The reason we buy insurance coverage is due to our needs to be protected while on the road. However, you might feel a slight pinch if the reason of your increasing insurance premiums is due to an accident. You think that insurance companies are becoming unfair because of such practice. First, let us understand the whole concept of insurance by reading the article below.
It is a fact that getting involved in an accident will have a huge impact on your insurance premiums. This has been the practice ever since to remind people that getting into an accident is a costly mistake. Now, auto insurance companies calculate the premiums based on the level of risk that you currently have. It means that the higher the risk, the higher the likelihood of you getting into an accident and them (the insurance company) paying for all the damages incurred. To hedge the potential loss, they will charge you with expensive insurance premiums.
In practice, drivers who usually receive expensive insurance quotations are those who have had involved in multiple accidents, filed multiple insurance claims, and so on. On the other hand, those who were not involved in any accidents or at the very least, filed any insurance claims will often pay the least insurance premiums. The reason could be any simpler and that low risk drivers will likely to file insurance claims or to be involved in any road mishaps. However, we would like to set the records straight that not all car collisions would result to high insurance rates. This is the usual impression that we get that any traffic accidents will automatically get us into expensive policies.
During an accident or traffic collision, there are factors that are considered before the insurance company would decide to increase your premiums. For instance, if you get into an accident and the police report have indicated that it isn’t your fault your premiums will not be increased. But do keep in mind that if you file more and more claims, you could still end up with expensive premiums. Depending on your insurer, the frequencies of claims are often confined under a three-year term, which means that if you file another insurance claim within this period, your premium rates would probably be increased by 60% or even more?
You do not have to be involved in any car accidents for your insurance company to increase your premium costs. When you apply for your insurance coverage, certain factors are being considered in order to determine your rates. These factors have negative or positive effects that ultimately translate as to how much you are going to pay for certain coverage. In calculating your rates, it will consider your age, gender, your residence, driving history, claim history, and so forth. Auto insurance companies believed that using these factors, they would be able to determine and assess the level of risk of an individual.
As you may have noticed, some factors like age and gender are uncontrollable on the part of the policyholder. This means that teenage drivers who are considered as high-risk drivers will always receive high premium rates in order to compensate the potential loss of the insurance company when these people will get into an accident. Aside from being a teenage driver, women usually get the lowest insurance premiums because of being a defensive driver by nature and do not do silly things behind the wheel like most men do.
On top of that, your location will also have an impact on your policies. If you live outside busy towns or cities, you may be considered riskier than your peers living in some urban areas. For instance, the state of Dakota is known for its relatively cheaper premiums because there are fewer insurance claims filed there. On the other hand, Massachusetts has high insurance costs because as it is a densely populated area and likelihood of accidents are relatively high. But it does not end there, because the cost of medical services and litigation are also being considered. To sum it up, policyholders can only expect to increase premium rates if there is the likelihood for an accident to occur and insurance provider to cover those expenses.
