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Understanding reasons of high insurance premiums


Auto insurance is mandatory, so understanding how the premium rates are charged becomes important in trying to reduce the monthly premium rates. Insurance companies may say that the minimum the policy, lesser the premium, but buying minimum insurance just to save in premiums is not recommended.

There are different reasons why a monthly premium can be high. Some of them are listed below:

  • Car efficiency and make:  Every insurance company has standards against which they compare every car that is being insured. If the car does not match the standards, a higher amount of premium is charged. Model and make of the car matters too, since some models have higher incidences of accidents on roads. Insurance companies decide this based on statistics taken for the past years and charge the insurance premiums accordingly. If premium rates are working out to be too high and the car old, it is better to update to a model which is in good books with the insurance company. If the car is not equipped enough to match the safety standards, then insurance companies are bound to charge a higher premium rate. Installing the car with safety equipment like airbags, power brakes, safety locks and seatbelts can reduce the premium to some extent. Sports cars also are charged a higher rate of premium, since they are meant to be high speed vehicles.
  • Area or region of residence: Some areas are prone to natural disasters which makes the probability of vehicles getting damaged high. Insurance in such areas naturally are high, since the chances if claiming for insurance is also high. Natural disasters are not the only thing that makes the premiums soar. Some areas are prone to vandalisms and riots as well. Crime rates will be higher in some areas of the city than others. Living in such areas mean a higher monthly premium for auto insurance. Routes used commonly to commute in some cases may be the reason for higher rates of premium. Living near highways, or high traffic zones, travelling through the cities to get to work may result in higher rates of premiums in some cities.
  • Senior drivers: Anyone above the age of 50 is considered a senior driver by the insurance company. Senior drivers are considered high risk drivers and hence are charged a higher rate of premium than other drivers. Updating car models and taking defensive driving lessons may help in reducing the monthly premium rates.