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1. DMV Records:
Ticket history and past involvement in accidents are major elements. Annual mileage also helps determine the likelihood of road accidents. The logical explanation is that the more time a car spends on the road increases the risk of incidents and the other way around. Clean records with no violation and incident-free experience indicate that the policyholder is a low-risk driver who deserves affordable premium.
2. Car Model:
The cost to repair and replace policyholder's car in case of accident comes into play as well. Insurance Information Institute suggests that the likelihood of theft is also an important factor. For example, a brand new Lamborghini which costs more than $ 200,000 demands more expensive financial protection than a $ 20,000 Toyota. Replacement parts for the former are nowhere near affordable range, so insurance company needs to ask for a higher premium. Criminals tend to target more expensive car, too.
3. Age, Address, and Occupation:
Auto insurance companies look for relevant personal information about the driver to make the quote. Young or teenage drivers have very little experience on the road, while senior drivers have a visual impairment; both of them show signs of higher risk. At the same time, a neighborhood where crime rate is quite high relates to the likelihood of theft and vandalism. Some insurers relate occupations with the possibility of accidents. Stressful jobs such as public relation officers and real estate agents can be the factors that increase premium rate.
4. Credit Score:
Many insurers still use applicants' credit score information to determine approval and price. A person with bad credit score tends to lapse payment due to financial difficulties. Because carrier needs assurance, the policyholder must pay more to cover the possibility of skipping payment.
5. Coverage:
In addition to states' minimum liability requirements, there are optional coverage options. Every auto insurance company has different prices for optional purchases such as Collision, Comprehensive, Rental Reimbursement, and Roadside Assistant. Policyholders can choose not to buy them to lower premium.
Age is the only personal factor that is impossible to control. Address and occupations are not ones that policyholders can change as they like either. DMV records and credit score are always open for improvement, and at some points, they can help to save money on auto insurance. When a vehicle comes to owners through lease or finance company, the optional coverage of collision and comprehensive often become mandatory. However, higher deductible allows for more affordable premium, hence manageable expense. It is worth to compare premium prices from multiple providers and consult an independent to get the best price for the most appropriate and complete financial protection.
How to Get More Affordable Insurance
There is no way to change age, and it is almost impossible to change address and occupations in an instant. In the auto insurance industry, cheaper is not always better, but it does not hurt to shop around and find the best deal available. Companies change prices all the time to attract potential customers; policyholders can do a little comparison before every renewal and switch in case the price difference is profound that it is worth the hassle to file a new application. Apart from that, there are some other effective methods to lower insurance premium at ease. Sometimes policyholders must consider all the options and make changes to habits / style to get the best deal.
PAYG (Pay-As-You- Go) Insurance
This is like a reward program that gives benefits only to safe or low-risk drivers. As soon as the insurance policy takes effect, the insurer monitors car usage such as mileage, average speed, sudden braking, and overall obedience to traffic laws. Drivers who demonstrate improvements over the last policy period deserve discounts for the next renewal. A teenager or first-time policyholder should pay more for premiums because the lack of experience, but PAYG gives the chance for them to showcase their low-risk behavior on the road to get the benefit.
Premium can change in every renewal, which means it can become higher when drivers receive traffic tickets for any reason. Some insurers that offer PAYG require policyholders to install tracker device so the company can monitor the vehicle at all times. For policyholders, such methods can be too intrusive to privacy. In California, tracker device only monitors mileage but not how policyholders drive their cars.
Defensive Driver
It never hurts to practice defensive-drive attitude on the roads. Drive safe and avoid involvement in accidents or traffic violations. There is no need to go faster than the speed limit or ignore the red light. Claim-free history often comes with premium price reduction. Also, safe, calm drive habit helps with fuel economy.
Low Cost of Ownership
Cost of ownership is different from the price of car. After the purchase price, owner has to calculate depreciation, interests (if the car comes from a lease or finance company), taxes, maintenance, and insurance premium. A vehicle with lower cost of ownership comes with lower premium as well. The best thing to do is to consult an insurer's representative about how car choice affects coverage price because this gives the chance to manage expense for many months to come. An independent agent will be glad to provide assistance in the calculation.
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Source: http://ezinearticles.com/?Major-Factors-That-Affect-Insurance-Premium&id=9574774
