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Factors that Determine Auto Insurance Premiums

One of the most commonly asked questions pertaining to auto insurance and auto insurance premiums from Customers revolves around what determines auto insurance premiums.  This question is very important.  As a Consumer, it is important to shop around for competitive insurance products.  However, it is also worth noting that some of the advertisements in the market place don’t address vital components that ultimately determine auto insurance premiums.  Below is a list of factors that can play a critical role in determining your annual auto insurance premium:

  1. Insure Multiple Cars/Drivers
    If you obtain a quote from an insurance company to insure a single vehicle, you might end up obtaining a higher quote (per vehicle) than if you inquired about insuring several drivers and/or vehicles with that company. This is because insurance companies will offer what amounts to a bulk rate because they want your business, and under some circumstances, they are willing to give you a deal if it means you’ll bring in more of it.

To obtain a discount, ask our experts to see if you qualify and get a quote. Generally speaking, multiple drivers must live at the same residence and be related by blood or by marriage. Two non-related people may also be able to obtain a discount; however, they usually must jointly own the vehicle.

Incidentally, some companies may also provide an auto insurance discount if you maintain other policies with the firm (ex. homeowner’s insurance). Check with your Agent to see if such discounts are available and applicable.

  1. Keep A Clean Record
    It should go without saying that the more accidents or moving violations an individual has, the more he or she will tend to pay in terms of annual premiums. For those unaware, points are typically assessed to a driver for moving violations. More points can lead to higher insurance premiums.
  2. Take A Defensive Driving Course
    Sometimes insurance companies will provide a discount for those that complete an approved defensive driving course. Also, sometimes a driver can reduce the number of points he or she has on his or her license by taking a defensive driving, accident prevention or other course.
  3. Take Mass Transit
    When you sign up for insurance, the company will generally issue you a questionnaire. Among the questions it asks might be the number of miles you drive the insured automobile per year. If you use your vehicle to commute three hours to work every day, you will generally pay more in insurance premiums than someone who only drives one mile a day. If possible, try to use mass transit to rack up fewer miles.
  4. Select Your Vehicle Carefully
    Buying a huge SUV may sound exciting, but insuring a 5,000-pound, top-of-the-line vehicle can be more expensive than insuring a small (but safe) lower-cost commuting car. Also, older cars are often cheaper to insure than their more modern counterparts.
  5. Raising Your Deductibles
    When selecting car insurance, you can typically choose a deductible, or the amount of money you would have to lay out before insurance picks up the tab in the event of an accident, theft or other type of damage to the vehicle. Depending on the policy, deductibles typically range from $250 to $1,000. The catch is that, the lower the deductible, the higher the annual premium. Conversely, the higher the deductible is, the lower the premium.
  6. Pay Attention to Where You Live
    It’s unlikely that you will move to a different location (i.e., state) simply because it has lower car insurance rates. However, when planning a move, the potential change in your car insurance rate is something that you will want to take into consideration. For example, Glendale, CA residents tend to pay higher insurance premiums than those living in San Diego, CA.
  7. Drop Unnecessary Coverage
    Dropping certain types of coverage can be a slippery slope. After all, nobody can predict if or when an accident will occur. However, if an individual is driving an extremely old automobile that’s on its last legs, it may make sense (depending on the cost, the individual’s driving record and other factors) to drop collision coverage. The reason for this is that were the vehicle to be involved in an accident, the insurance company would likely total the car. If the value of the car is only $1,000 and the collision coverage costs $500 per year, it may not make sense to buy it.
  8. Install Anti-Theft Devices
    Individuals have the potential to lower their annual premiums, sometimes by as much as several percent, if they install anti-theft devices. Your agent or insurance company should be able to tell you specifically which devices, when installed, can lower premiums. Car alarms and LoJacks are two types of devices that you might want to inquire about. If your primary motivation for installing an anti-theft device is to lower your insurance premium, make sure to consider whether the cost of adding the device will result in a significant enough savings to be worth the trouble and expense.
  9. Question Your Agent
    It’s important to note that there may be other potential cost savings to be had in addition to the ones described in this article. In fact, that’s why it often makes sense for you to speak directly with your agent or a representative of the insurance company to ask if there are any special discounts that the company offers for individuals such as military personnel or employees of a certain company. The insurance company may also offer a “good student” rate or some other special savings. You never know what sort of discount pricing might be available for your circumstances, but unless you ask, you probably won’t be able to take advantage of it.


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