Understanding Auto Insurance Premiums: How Are They Calculated?

Auto Insurance

How Are My Auto Insurance Premiums Calculated?

 Auto insurance is essential for protecting your vehicle and finances against accidents, theft, and unexpected damage. But many drivers wonder what goes into determining their premium costs. We believe in helping our clients understand the factors that influence their rates, empowering you to make informed choices about your coverage. From driving history to location, various elements play a role in calculating premiums. Let’s break down these factors, explore how they interact, and share tips for potentially lowering your auto insurance costs.

  What is an Auto Insurance Premium?

 An auto insurance premium is the amount of money you pay to an insurance company for coverage over a specific period, usually six months to a year. This premium is influenced by various factors, including your driving history, the type of vehicle you own, your location, and even your credit score.

 When you purchase a policy, you can choose different levels of coverage that will affect your premium. Higher coverage limits and lower deductibles typically lead to higher premiums, while lower coverage limits and higher deductibles can reduce your costs.

  Factors That Affect Your Auto Insurance Premium

 Understanding the factors that influence your auto insurance premium can help you make better choices regarding your coverage. Here are the primary factors that insurance companies consider when calculating your premium:

  1. Driving History

 Your driving history is one of the most critical factors in determining your auto insurance premium. Insurance companies view your past driving behavior as an indicator of future risk. Having a history of accidents, especially those were you were at fault can affect your premium. Also, traffic violations on your record and a multiple claims in a short period, may cause you to be viewed as a higher risk.

   2. Location

Where you live plays a big role in your auto insurance premium. Insurers consider factors like crime rates, population density, and accident stats to assess risk. Key location-based factors include:

  • Urban vs. Rural: Urban areas often mean higher premiums due to more traffic, accidents, and theft risk. Rural areas generally see lower rates with less traffic.
  • Crime Rates: High rates of vehicle theft or vandalism in an area can drive premiums up.
  • Weather: Living in regions with severe weather, like hurricanes or snowstorms, may result in higher premiums due to potential vehicle damage.

  3. Vehicle Type

 The type of vehicle you drive plays a significant role in determining your auto insurance premium. Insurance companies evaluate vehicles based on several factors such as the make and model, repair costs, and safety features.

  4. Age and Gender

 Age and gender can also affect your auto insurance premium. Insurance companies analyze statistical data to determine risk levels among different demographics.

   5. Credit Score

Many insurers consider credit scores when setting premiums, as higher scores often indicate lower risk. Here’s how it works:

  • Credit-Based Insurance Score: Insurers may use a special score based on your credit history, including payment habits and debt levels.
  • Premium Impact: Lower scores can lead to higher premiums, while higher scores may earn discounts. Not all states permit this practice, so check local regulations.

 6. Coverage Levels and Deductibles

 The specific coverage options you choose for your auto insurance policy will directly impact your premium. Higher coverage limits generally lead to higher premiums. If you opt for lower limits to save on costs, be aware that this may leave you financially vulnerable in the event of a severe accident. A deductible is the amount you agree to pay out of pocket before your insurance coverage kicks in. Choosing a higher deductible can lower your premium, but it also means you’ll need to pay more out of pocket in the event of a claim.

  7. Discounts

 Insurance companies often offer a variety of discounts that can help lower your auto insurance premium. Understanding these discounts can lead to significant savings. Common discounts include safe driver discounts, multi-policy discounts, good student discounts, and low mileage discounts.

   8. Insurance Company Rating

 Different insurance companies have varying approaches to calculating premiums, influenced by their underwriting guidelines and risk assessment strategies. Some companies may provide more favorable rates based on their claims history and customer satisfaction ratings. Researching and comparing insurance providers can help you find the best deal. Companies with a reputation for faster and more effective claims processing may charge higher premiums due to increased demand for their services.

  How Premium Calculation Works

 Now that we’ve explored the various factors that influence auto insurance premiums let’s look at how these factors interact in the premium calculation process.

 1. Data Collection: Insurance companies gather data from various sources, including your application, driving records, and insurance history. They may also access third-party databases to gather information on claims and vehicle history.

 2. Risk Assessment: Insurers use sophisticated algorithms and statistical models to assess risk based on the collected data. They analyze how different factors correlate with accident rates, claims frequency, and overall risk.

