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The Top Factors Affecting Auto Insurance Rates

Have you ever had a conversation with a friend or family member and wondered why their auto insurance rates are so different from yours? The factors that go into determining the premium for an auto insurance policy are many, and the rates for two drivers can be very different. If you are wondering how the auto insurance company arrived at your rate, here are some of the factors that have an impact on your premiums.

Your Age And Experience

Your age and the length of time you have been driving are two of the biggest factors in determining auto insurance rates. Young drivers who are less experienced are statistically more likely to have accidents, and their accidents are more likely to be serious. Thus auto insurance companies rate for age and experience based on the risk they are taking by insuring you. You might hear that word a lot if you look into how auto insurance rates are determined: risk. The higher the risk a driver represents to an auto insurance company, the more they will be charged.

The Type Of Vehicle

The type of car you drive has a big impact on your rates as well. Some cars are more expensive to repair, more likely to be stolen, or considered more dangerous to drive due to high speeds (sports cars, for example). All of these things can lead to an increase in the premiums to insure that car. Older, less valuable cars tend to be a lot cheaper to insure than newer, more expensive cars, because it will cost the auto insurance company more to repair or replace a newer car.

Where You Live

The zip code where you park your car at night is another determining factor in your premiums. If there is a lot of theft in your neighborhood, this might cause an increase in insurance rates, as the insurance company is taking on a higher risk of having to pay out on a theft claim.

How Much And How Far You Drive

If you have a long daily commute, you spend more time in your car than someone who works from home, which means you are more likely to be in an accident. The more you drive your car, the higher your premiums are likely to be. Again, you are at a higher risk of having a claim due to more frequent use of your car, resulting in a higher premium. These are just a few of the many factors that go into determining what an individual pays for their auto insurance. Auto insurance companies rate each driver and vehicle based on the level of risk they represent—the likelihood that they will have a claim. The lower your risk level, the better your premiums will become.

Why A Lapse In Auto Insurance Coverage Can Have Serious Results

Letting your auto insurance policy lapse doesn’t seem to be that serious a matter on the surface. Unfortunately, it is not only illegal to drive without auto insurance; it can also have much more serious consequences than a ticket for driving without auto insurance. A lapse in auto insurance can have far reaching results with the potential to affect your entire life.

The Legal Aspect

All drivers are required by law to carry a minimum liability policy in order to get behind the wheel. This protects all of the drivers on the road by ensuring that in the event of an accident, the at-fault party will have insurance to pay for the damage. If you are pulled over and found to be driving without insurance, you will be given a ticket and may face even more serious legal consequences, depending on the state in which you reside.

Financial Consequences

If you think you can’t afford to pay your insurance premiums, then you really can’t afford not to pay them. If you are involved in an accident where you are found to be at fault, and there is no insurance to pay the damages, you will be responsible. In a serious accident with a lot of property damage and injuries, this can add up really quickly. You may not have the thousands of dollars to pay the bills, but with a judgment against you your wages can be garnished and other assets placed in danger, including your home. Not paying that auto insurance premium can lead to paying off a huge amount of money for the rest of your life.

Future Insurance Premiums

Some auto insurance companies won’t even take a driver who does not have previous insurance (aside from new drivers), while others will simply charge you a higher premium. A lapse in your old policy can mean that you will no longer qualify for the rates you were getting before. You may lose discounts including longevity with your auto insurance company, or be treated as a higher risk to the company. You may also have to make a new down payment or pay reinstatement fees. It can take a while to work your way back up to getting the better rates reserved for the company’s best customers. Some auto insurance companies may also have a limit on the number of times you can lapse before they refuse to reinstate you.

A lapse in your insurance policy can be much more costly than had you simply continued to pay your premiums. If you are having trouble paying your insurance bill, talk to your agent about ways to reduce your rates, rather than allowing a lapse to occur.

How To Compare Auto Insurance Quotes

Shopping around for auto insurance is the best way to make sure you are

getting the best deal. But not every agent or insurance company quotes in

the same way. It’s important to be sure you are comparing apples to apples

when you compare auto insurance quotes to ensure that you are getting a

great deal. That low price may come with lower coverage or higher

deductibles and might not be such a great deal after all. Learn how to

compare auto insurance quotes for a truly good rate.


Are The Coverages The Same?

When you read over an auto insurance quote (and do read it—ask for it to be

emailed or faxed to you, as mistakes can be made over the phone!) look to

be sure that the numbers listed for liability limits, uninsured motorist

coverage, and the comprehensive and collision deductibles match up. Then

look for additional coverages that are listed on the quote, such as roadside

assistance. Make sure that all of the quotes you compare list exactly the

same coverage, for accurate comparison.


Is The Policy Term The Same?

