Insurance companies also issue different rates based on the customer’s individual characteristics and the type of insurance policy being bought. Insurance companies make their rates based on the probability through actuarial science and the data from claims on some risk factors. If you know what causes your premiums to rise, you may be able to avoid or minimize things that lead to high charges. The following are some of the factors that determine the insurance premium that you are likely to pay for insurance cover.
Your Driving Record
In automobile insurance, policyholders with prior speeding tickets, at-fault accidents, DUI convictions, and other violations are considered to be of a higher risk by insurers. This means that if your violations are relatively new and/or severe, or if you have racked up more points than others, your rates are likely to increase. Many factors influence the cost of auto insurance but the most effective way to keep the costs low is by ensuring you do not have any prior accidents or traffic violations. Defensive driving can also be used to reduce rates in some occasions by enrolling for defensive driving classes.
Your Credit Rating
In most of the states, the insurance companies rely on credit-based insurance scores which are extracted from your credit report to determine the rates to charge. The studies done reveal that creditworthiness is related to the estimated probability of claims. Holders with higher scores are likely to file fewer claims. Paying your bills on time, checking credit reports, not applying for too many credit cards and ensuring that credit limit is low may help in lowering the insurance cost at some point.
Your Claims History
One of the ways that can lead to very high renewal premiums is when you file claims very frequently or when the losses are large. That is because prior losses suggest that you are higher risk. After a claim, you may choose to settle some of the minor losses from your pocket in order to avoid another hike in rates or look for other insurance companies who may offer better terms of coverage. It is also important to keep the duration between claims as long as possible, as it can either stabilize or even reduce your premiums.
Your Age
The young and the elderly aged persons are likely to have higher average auto insurance rates. To the teens and young adults, the major cause could be attributed to lack of experience. Older adults may also have vision and reflex problems that make them prone to accidents. Insurers also mark up the cost of health insurance for seniors since they have a higher average claim costs. It means that your premiums are likely to change with different age brackets you find yourself in.
Where You Live
The insurance prices for automobile and home depend on crime rates, probabilities of disasters, and the cost of claims and litigation for your geographical region. If you switch your zip code or county – especially in a large population zone – your premium may change while your other conditions remain constant. It is also essential to point out that urban areas are characterized by higher auto insurance rates than rural zones.
Your Policy Limits
It is self-explanatory that when you opted for higher dollar limits to be covered such as liability, collision, comprehensive and personal injury protection, you will have to pay higher amount of premium. A closer look at your assets and risks, and choosing average as opposed to maximum coverage policy might just turn out to be helpful in saving you some amount of money. Lower deductibles might also imply higher continuing premiums. On the other hand, raising your deductibles could do the opposite.
Your Insurer
The rates for the same coverage vary to a great extent from one insurer to another. That is why some insurance companies may have different levels of risks in your area or even work under different efficiency measures. A comparison of quotes from different companies might show that one could save $100-$200 per year on similar privileges and guarantees. But always ensure that the policies are similar on features such as types of coverage, coverage limits and deductibles before switching.
Lifestyle Factors
Some of the activities that you cater for may put the insurance company at a higher risk than others. On health insurance, you will be charged higher if you are significantly overweight or if you do not follow your doctor’s advice. That means that auto insurers consider your mileage, where you leave your car, whether as a commute or pleasure and other usage aspects that may pose risk. For an accurate quote, every detail needs to be disclosed as truthfully as possible.
Bundling Multiple Policies
Another way to reduce cost when it comes to insurance is to get your insurance needs from the same insurance company since this is cheaper. Many insurance companies give multi-policy discounts of 10-30% for auto and homeowners insurance. Another factor that may lower your costs is having policies for more than home or for more than one car with the insurer. Bundled services can be compared to other services as well as unbundled services can be compared to their bundled counterparts.
