Entries Tagged 'auto insurance' ↓

The easiest way to understand how an insurance policy works is to think about gambling. You are about to drive your vehicle out on to the public roads and you make a bet with the insurance company. If you can do this without having an accident, you lose the premium. If you have an accident, the insurance company pays your losses. So, as with a field of horse about to set off round the track, the bookmakers check the records of each horse. How many times has it run and placed. This gives them a basis on which to set the odds. In theory, everyone has access to the same information so you decide whether to place the wager depending on the fairness of the odds quoted. Well, it’s exactly the same with drivers. The insurers make a risk assessment of you as a driver. What make and model are you driving? How many miles a year do you drive? How many years of experience? How many tickets and claims? This profiling gives them the odds of an accident and the company sets the premium rate to quote you. You also know your own track record and have a good basis on which to decide whether to pay the premium.

Unlike a conventional bet, you can decide to self-insure a part of the potential liabilities. This is done through the so-called deductible where you pay the nominated amount before the insurer has to contribute. So if the claim against you is for $800 and you have a deductible of $1,000, you pay the whole of the $800. But if the claim is for $1 million, you only pay $1,000 and the insurance company loves you like a brother. The majority of traffic accidents are minor fender benders and the repair costs are usually low. If no-one is injured, self-insurance is a cost-effective option, i.e. the amount you save on the premium covers the likely payments of claims. But you should consider the issues carefully before accepting the maximum deductibles. Suppose you have a bad run of luck and, in the space of a year, you are involved in three accidents where the claims exceed the deductible. Now you have to find the deductible multiplied by three as a cash sum and your premiums will go up because you have proved yourself a bad risk. Can you afford the pay this lump sum without breaking the bank? Given your premiums are going to rise, do you still want to pay the maximum deductibles in the future? Continue reading →

Doesn’t it feel sometimes that when it comes to auto insurance it’s like playing the game no one tells you how to play it right and where the rules are written without your consent? Well, to ease the situation, here are some auto insurance rules most insurance companies won’t tell you about.

1. If your credit rating is good you will have better rates.

Most of the insurance providers, whether big or small, use credit information to determine the rates you will be charged with. That’s because numerous studies have shown that there’s a direct link between a person’s credit rating and the probability that the very same person would file an insurance claim. Those who have poor credit scores tend to file claims more often than drivers with good credit reports. And we know how insurance companies don’t like insurance claims.

Tip: If your credit report is not that good, don’t haste with buying auto insurance. First, make sure you have settled all your debts and closed unused credit lines. After doing this wait for a month and your rates will be much lower than you would expect.

2. The model of your car affects your premiums.

Insurance companies don’t disclose the exact methods they use to calculate their rates, but your car make and model certainly plays an important part in the equation. All insurance providers have charts on all car models and their respective insurance cost based on theft rates, repair costs and overall safety.

Tip: Try purchasing a car with reasonable repair costs, good safety scores and low theft rates in your area in the first place. This will always give you the chance of having cheap car insurance. Continue reading →

When it comes to paying the premiums vehicle insurance can give you a bunch of unpleasant problems, especially if you have a costly car to insure. And “costly” doesn’t necessarily mean “expensive”. You may ride a cheap car that will cost you hundreds of dollars more to insure than a large SUV. It may seem illogic at first, but you will have to understand the way insurance companies asses risk in order to find the perfect car to lower your insurance costs with.

Insurance companies analyze a set of elements regarding each car make and model before giving you a quote. It’s not that insurance providers have prejudice against certain makes. Each car is analyzed and evaluated by how risky it is to insure. The factors that will influence a car’s insurance rating include: passenger safety; damage and injury scores; theft rates; repair costs. These factors vary significantly between car types and within types as well. So let’s look closer at these elements. Continue reading →