In Part One of this post, we learned that each insurance company uses a different formula to determine how much you will pay for auto insurance coverage, and the differences between insurers can be dramatic. That is why the company that saved you hundreds of dollars may turn out to cost you hundreds more. Continue reading Part Two to learn additional factors that affect your auto insurance rates and what you can do to reduce your coverage costs in the future.
Your Record of Claims
You know your driving record follows you everywhere you go, but did you know your insurance claims record does, too? Most insurers report claims made against auto insurance policies to a consumer reporting agency. When you apply for new coverage, your new carrier can pull your CLUE report to see your past claims activity. This usually includes all claims made, whether paid or denied, as well as claims that you may have contacted an insurer to ask questions about but never actually made. Based on the frequency of your claims activity, a new insurer may determine how likely you are to make future claims and thus, how much to charge you for coverage.
Your Credit Score
When it comes to applications, credit scores are major influencers for banks, employers, and you guessed it -insurance companies. Some insurers only penalize bad credit scores, whereas others may offer graduated pricing with preference to those in the top tier of scores. If your score is less than excellent, you might pay for it in the form of higher premiums. Working with an independent agent can help you find an insurer with pricing algorithms that favor your unique circumstances -even if your credit score is a work in progress.
Discounts
Discounts are common in the auto insurance industry, although some insurers are more generous with them than others. A company may offer savings to drivers who meet certain criteria, such as low annual mileage or insuring multiple vehicles on the same insurance policy. Others may offer safe driving discounts or savings for drivers who also purchase home or renters insurance from the same carrier. One discount that is common to many insurers is the driver safety course discount (also known as the defensive driving discount). This awards savings to drivers to complete and pass an approved driver’s safety education course.
Your Deductible
Your insurance company may require a deductible when filing a claim. This is the amount that you will contribute out of pocket toward your covered loss amount. The insurer then pays the remaining covered damages up to the limits of your policy. A low deductible is likely to cost you more in the way of premiums, but it can reduce your financial burden when you need to file a claim. If you are instead looking for ways to save on premiums and have enough cash to cover a sudden loss, a high deductible could be the right option for you.
Your Coverage
The amount of coverage you purchase can influence your premiums, but it is not the place to cut corners on your policy. Slimming down your coverage amounts or eliminating certain coverages altogether could stick you with major losses in the event of a collision -particularly if you are liable for third-party injuries and damages. Instead, we recommend fully protecting yourself with a comprehensive policy that checks off all the points of loss and mitigates your financial risks.
