Auto insurance is a state-mandated expense that cannot be avoided if you operate a vehicle. The average cost of auto insurance decreased by 2.6 percent in 2007, according to the National Association of Insurance Commissioners. However, in 2010, AAA reported that the cost for insurance on sedans increased by 5.7 percent. Auto insurance companies determine premiums based on the individual risk of the insured, claims and legal fees the company paid out, and the cost of medical insurance included in the policy.
Factor in your driving record and age. Insurers measure your risk based on your driving history. If you have several points on your license from tickets, violations and accidents, then insurance companies will surcharge you. In addition, the older you are, the less your premium will be because insurance companies believe that the longer you have been licensed, the more responsible a driver you are.
Total your auto claims. If you have an extensive claims history, then the insurance company will charge you extra. Insurance companies look at your claims history to predict your future claims and penalize you with additional charges if you have filed numerous claims.
Calculate discounts on your auto policy. Most carriers offer a variety of discounts as incentives to customers who have a good driving record and who purchase multiple policies with the same company. For example, some companies give the multi-car discount for policy holders who insure more than one car. Others offer the no claims discount for drivers who have no claims or none within a certain time period. Other auto discounts include good student, multi-product, senior and new car discounts. You should check with your insurance agent to determine what specific discounts your carrier offers and how you can qualify.
Assess your garaging location. Where you live plays a major role in how much you pay for auto insurance. Insurers review the number of claims that were paid in your area and determine if it is high risk. If there are a large number of thefts and vandalism claims, then you will pay a higher premium.
Evaluate your car. Each insurance company has a rating system for different vehicles. Most carriers use the car rating system created by the Insurance Services Office. This system uses a rating scale of one to 27 to evaluate the safety of the vehicle, cost and theft data. The older your car and the less expensive it is to repair, the cheaper your insurance.
Consider your vehicle use. Insurance companies base a percentage of your premium on how far you drive daily and if you use your vehicle for commercial purposes such as transporting people or merchandise. Driving more increases your exposure to potential accidents and using your vehicle for business adds more liability risk.
Review your insurance score. As of 1995, insurance companies started using credit scores to help determine how much to charge in premiums. Your credit score is then converted to an insurance score. Insurance companies do not disclose their formulas for how they compute your insurance score, however, some have indicated that it’s based on your credit rating and claims history. The better your credit score, the lower your insurance premium.
Add the coverage in your policy. Your policy includes liability coverage that consists of bodily injury and property damage. There is also a personal protection section that covers you for medical payments in case you are injured in an auto accident. In addition, coverage to your vehicle includes comprehensive that covers theft and vandalism, and collision. Contact your agent to discuss the specific coverage in your policy.