Some rates look absolutely incredible—until you realize the policy term is

only six months. Some companies offer different policy terms as well as

different payment plan options. If you plan to make monthly payments on

your policy, be sure to ask for the monthly premium. It isn’t necessarily as

simple as dividing a yearly premium by twelve. Many insurance companies

charge fees for the privilege of paying your premium on a monthly basis,

which can make the total yearly cost of the policy higher than quoted.


Are The Discounts The Same?

An auto insurance rate may appear lower because it was quoted with a

discount such as auto/home which you may not necessarily qualify for or

desire. If you don’t plan to take out a homeowner’s policy with the same

company, make sure they haven’t quoted it that way. Also check for other

discounts; they won’t all match up, as every company offers different

discount options. The best thing to do is to compare which discounts you do

qualify for, with each company, to help determine who is offering the best

discounts. Be on the lookout for discounts that don’t actually apply to you

and will likely be removed by underwriting after you accept the policy.


A good quote will be simple, straightforward, and easy to read. It will outline

all of the coverage included in the quote and apply only those discounts for

which you truly qualify. An inaccurately low rate in the quote won’t do you

much good if it changes once you accept the policy.

Why Does My Credit Score Affect My Auto Insurance Rates

If you have ever shopped around for car insurance, you probably already

know that there are a number of factors that affect the rates you will be

paying. Age, experience, and the type of vehicle you drive all seem like

reasonable criteria, but what about your credit score? Whether you are

aware of it or not, your credit rating in most cases does affect your insurance

rates; knowing your credit rating and what it means for your rates makes it

easier for you to get the best deal.


How Does My Credit Score Affect My Insurance?

We all know that your credit rating can affect your ability to get a loan or

purchase a home, but how your credit score affects your skill as a driver may

not seem apparent—because it does not. The use of credit ratings as criteria

for insurance premiums is a controversial topic, and the decision of insurance

companies to include them is not fully understood. Your best strategy in

determining what role your credit score has on your rates is to contact your

insurance company and ask them for information.


How Do I Find My Credit Score?

If you are concerned about the effect of your credit score on your car

insurance rates, you can easily determine your exact credit score. You can

obtain your credit score from a number of free organizations such as Equifax,

for example. Having an up-to-date and accurate breakdown of your credit

rating before contacting your insurance company will give you the power of

knowing whether or not their evaluation is a fair reflection of your credit



What Can I Do If I Have A Bad Credit Score?

If you do have a bad credit rating, repairing your credit is your best strategy

in eliminating this negative factor in your insurance company’s calculation of

your premiums; this will not reduce your rates in the short term, however. If

your credit score has a considerable effect on your rates, your only real

option in the short term is to shop around for a new policy at renewal time.

Though the fairness of insurance companies in using credit scores as criteria

for evaluating the risk of insuring a particular individual is arguable, at this

point it cannot be changed. Arming yourself with information about how

your rates are calculated—and remembering that as a consumer you have

the right to shop around—will help reduce the impact of this factor.

Common Auto Insurance Discounts And How To Qualify

You probably hear a lot about discounts on auto insurance; television

commercials for various companies strongly advertise all the discounts they

have available. Most insurance companies do have many ways you can

qualify for better rates, and some of them are better known than others.

Although you won’t qualify for all of the discounts, you can make certain you

are getting all the appropriate discounts on your premium.


Multi-policy Discounts

Insurance companies want to get as much of your business as they possibly

can, so they offer good discounts when you add more policies to your

account. Multi-policy discounts can include options such as multi-car,

auto/home, auto/life, and many other combinations of policies. Some

companies even offer a discount if they insure your boat or RV. Qualifying

for these discounts is easy; simply start a second policy with your insurance

company, and the discount should apply.


Good Driver And Longevity Discounts

These discounts are easy to qualify for as well. If you have a good driving

record, you should be getting the discount automatically. The same usually

goes for a longevity discount. This is a discount that applies to your policies

after you have been with a company for a certain period of time. Often the

longer you continue to renew the policy, the larger the discount will become.

The key to longevity discounts is to stay with one company long enough.

Skipping from company to company for lower rates may not save you as

much in the end as staying in one place.


Discounts For Younger Drivers

There is no question that adding a young driver to your policy can be an

expensive proposition. If you have a teenager new to driving, inquire about

a good student discount that can alleviate some of the cost. You will likely

be required to provide a transcript proving your child has the required grade

point average to qualify. Some companies also offer a new driver training

course, and your young driver can qualify for a discount just by taking the

course. It can usually be done right in your agent’s office. Not only will you

save money, but you will help put safer young drivers on the road.

These are just a few of the discounts you may qualify for with your insurance

company. Each company is different, so be sure to ask so that you don’t

miss out on potentially big savings on your premiums.

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