According to a report by Statista, there were over 273.6 million vehicles that were registered in the year 2018. Out of these, how many do you think were insured? People seem to apply for life insurance, yet vehicle insurance is pushed aside to be done later, as about 13 percent of drivers are uninsured.
Car insurance is a necessity and people find it difficult to understand which is why they don’t apply for it or neglect it. It protects you in the event of an accident or theft where the insurance company pays for financial losses. When you’re shopping for car insurance, it is important to know the factors that go into the cost of your insurance plan.
- Credit Score
A 2003 study published by the Casualty Actuarial Society Forum proves that there is a link between credit scores and insurance losses from an actuary and statistical point of view. Although people say that it’s a controversy, many companies have a look at your credit score before finding out your insurance rate. A lower credit score usually means a higher insurance premium rate. Your credit score and history affect how a company will let you pay for your insurance policy. Having a good credit score gives you more options as opposed to paying a large amount of the cost upfront with a low credit score.
- Driver History
Insurance companies will refuse to give you vehicle insurance if you already have a bad driving record or history. Being in past accidents, earning tickets through reckless driving, and claiming previous auto insurance will put an insurance company off because you will more than likely make another claim because of your bad driving. Even if they do offer you insurance, it will be at higher premium rates as compared to when you have a clean driving record. Tickets won’t affect your premium rates after three years, but a DUI will affect it for ten years.
- Gender and Age
The AARP or American Association of Retired Persons is a non-profit organization that tends to the needs and interests of older adults. If you’re celebrating the big 5–0 soon, consider joining AARP for special discounts and benefits. AARP members might be eligible for programs offered by different insurance companies. Programs like these offer special discounts and benefits such as life-time insurance renewability, yearly protection discounts, car replacements, financial aids in the event of car accidents, and car towing and assistance.
- The Vehicle
Certain cars lack adequate safety and are more likely to be stolen, cause accidents, and cost a lot of money to repair. These factors related to your car need to be taken into account since they affect your insurance rate:
- Age – Although the price for repairing a new and old car is similar, older cars have a higher chance of being totaled or damaged beyond repair. In such a situation, the cost of repair is a significant amount. It makes more sense to purchase a whole new car than spend the same amount on repairing an old one.
- The size – Smaller cars are less safe as compared to larger cars, which is why they have higher premium rates even though they may have similar safety ratings. However, this doesn’t mean that this rule applies to small cars with larger engines.
- Safety – Owning a car with a high safety rating means that you have lower chances of getting in an accident. Therefore, you will have a lower premium as compared to those vehicles with a low safety rating. A safe car is one that has automatic seat belts, airbags, and traction control to prevent you from getting into an accident.
- Condition – This is another car-related factor that depends on the age or the state you have kept it in. The premium rate depends on the damage and if it is worth fixing according to the insurance company.
- Where You Live
Every insurance company considers this an essential point to consider when deciding on your insurance costs. The reason this is so important is that living in a populated/dense area such as metro cities puts you at a higher risk of having car accidents because of high traffic. Apart from this, you are also more vulnerable to car theft as compared to if you were living in a rural area with fewer people.
Decide if it is Worth it
Vehicle insurance doesn’t always have to be expensive, especially if you keep the above factors in mind before applying for it. Just like any other insurance, it is a necessity that saves you a lot if you face an unfortunate accident.