There are many mysteries in the world and one of them is the methods behind how car insurance amounts are calculated. It can be difficult to track down, however the truth is major auto insurance companies use three factors to determine premium costs.
Those being the driving history, where you are located, and your daily average driving miles.
With these factors in mind, you can piece together exactly how much money you will be paying in premium costs. This is important if you ever want to be in control of your finances.
Let’s go into detail with those three.
Your Own Driving History
Mistakes are a natural course of life. As such insurance companies factor this into costs as no one person is perfect. So much like making poor financial decisions, strikes on your driving records can plague you for years to come. This places you at a higher risk than those who have cleaner records so insurance companies charge higher premiums.
Going into specifics here, you may also pay higher rates if you have a history of making a number of claims, but also having consistently missed car insurance payments too.
In the cases where someone just got their license and are looking, insurance companies will likely quote you a higher cost. In these kind of situations the insurance company will take a backseat approach and see what kind of person you are like before making changes to it.
Location Car Insurance
Location to a insurance broker is everything. Whenever you fill out a form for a quote, where you live is likely at the very top of the list right with your name and the like. The reason they ask this is to assess where exactly you live of course but it is a major factor for them. Any undue carelessness on the drivers part makes them nervous.
It’s why they charge higher costs for those who have been in accidents and were at fault. It’s also the same reason they charge higher costs if you are in an area with a lot of theft or accidents in general.
The rationale behind all of that is when there are more cars around in the area, the more at risk you are placing yourself in on getting an accident. The same idea for theft as well.
Your Average Miles
To the auto insurance industry, the more you drive, the more at risk you are in getting into an accident. It does make sense, but therein lies the key to managing insurance costs. Overall a person can expect to pay higher premiums if they typically drive for more than 20 miles every single day compared to others who are driving less.
Some other things to think about is the more you drive the more the vehicle gets worn down. This can lead to auto problems like flat tires, and breakdowns, which your insurer may need to cover. What this means for them is more money they need to pay out to cover the costs.
You Can Always Change
After reading through this post, you may be looking to make some changes. By all means do that, but change doesn’t have to be something massive like moving to a new part of town. You can take extra measures to ensure that your are protecting your car and that’s really what insurers want to see.
When it comes to location, consider having an anti-theft alarm on your car or parking your car in your garage. With miles consider carpooling, public transit, walking or biking whenever you have the time to do so.
When it comes to your driving history, the best you can do is strive to be a better driver and pay your bills on time. Consider setting up pay arrangements with the bank. Maybe even taking some defensive driving courses too.