 3. Premium Calculation: Using the risk assessment, insurers calculate a premium based on the likelihood of future claims. This calculation includes pricing for various coverage options and deductibles.

 4. Policy Issuance: Once the premium is determined, you will receive a quote outlining the coverage options, limits, and total premium. You can then choose to accept the quote and finalize your policy.

  Tips for Lowering Your Auto Insurance Premium

 Now that you understand how auto insurance premiums are calculated, here are some actionable tips to help you lower your costs:

 1. Shop Around: Don’t settle for the first quote you receive. Compare rates from multiple insurance providers to find the best deal for your coverage needs.

 2. Maintain a Clean Driving Record: Safe driving is one of the best ways to keep your premiums low. Avoid accidents and traffic violations to qualify for discounts.

 3. Choose Your Vehicle Wisely: If you’re in the market for a new car, consider the insurance implications. Research vehicle safety ratings and repair costs to choose a car that is less expensive to insure.

 4. Take Advantage of Discounts: Ask your insurance provider about available discounts and make sure to take advantage of them. This could include safe driver discounts, multi-policy discounts, or student discounts.

 5. Review Your Coverage Annually: Life changes, such as moving or getting married, can affect your insurance premium. Review your coverage annually and make adjustments as needed.

 6. Consider Higher Deductibles: If you can afford it, consider opting for a higher deductible to lower your premium. Just be sure you can cover the deductible in the event of a claim.

 7. Improve Your Credit Score: Work on improving your credit score if it’s currently low. Paying bills on time and reducing debt can positively impact your credit score and, consequently, your premium.

 8. Limit Your Mileage: If possible, limit your driving or consider carpooling to reduce wear and tear on your vehicle, which can lower your premium.

 Knowing what influences your auto insurance premiums—like driving history, location, vehicle type, and credit score—helps you make smarter choices. By understanding these factors and reducing risk where possible, you could lower your costs.

Auto insurance isn’t one-size-fits-all. Each driver needs tailored coverage for optimal protection and affordability. To get the best rates, keep a clean driving record, take advantage of discounts, and shop around.

Auto Insurance Costs

Auto Insurance Costs

If you own a vehicle, you should own an auto insurance policy. Have you ever wondered how the cost of your policy is determined? There are a number of different factors that impact the cost of your auto insurance. While not all companies use the same parameters, we will help you understand what commonly determines the bottom line of your auto policy.

First, your driving record – The better your record, the lower your premiums. If you have been in accidents or had serious traffic violations, it is likely you will pay higher premiums. How much you use your car is also considered while determining the cost of your premium. The more miles you drive, the more chance for an accident. Even where you park is taken into consideration. Do you park in a secure garage? Or do you park on a street?

Other factors taken into consideration while determining your auto insurance costs are: your age, your gender, the car you drive, and the amount of auto insurance you wish to carry. Mature drivers generally have fewer accidents than beginners. Statistics show that women are involved in fewer accidents, and when women are involved in an accident they tend to be less severe than men. The cost of your car and the amount of insurance coverage you want to carry are major factors in the cost of your policy as well.

There are many different factors that go into determining the cost of your auto insurance policy. Some factors can vary from one area or state to another. To get the best idea of the cost you will pay for auto insurance, contact us to request your free auto insurance quote!

Source: https://www.iii.org/article/what-determines-price-my-auto-insurance-policy

SAFE DRIVING MEANS SAVING MONEY

drive_safely__optimized

Do you want to save money on your auto insurance by driving safely? Most companies are using car telematic programs to do so.

Car telematic programs are wireless devices that communicate with each other. In the world of auto insurance, this means that insurers collect data by using a cell phone app or a small in-car tracking device. Yes, that might sound intimidating but there are many reasons these devices could be useful to you.

Lower Rates. Do you want to pay less for car insurance? Your car insurance should be based on how you drive, not the age of the driver. Careful drivers can be rewarded for their good driving habits. Whether it is a lower deductible or premium, you will see exactly how your driving affects you.

Misuse. Trying to save your family vehicle for as long as possible? Telemetric information can help discourage the misuse of your vehicle so it will have a longer life in the family. Some devices will let you know when you are braking or accelerating too hard, which could decrease the life of your vehicle.

