October 28, 2021

What factors influence the price of an auto insurance policy?

The average annual cost of auto insurance is about $ 800, but there is huge variation because many things affect the price of a policy. All of the factors that affect the price of a policy help determine how likely you are to have an accident.

Most surprising is that many of the factors that analyze these possibilities are better at predicting that you may have an accident than your own driving record. However, not all insurance companies use all of the listed predictors, and some companies may use others that are not included. In general terms, the price of your auto insurance policy may vary depending on any of these factors in no particular order of importance:

  • Your driving record or driver record.

The better your driving record the lower your auto insurance premium. If you have committed traffic violations, have tickets or have had accidents with the vehicle, it is very likely that you will pay more for your insurance premium than if your history is free of these. You may also have to pay more for your insurance premium if you are a novice driver, have just gotten your driver’s license, and have not had auto insurance for a number of years.

  • Your use of your car and the miles you drive annually.

The more miles you drive, the more likely you are to be in an accident. If you use your car to work or travel a long distance to work, you will pay a little more than if you only use the car occasionally, which is known as pleasure use or ” pleasure use. ” , in which case you will pay less for car insurance.

  • Where you live and where you keep your car.

Where you live and where you park your car can affect the cost of your auto insurance premium. In general, due to greater chances of vandalism, theft, and accidents, urban areas tend to be more expensive for auto insurance than smaller cities, towns, and rural areas.

Other factors that vary from one area or state to another include: the cost of litigation in the area, costs of vehicle repair expenses and costs of medical services, the presence of widespread auto insurance fraud, and the weather conditions of the location.

  • The age of the driver.

In general, mature drivers have fewer accidents than less experienced drivers, especially teenagers. Therefore, insurers usually charge a higher premium to young people who drive or if there are people under the age of 25 in your family who drive your vehicle.

  • If the driver is a man or a woman.

As a group, statistics show that women have a lower frequency of being involved in an accident, or driving under the influence of alcohol (in English it is known as DUI – driving under the influence ), and they have accidents that are less serious than the that occur while men drive. Of course, this depends on the individual specifications and the driving history or driving history of each, which will have a greater impact than generalities, on how much the car insurance will cost.

  • The type of insured car you drive.

Some cars are more expensive to insure than others, depending on many variables, such as the possibility of theft, the cost to replace the car, the cost of repairs, and the vehicle’s safety features and performance. Things like engine size can influence how much you pay for insurance even for the same models or the same make. Cars with high-quality safety devices may qualify for some specific premium discounts.

Insurers not only look at how safe the vehicle is for those who drive or ride in it, but also how much damage that car can inflict on another vehicle. If a car has a greater chance of inflicting more damage on another or its occupants in an accident, the insurer may decide to charge a higher premium for liability insurance.

  • The insured’s credit .

For many insurers, an insured’s risk rating based on the driver’s credit history is one of the most valid tools in predicting the likelihood of an individual filing an accident claim with their auto insurance company. The credit histories used in insurance are based on credit information that includes the payment history of the person, if he has delinquent accounts, if he has declared bankruptcy, how much debt he owns and how long he has a credit history. For example, a credit history showing timely payments on credit card and mortgage payment accounts has a positive effect on the use of credit history for insurance,

  • The type and amount of insurance coverage purchased by the driver.

In almost every state in the country, by law, a driver is required to have minimum liability insurance coverage . Each state determines the limits of coverage required in the state and they are generally very low and the vast majority should consider purchasing more than the minimum required coverage. What’s more, the recommended amount of coverage is usually ten times more than the minimum required by state law.

If you buy a new car, or a recent model (or are financing the vehicle), it is very likely that you purchase elective coverage against collisions ( collision coverage ) and coverage for other damages than crash or extensive ( comprehensive ), which repairs or will replace the car for damages suffered due to weather, theft, physical damage to it, etc. The collision and extensive coverage are subject to a deductible, and the higher it is, the less it will pay for the premium of that portion of the insurance. While there is no legal requirement that you purchase collision or extensive coverage, if you finance the vehicle, the finance company may contractually require you to purchase it.

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