Auto insurance rates have been gradually dropping over the last couple of months. The main reason for this is the prevailing economic condition in the country. But in recent times a revival of sorts is in the making. Auto sales are picking up and so will the auto insurance rates. And in order to be prepared for this new spike, we must know what exactly affects our auto insurance cost.
Auto insurance is not just an added advantage; it is the law in all states across the country. This makes it mandatory for people to purchase the minimum auto insurance prescribed by their respective state.
So what are the factors that affect auto insurance premium rates?
Well there are a number of factors actually. Firstly, it depends on the type of insurance coverage that you have. A comprehensive plan will set you back a huge amount. But it is worth it in that you do not have to bank on the other party’s insurance to pay you for your damages. It also pays you for events such as banging your car against a tree or a pole or any other inanimate object which has no insurance coverage.
The third party insurance or limited insurance is a lot cheaper than the comprehensive package. But here you will have to show fault in order to claim insurance. Your company will pay you only if you are at fault. And you are not covered for losses incurred due to fire and theft etc. another type of midway policy is the second party fire and theft policy which will cover you for fire and theft losses but for all other purposes it will behave like a third party insurance coverage.
The second factor affecting insurance premium rates is the age of the driver. A younger driver who has just started out will be paying more since he does not have a track record yet and is inexperienced. And it is also assumed that teenage drivers are not responsible. The best way to prevent this is to show proof of responsibility. This can be by showing good grades to the insurance company or enrolling in a defensive driving course in order to show that you are serious.
The third factor is the track record of the driver. If you have a number of offenses against your driving license, you will obviously be charged more as you will be considered a high risk driver. The more number of times you file for reimbursement, the more your premium will be. Hence it is very important to have a good driving record. You now have one more reason not to commit a traffic infraction.
And then there are some other less important factors like the type of insurance company. The big national names will charge you more for all the reliability and standards of operating that they provide you. The lesser known local companies might offer you better deals but you can not be so sure about their reliability. In the case of local companies, it is better to ask friends or family for their suggestions.
And lastly, it also depends on the type of car you are insuring. A sports car or classic car will be more expensive to insure as in the case of a sports car it is assumed that you are going to drive fast and in the case of a classic car it is assumed that the car is going to break down pretty soon.