Insurance companies weigh the probable risk factors that can contribute to an accident when they calculate the cost auto insurance. The most common practice is to use statistical data that indicate the likelihood of an accident. The most common factors are the driver’s age, gender, marital status, profession, the location where you live, the type of vehicle you drive, your driving history, previous accidents if any. Based on the data the insurance company will decide how much premium is right for sharing the evaluated potential risk on the part of you and those on your auto insurance policy.
When calculating the rate for your liability auto insurance which is mandatory in all states in the US, the minimum coverage is often not adequate. So it is wise to choose a higher amount for liability coverage. To calculate the rate of your liability auto insurance, the insurance company will take into account the following criteria:
· Driving records of all the drivers included in your policy will be rated by the insurer. They obtain the driving records of these drivers form the DMV and they use these data along with the age of each driver in determining the rate of premium. Drivers below the age of 25 are considered more prone to risks due to their inexperience and irresponsibility and this categorizes them as high risk and the cost will be higher. It is advisable to exclude such problem drivers in your policy to lower the cost of your auto insurance.
· The amount of coverage you plan to buy is an important factor that influences the cost your auto insurance. Though each state stipulates a minimum liability coverage as mandatory but you need to carry more to ensure that you don’t end up paying for damages you may cause in an accident to others form out of your pocket. If you cause bodily injury you will have to pay medical expenses, especially in today’s escalating costs of repairs. If you cause a death, you may face a lawsuit demanding an amount far more than your policy amount.
· When your vehicle is leased your lender will require that you purchase collision coverage. Usually lenders will insist on your auto policy to include collision coverage in your policy and add its cost to your auto loan. When this happens, the deductible you choose also affects the cost of your auto insurance policy.
· The car you drive, its make, model and age are factors what will decide the cost of repairs to a vehicle damaged in an accident. With collision coverage you can recover the cost of repairs from your policy regardless of who is at fault. Your insurance company will take action to recover the repair costs that includes your deductible form the other driver’s insurance company. Normally a higher deductible lowers the rate and cost of your auto insurance.
· Comprehensive coverage will compensate for theft or damage to vehicle for reasons other than collision like vandalism. The place of your residence also matters in determining the cost of auto insurance. If you have a garage in your house it ensures safety of your car and less likelihood of theft and you can get a lower auto insurance rate on this count. If you live in an area where crime rate is high will mean that the likelihood of car theft is more and hence the higher risk for the insurance company. This will push the cost of your auto insurance up. In this case too, the age, make and model of your car will cost more to insure.
The above are the common and primary factors that are considered in determining the cost of your auto insurance. These are applicable for only vehicles of normal household use. For specialty cars such as vintage cars they will use a different set of criteria to set the cost of auto insurance.