three years so be sure to drive safe and drive smart.

The age of a car will also affect the amount you pay in automobile insurance for two very specific reasons. The first is that newer automobiles have significant safety technology where older vehicles do not. ABS brakes, driver and passenger airbags, anti-theft devices and other safety features all lead to fewer insurance claims and lower insurance premiums. Older vehicles are viewed as less safe and may result in more expensive claims. The second important factor is that older vehicles are often paid for and have depreciated to such an extent that full coverage is no longer necessary. It is very common for older vehicles to only have liability insurance coverage which protects other drivers in the event of an accident. A perfect automobile therefore would be one that is 15 or so years old with additional safety features that may have been expensive at the time but results in incredibly low auto insurance premiums today.

Additional factors, of which there are many, which could affect the cost of auto insurance include gender, driver age, marital status, geographic location, type of vehicle, business or personal use, good student discounts, bundling with other insurance, driving distance and the deductible amount. The individual characteristics which are most likely to affect most drivers fall under age and gender because teen male drivers are often the most expensive to insure where older married female drivers tend to be the least expensive for auto insurance. The deductible amount also plays a big part in premium pricing because consumer behavior shows that the higher the deductible the less likely the driver is to make a claim and therefore cost the auto insurance company money. The opposite is also likely to be true so drivers who have $250 deductibles tend to put a claim in for everything whether it's necessary or not.

When it comes to determining what affects the cost of auto insurance there are some aspects which will apply universally to all drivers and others which fall under specific scenarios. If you understand which factors more heavily impact auto insurance pricing you can then make educated decisions which will hopefully lower your premium prices. Keeping a clean driving record, not driving a sports car, have a higher deductible, getting only liability insurance on an older vehicle and getting married might be the perfect combination which can lead to an absolute minimum of expense when it comes to paying for auto insurance.

Image by: Jimmy Emerson