Insurance World

This isn’t old news, but the type of car you buy effects your auto insurance rates. The more expensive or high-performance your car is, the higher your premiums will be. Why? It’s because the cost to repair a luxury or sports car is often significantly more than it is to repair an economy car. It’s a matter of mathematics. Less expensive automobiles are not as costly to repair if they’re involved in an accident. For some higher-end cars and trucks, just to replace a side-view mirror could cost a few hundred dollars.

How Rates are Set

Car insurance companies refer to the Insurance Services Office (ISO) when establishing coverage costs. The ISO is a reporting group for the insurance industry that publishes a statistical manual that rates vehicles based on the manufacturers suggested selling price, its loss history (if the car is not brand new), and in some cases the vehicles safety liability and theft level. The ISO establishes a number between 3 and 27 for each vehicle. The number assigned symbolizes the comprehensive and collision cost/coverage of that vehicle. The higher the number, the more costly it is to cover that vehicle.

Now let’s look at a few examples. If you have a car that is considered an economy car, yet the specific make and model you have has a high theft rate (i.e. it is stolen more often than other cars on the road), the number the ISO establishes for the car might be high. For sports cars, the ISO number is normally high because the faster the car, the more prone it is to traffic accidents; and in many cases, the cost to repair high-performance vehicles is significantly more than other vehicles. Sport utility vehicles (SUVs) are also weighed as high-liability vehicles. That’s because studies have shown that SUVs cause more damage in an auto accident than a standard economy or sedan model. In this case, some auto insurance providers increase the liability premiums for high-performance cars and SUVs.

Before You Buy, Research

If you want to keep your insurance from skyrocketing, it’s a good idea to do some research before you hit the dealerships. For starters, ask your existing car insurance company for an estimate on a few makes and models you’re thinking about test driving. The quotes you get back will give you an idea of how much it will cost to insure those makes and models. Having those quotes in hand will also help you keep your spending under control by reminding you that you also need to consider insurance rates when estimating how much you can afford on a new car.

Your age, where you live, and your driving record all play a factor in the cost of your auto insurance. Of course, the ultimate factor is the type of car you drive. The difference between insuring a four-door economy car will be significantly less than insuring a high-priced sports car. So, if you’re shopping for a new car, remember to keep your future auto insurance premiums in mind. It will help you make a more informed and affordable choice.

The annual cost of your auto insurance policy is influenced by many factors. A policy with a very low premium may not carry all the coverage you need. A policy with a very high premium may be stuffed with extras you don’t need. Understanding a few basic auto insurance terms may help you decided which types of auto insurance are best for your particular needs.

Usage

The way you use your car may have a great impact on the premium you pay. Some companies offer significant discounts to car owners who don’t commute on a daily basis. Be sure to let your insurer know if you take mass transit to work or carpool. If you drive a considerable number of miles for work or pleasure your premium may be higher.

Principal driver

The principal driver is the person who has control of the car the majority of the time. Certain age groups have fewer accidents. Having a child or other driver who is under 25 as the principal driver on a car will generally greatly increase the premiums on that car. Drivers over 75 may also have higher premiums. If the principal driver has multiple violations or accidents the premium will reflect those occurrences. Try to list a person from the most accident free age group and with the best driving record as the principal driver.

Deductible

The deductible is the amount which you will pay toward the expenses of an accident. Deductibles are per accident. If you have a $1,000 deductible and have two accidents in a year you will pay a $1,000 deductible for each accident. If your vehicle is totaled the payment you receive will be less your deductible.

Collision coverage

Collision coverage is the insurance for a car when it hits or is hit by another car. This is considered minimum coverage and is required by most states.

Liability insurance

Liability insurance is another part of minimum insurance coverage which is required by most states. Liability insurance refers to coverage for damages which you caused and for which you may be legally liable.

Uninsured driver coverage

Some policies cover damage to the insured person’s auto if the other driver doesn’t have insurance or if the other driver is unidentified due to a hit and run accident. Coverage of this sort may carry many restrictions, read through it carefully.

Please get as many insurance quotes as possible to compare services and pricing. By doing so you will learn more about the insurance process and industry.