Teen Drivers. Having a teen driver out on the roads for the first time can be scary. Telemetric tracking devices allow you to see if your teen is driving safely. Are you scared of them being reckless with the family vehicle? You are able to gather information such as braking or accelerating too quickly, for a teaching moment that could one day save their life.

There are many carriers that use this technology today. Each carrier has their own unique device or app that allows you to personalize your rates based on how you drive. You can start saving by calling our agency.

Sources:

https://www.brickhousesecurity.com/gps-trackers/apps-vs-devices/

https://twocents.lifehacker.com/should-you-let-your-insurance-company-track-your-drivin-1845201248

https://www.compare.com/auto-insurance/resources/how-insurance-telematics-work

Crash-Avoidance Features Complicate Auto Repairs But Are Still Valued

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As more new vehicles become equipped with crash-avoidance features, some owners report significant issues with the technologies after repairs, according to a recent report from the Insurance Institute of Highway Safety (IIHS).

In the survey, approximately half of those who reported an issue with equipped front crash prevention, blind-spot detection, or rearview or other visibility-enhancing cameras said at least one of those systems presented problems after the repair job was completed.

Nevertheless, many owners remained eager to have a vehicle with these features and were pleased with the out-of-pocket cost, according to Alexandra Mueller, IIHS senior research scientist.

“These technologies have been proven to reduce crashes and related injuries,” Mueller said. “Our goal is that they continue to deliver those benefits after repairs and for owners to be confident that they’re working properly.”

Still, as problems with these technologies persist, the study notes that it is important to track repair issues to further the adoption of crash avoidance features. IIHS research has shown that front-crash prevention, blind-spot detection, and rearview cameras all substantially reduce the types of crashes they are designed to address. For example, IIHS said, automatic emergency braking reduces police-reported rear-end crashes by 50 percent.

An analysis conducted by the IIHS-affiliated Highway Loss Data Institute (HLDI) showed the reduction in insurance claims associated with Subaru and Honda crash-avoidance systems remained essentially constant, even in vehicles more than five years old. But repairs can make it necessary to calibrate the cameras and sensors that the features rely on to work properly, making repairs complicated and costly.

For example, a simple windshield replacement can cost as little as $250, while a separate HLDI study found vehicles equipped with front crash prevention were much more likely to have glass claims of $1,000 or more. Much of that higher cost is likely related to calibration.

The new IIHS study found that owners often had more than one reason requiring repairs to these safety features. Most had received a vehicle recall or service bulletin about their feature, but that was rarely the sole reason they brought their vehicles in for service or repair.

“Other common reasons — which were not mutually exclusive — included windshield replacement, crash damage, a recommendation from the dealership or repair shop, and a warning light or error message from the vehicle itself,” according to the study.

Repair difficulties could motivate drivers to turn off crash avoidance features, potentially making collisions more likely.  But, despite the post-repair issues, the study found that slightly more than 5 percent of owners would opt not to purchase another vehicle with the repaired feature. As reckless driving and traffic fatalities continue to rise, advanced driver-assistance systems will only become more important for the roadway safety, necessitating reliable technology. 

Source:  Max Dorfman | https://www.iii.org/insuranceindustryblog/crash-avoidance-features-complicate-auto-repairs-but-still-are-valued/

Safe Driving

Do you want to save money on your auto insurance by driving safely? Most companies are using car telematics programs to do so.

Car telematics programs are wireless devices that communicate with each other. In the world of auto insurance, this means that insurers collect data by using a cell phone app or a small in-car tracking device. Yes, that might sound intimidating but there are many reasons these devices could be useful to you. 

Lower Rates. Do you want to pay less for car insurance? Your car insurance should be based on how you drive, not the age of the driver. Careful drivers can be rewarded for their good driving habits. Whether it is a lower deductible or premium, you will see exactly how your driving affects you. 

Misuse. Trying to save your family vehicle for as long as possible? Telemetric information can help discourage the misuse of your vehicle so it will have a longer life in the family. Some devices will let you know when you are braking or accelerating too hard, which could decrease the life of your vehicle. 

