Things to know about Auto Insurance

Have you ever wondered how insurance premiums are determined?  For many it seems that determining what car insurance should cost is simply a random number.  What may reinforce this feeling is that insurance premiums can vary widely from company to company.

The reality is that auto insurance premiums are based on factors that you can control and some that you cannot control.  Things within your control include having a clean driving record, driving sober, observing the speed limit and avoiding texting and other distracting actions. The fewer risks you take behind the wheel, the more likely you are to avoid having an accident which will certainly cause your car insurance premiums to increase.

Other things that affect your premiums may not be within your control.  They include your age, where you live and if you are just finishing school and do not have a job yet, any type of credit history.

Whether you pay your car insurance premiums monthly, quarterly or all at once, it is always made up of different coverage components.  These components include liability coverage, collision coverage and comprehensive coverage.  It is important to understand what each of these mean and the level of coverage for each you should secure

• Liability coverage covers the damages you are responsible for because of an accident.  Most states require all drivers to have a minimum amount of liability coverage by law.
• Collision coverage covers damage to your vehicle if an accident occurs.
• Comprehensive coverage covers damage to your vehicle that is not accident related.

Both collision and comprehensive coverage are optional but strongly recommended.  You should never settle for the minimum auto insurance coverage required by law.  The more auto insurance you buy, the cheaper it is.  That means you can get significantly more insurance coverage with just a small increase in your premium.

A number of different risk factors go into determining how much you will need to pay for auto insurance.  Gender, age, occupation, driving record, type of vehicle, and where you live are just some of the factors considered when obtaining auto insurance quotes.  Based on past accident and theft statistics, insurance companies use these factors to determine the probability that you will file a claim.  For example, if you have a clean driving record with no speeding tickets, insurance companies feel like you are less likely to have an accident.  Therefore, your auto insurance quote will be lower than someone who has one or more speeding tickets.  In the same turn, it costs more to insure types of vehicles that are prone to accidents and theft.

There are a number of strategies that can help you get a lower auto insurance quote.  For one, you can shop around.  While most companies use similar methods to determine premiums, there is a lot of competition for your business in the industry.  Premiums for the same coverage can vary by hundreds of dollars from one company to another.  You can also ask for discounts.  Many insurance companies will reduce your auto insurance premium if you purchase another form of insurance such as homeowners insurance or life insurance from them.  Likewise, if you have anti-theft devices or additional safety features on your vehicle you may also qualify for a discount.  If you need to lower you premium further, consider getting a higher deductible.  Paying your premium in fewer installments can also save you money.

While switching policies can help you save, it’s important to never leave a gap in your auto insurance when you do.  Before you cancel an auto insurance policy, make sure you have another one activated.  That way you will always be covered, and you can avoid any penalties your state might impose.