You may not realize it, but your car insurance premium is affected by a lot more than just how safe you are at the wheel.
Insurers consider all kinds of factors about your vehicle before setting premiums, including its make, model, and year; how much it would cost to repair it if it was damaged or stolen; the likelihood of your vehicle being stolen; and even where you live.
Listed below are six things you must know about auto insurance to make a smart decision. We’ve also included some tips on how to save money on premiums — be sure to keep them in mind.
How Are Prices Determined?
Each insurance company uses its own formula for calculating premium prices, but the most common factors include the following:
– The make and model of the car
– How you use it
– Whether or not you’ve had any accidents
Other factors that affect your insurance rate include your age and gender, where you live, and your credit score.
What’s the Difference Between Collision and Comprehensive Car Insurance?
Many people are confused about what they’re purchasing when it comes to auto insurance. A survey by InsuranceQuotes found that 68% of Americans are under the false impression that the comprehensive part of their policy covers damage to their car from a collision.
Here’s a quick reminder:
Comprehensive: Covers damage to your vehicle caused by events like fire, flood, hail, falling rocks or trees, vandalism, or hitting a deer.
Collision: Reimburses you for damage from potholes and collisions with other vehicles, trees, and guardrails when you’re at fault.
Expensive Cars Don’t Necessarily Cost More to Insure.
Some expensive cars might have better claim rates than cheaper ones, so the premiums cost less.
There Are Ways to Lower Your Premiums
You can save money on your insurance by increasing your deductible, decreasing your policy limits, being a safe driver, and improving your credit score.
Personal Auto Insurance Doesn’t Cover Business-Related Use of Your Vehicle.
Many personal policies don’t cover driving for business purposes, such as pizza delivery, messenger, or ride-share driving. If your provider learns that you are doing this, they may cancel your policy.
If You Let Your Car Insurance Lapse, It Could Be More Expensive the Next Time You Need It.
You’re probably thinking, “I don’t need to pay for car insurance when I don’t drive.”
But the truth is, you do. If you let your car insurance lapse, you’ll pay a higher premium when you get back on the road. So even if you don’t plan on driving for a while, it pays to keep your policy intact.