Teen Drivers. Having a teen driver out on the roads for the first time can be scary. Telemetric tracking devices allow you to see if your teen is driving safely. Are you scared of them being reckless with the family vehicle? You are able to gather information such as braking or accelerating too quickly, for a teaching moment that could one day save their life.

Dial Insurance

Sources: 

https://www.brickhousesecurity.com/gps-trackers/apps-vs-devices/  

https://www.compare.com/auto-insurance/resources/how-insurance-telematics-work

https://twocents.lifehacker.com/should-you-let-your-insurance-company-track-your-drivin-1845201248

How to Change a Tire

Knowing how to change a tire is a necessary skill for all drivers. You might be thinking, “I pay for a AAA membership so that I get roadside assistance and don’t have to worry,” or “I have a cell phone, I can just call someone to help.” Even if this is the case for most situations, there are still plenty of situations where these reasons don’t cover you.

WHY SHOULD YOU KNOW HOW TO FIX A FLAT TIRE?  

1. Cell phones don’t always have service

In this day and age, we depend heavily on our cell phones, but cell service doesn’t always cover what it says it will. Landscape, weather, the locations of antennas, and the cell network capacity all play a factor in you getting your service when you need it. 

2. You might get a flat in a dangerous place

Even more serious would be finding yourself in a remote, secluded area with a flat tire. People can be dangerous, so we recommend getting help from a source you trust, if possible, like your roadside assistance. But sometimes roadside assistance cannot reach you within a reasonable amount of time. If you’re out on the road, it may take several hours to get help. In the meantime, you are putting yourself at risk by staying in this spot. 

Other danger factors include weather conditions and where you had to park your vehicle (like a spot that slows down or blocks traffic). This isn’t to mention if you are in a rush: say you are on the way to an important meeting or need to catch a flight – knowing how to change the tire yourself can get you back on the road quickly.

3. You might save money

Aside from saving time, you might save yourself some money. If you don’t have roadside assistance or a friend who can help, your only other option may be to call a towing company to take it to a nearby repair shop. Needless to say, this is much more time and money than simply doing the job yourself.

Thankfully, changing a tire isn’t all that hard! Just adhere to the following guidelines to be prepared in case you have a flat.

ITEMS YOU’LL NEED TO FIX A FLAT TIRE

These items should have come with your vehicle: jack, lug wrench, fully inflated spare tire, and a vehicle owner’s manual.

If you have misplaced any of these items, or if your car did not come with these items, you should purchase new ones right away. And be sure you’re regularly inflating the spare tire to your vehicle manufacturer’s recommended PSI. You should check the spare’s air pressure every time you check your other tires. Remember to check pressure every month and before long trips or carrying an extra load.

Here are some items that don’t come with your vehicle but that you should stow in your trunk or glove box in case you have to change a flat tire: a flashlight with working batteries, a rain poncho, a small cut 2″x6” wood to secure the jack, gloves, and wheel wedges.

HOW TO CHANGE A TIRE

The long and short of this process can be found in the list below. For a full video on step-by-step directions, visit Bridgestone Tires.  

1. FIND A SAFE LOCATION

2. TURN ON YOUR HAZARD LIGHTS

3. APPLY THE PARKING BRAKE

4. APPLY WHEEL WEDGES

5. REMOVE THE HUBCAP OR WHEEL COVER

6. LOOSEN THE LUG NUTS

7. PLACE THE JACK UNDER THE VEHICLE

8. RAISE THE VEHICLE WITH THE JACK 

9. UNSCREW THE LUG NUTS

10. REMOVE THE FLAT TIRE

11. MOUNT THE SPARE TIRE ON THE LUG BOLTS

12. TIGHTEN THE LUG NUTS BY HAND

13. LOWER THE VEHICLE AND TIGHTEN THE LUG NUTS AGAIN

14. LOWER THE VEHICLE COMPLETELY

15. REPLACE THE HUBCAP

16. STOW ALL EQUIPMENT

17. CHECK THE PRESSURE IN THE SPARE TIRE 

18. TAKE YOUR FLAT TIRE TO A TECHNICIAN

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Source: https://www.bridgestonetire.com/tread-and-trend/drivers-ed/how-to-change-a-flat-tire# and https://www.procarecollision.com/why-it-is-important-to-know-how-to-change-a-flat-tire/