Auto insurance is basically an agreement with insurance companies which will pay for your certain types of financial losses, arising from your use or ownership of any automobile. To get this agreement, called auto insurance policy, you pay certain amount called premium. Against the premium paid, the insurance company agrees to pay your financial liabilities as per the terms and conditions of the policy. The right insurance coverage may prevent you from huge financial loss that may occur in future due to auto accidents. Also with increasing cost of healthcare & medical charges, automobile repair etc, insurance providers have also hiked the premium over the period. Therefore, in today’s recessionary phase, it becomes even more important to find affordable auto insurance.
Even the Governments have made it mandatory for all owners and drivers of automobile to carry the automobile liability insurance coverage. The minimum limits of liability coverage that one must carry vary from state to state. However, this liability coverage covers protection of others in terms of bodily injury and/or property damage. Owner/Driver coverage is not mandatory. However, since, you may be personally responsible for damages above the policy limits, you should consider purchasing liability insurance with higher limits than the minimum required by law.
However, with increasing risk of accidents due to omnipresent traffic chaos and increased cost of hospital stays, medical care, and car repair, auto insurance coverage has become more costly to purchase for most of us. Searching for affordable auto insurance has never been more important. You need to look at the ways and means through which you can reduce the cost of coverage but still afford the appropriate amount protection. If you know the factors that affect the cost of your policy or the issues that can help you get discounts, you may be able to reduce the final cost of coverage.
Factors Affecting the Cost of Auto Insurance Coverage:
Auto insurance is like any business and therefore auto insurance providers try to minimize their business risk as much as possible. For them, the more risk associated with your coverage, the more premium they charge. Their business is based on how judiciously they find out risks associated with your coverage. Usually insurance providers analyze the following factors to appraise the risk associated with you:
Age, Gender & Marital Status: Unmarried male under 25 and unmarried women under 21 usually commit the maximum auto related accidents; therefore their coverage is the most costly. On the other hand, people above 50 can easily get discount.
Driving Record and Claims: A good driving record helps you save money on coverage. But, any accidents or tickets on your driving record means you have to pay more for coverage. Companies charge extra for convictions, traffic violations, property damages cause by accidents etc.
Type of car: Cost for additional coverages such as collision and comprehensive for luxury and sports car are highest. Similarly, rates for coverages of cars that cost more to repair are always high.
Use of Car: Rates for cars that you use regularly, e.g. for driving to and from work are always higher than the rates of those cars that you use only on holidays or weekends.
Location: Cost for coverages is usually higher if you reside in urban areas than that of rural areas. This is because accidents and thefts take place more in urban areas than in rural areas.
Credit score: Some of the insurers may check your credit score and may charge a little extra if you have a below average credit score.
Uninsured Driving: In some of the states, companies may charge extra for driving uninsured for more than 30 days in the previous year before you applied for insurance.
As a rule, all auto insurance companies are required to file their underwriting guidelines, i.e. the parameters based on which they offer any policy to any client, with the Department of insurance of the respective state governments. These guidelines are also available through various websites. Therefore, if you are looking for affordable auto insurance, take help of the factors mentioned above before making application for auto insurance coverage.
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