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Breaking Down the Cost of Insurance


For people who have teenage drivers, the rough roads do not end when a young driver passes the driver’s course. It does not even end when he or she has gathered enough funds to support the purchase of a new car. The problem may lie with insurance since it can be a huge source of monetary burden. When it comes to the insurance of teenage drivers, premiums are very high. This price may even seem unbelievable for some. Imagine paying an excessive amount of premium for a run-down and poorly performing pre-owned sports car.

Some people are surprised when they see that the cost of car insurance reaches the same amount spent on a vehicle itself. A lot of people do not understand the prices associated with teenage drivers. They even take it against the old model of a car.

All scenarios described above are results of collective factors known as risk.

For an insurance provider, clients are actually aggregated packets of risk. Some factors that determine a person’s risk level include some that may seem incoherent with motoring. This may include gender, age, marital status of the driver, driving record of the policyholder, type of car and its make and model, and even the nature of residence of the policyholder. The given just now are determinants whether a person will be more likely to file a claim in the future.

Of course, the provider of auto insurance will never fully know what kind of driver an individual will come to be. These auto insurance providers can only ascertain it with the risks associated with a client. Even if a policyholder has a pristine driving record, if the individual is single and male, in addition to having a very expensive sports car, he can be charged with unbelievable insurance rates. In worst case scenarios, a client may be rejected for coverage outright.

Thankfully, the basis by which insurance providers see risk is not universal. Insurance agencies are regulated in a lot of states, but they basically remain as a competitive business entity. They may focus on a certain part of the market and may completely avoid others. Performance levels of insurance firms are highly unequal too. This is evident by the savings passed on to clients by other firms.

Because of this, it will be more favourable for a person to shop for auto insurance regularly in a year. This may potentially save anyone hundreds of dollars and a client may even remain true if a certain company issues loyalty rewards. However, a competitive offer from another company will beat any reward given.