What Affects Policy Cost
A
number of factors affect the insurance premiums you pay. Different insurance
companies may determine rates in different ways, but here are some of the items
that affect the cost of the policy.
Added
coverage. In addition to required coverage and optional collision and
comprehensive coverage, you may choose additional coverage that will increase
the cost of the policy. Full glass replacement, towing, and providing for
rental car use when your car is unavailable are examples of optional coverage.
Age
and gender. Insurance industry statistics show that certain groups of people have
different accident rates, based on their age and gender. For example, teenagers
and seniors have more accidents. Because they are viewed as an increased risk
for the insurance company, they pay more for coverage.
Type
of vehicle. Certain vehicles cost more to repair or replace. An insurance
company charges more for physical damage coverage on one of these vehicles.
Mileage.
The more you drive, the more opportunity for an accident—and the more you pay
for coverage.
Driving
record. You will be rated according to traffic accidents and tickets you have
over a period of years. The more incidents, the greater the premium. You may
also be turned down for coverage if you have too many.
Where
you live. If you live in an area with more traffic (a city versus a rural
area), industry statistic show that you have a greater chance for an accident
and therefore will pay more for coverage.
Deductibles.
Some coverages in your policy have a deductible, which is the amount you pay
first, before your insurance company pays, on a covered loss. The higher the
deductible, the lower your premium. Insurance companies offer varying
deductible amounts.
Discounts.
Your premium may be reduced by various discounts offered by some companies in
some instances. For example, some companies may offer a discount if you have
your homeowner’s insurance with them or if you are a non-smoker. Other
discounts are required by law: policyholders age 55 and over who have successfully
completed a defensive driving course receive a 10 percent discount; a vehicle
equipped with an authorized anti-theft protection device receives a 5 percent
deduction on comprehensive coverage.
Surcharges.
If you have one or more traffic violations or accidents, your insurance company
may attach an additional charge to your policy. What triggers the surcharge and
how much it will be vary from company to company. The Surcharge Disclosure Sheet,
which by law must be given to you at the time you apply for your policy, will
have the details.
Ways
to reduce auto insurance costs
•
Comparison shop.
•
Talk to more than one agent and insurance company.
•
Increase deductibles: the higher the deductible the lower the premium.
•
Ask about discounts. Find out if you are eligible for any of the discount
programs offered by the company.