How Car Insurance Companies Calculate Your Premium

How Car Insurance Companies Calculate Your Premium

How your insurance premium is calculated depends on various factors. Some of the factors can be determined or selected by you, but unfortunately most of the factors such as your age, where you live or your marital status are out of your immediate control.

               

         

   

       

 

Gone are the days where only a few basic parameters determined the rate you pay. Insurance companies has come a long way and nowadays, the criteria for calculating insurance premiums has changed significantly and includes several complex parameters that are being considered to determine the premium rates. In this article we explain the main factors that influence the insurance premium that you pay for your car.

THE VALUE OF THE CAR

Insurance companies usually covers vehicles at their 'Market value', except if requested or stated otherwise. The 'market value' of a car revers to the average between the trade-in and retail price.

The trade price is the price a second hand auto dealer will pay for a used vehicle whereas the 'retail price' refers to is the value that the car 'retails' for if you were to buy it from an auto dealer. The 'trade price' off a vehicle is basically the lowest value of a used car, and the 'retail price' can be seen as the highest valuation of a used car.

Market value is calculated with this formula: Market value = (Trade value + Retail value) / 2

The premium is then calculated based on the car's market value, which takes into account the make and model, age, condition of the vehicle and the resale value, and the value of all additional accessories.

MAKE / MODEL OF THE CAR

Types of cars vary greatly - from Luxury SUV's, a family sedan to a contractor's faithful old bakkie. It can hence be expected that the make and model of a vehicle have a big influence your car insurance premium. Some vehicles would cost a lot more to repair while other cars could be more at risk of being stolen or hijacked. Remember, each car make / model has its own claim record and the insurer calculates the vehicle premiums based on its own claim experience.

The age of the vehicle will have a definite influence. Older cars are often cheaper to insure than their more modern counterparts. Older, second hand cars may be less expensive to replace, but it may be difficult to get parts for the vehicle. Big engine capacity, high speed and younger drivers are usually associated with sports cars and will raise the premium significantly whereas safety features offered with a particular vehicle would in turn positively influence your premium.

TYPE OF INSURANCE / COVER

Two main types of car insurance cover exists in the market and some variations of the two main types. Comprehensive insurance is very extensive and covers injury to other people or damage to their vehicle / property in an accident as well as your own vehicle for accidental or other damages, theft and hijack, and some 'acts of god'. It is therefore the most expensive type of car insurance.

Third party insurance is quite limited and is also the cheapest of the options. Generally, it covers you for damage to another party's vehicle and costs associated with the accidental death or injury of third parties involved in the same accident, but you are not covered in any way.
Some insurance companies may also provide a discount on your car insurance if you also maintain other policies, such as homeowners' or life insurance with the same firm.

WHO YOU ARE PLAYS A BIG ROLE

AGE

As you get older, seek out discounts at the ages of 21, 25 and even 55 which is common milestones where insurers consider a statistical reduction in the risk of a driver. When turning 60, you may be eligible for still more discounts. Check to see if your insurer offers a discount for retirees.

If you have kids below the age of 21, insure them on the parents' policy rather than a separate policy to save costs. Insuring a teen driver can be expensive, but teenagers who maintain a very good school average (Usually at least a B-average) could qualify for significant discount. Never list yourself as the main driver on a teenage driver's policy if you are not - This is known as fronting and can nullify your insurance cover with the company.

GENDER

Single males under the age of 25 are considered the highest risk and pay the highest rates. Statistics show that male drivers are involved in more accidents and female drivers, so insurance companies charge young men higher premiums than women of the same age.

OCCUPATION

Many car insurers consider education and occupation when they set rates. Even though they usually do not publicise exactly how much a premium is affected by this, specific discounts are offered for people who work in or have degrees in particular fields.
Vehicle insurance companies have found that people in the following fields are statistically less risky than other occupations:

• Educators: College professors and school teachers
• Medical professionals: Doctors, surgeons, dentists and other
• First responders: Police officers, fire-fighters and emergency medical technicians
• Scientists: Any field with suitable degree
• Engineers: A bachelor's or higher degree in Engineering or Architecture
• The Military: Active or retired military-related associations, Pilots

MARITAL STATUS

Most insurers factor your marriage status into their risk equations. Those who are married are viewed by some insurers as less risk prone, and qualifies for a discount.

EDUCATION

Almost all insurers will offer a discount to anyone with tertiary schooling, particularly persons with a degree are considered less risky than those without one. Some insurers might even offer further discounts to alumni of certain universities.

DRIVING / CLAIM HISTORY

Drivers with a good driving record with little or no previous claims may benefit when they purchase a vehicle insurance policy by receiving lower premiums. First-time drivers or drivers with no history on South African roads could expect a higher premium until they build up a reputation as a responsible driver.

WHERE YOU LIVE

Where you live and work plays a big role in the cost of you insurance premium. Urban areas, with greater population densities and heavier traffic, get higher rates than rural areas. Your specific neighbourhood or whether you live in a secure housing complex also plays a role. If your car is kept in a locked garage at night where you live or in a secure basement during the daytime where you work, you would see a reduced premium rate.

SECURITY FEATURES

The premium may be reduced if the vehicle is fitted with security features. Cars fitted with anti-theft systems such as GPS Tracking devices, visible wheel, steering locks or ignition cut-off anti-hijack systems are less likely to be stolen, and hence less expensive to insure against theft.

BUSINESS VS PRIVATE USE

If you use your car for business regularly, you would inevitably have a higher annual mileage rate. Higher than average mileage rates increases the chance of being involved in an accident which translates into higher risk to an insurer and your premium would be adjusted accordingly.

EXCESS AMOUNT

Most insurers allow you to negotiate the amount of the excess you are willing to pay. This means you can undertake to bear a fixed amount of the loss for every claim, and hence get a substantial discount on your premium. Generally, the higher the 'excess payment' value that you agree for, the lower your premium will be.

NO CLAIM BONUS

Insurance companies usually offer a 'no claim' bonus to policy holders who maintains a 'clean record' for a specific period of time. The longer the period you have not claimed, the greater the discounted premium you can expect to pay.

CREDIT RECORD

Insurers also make use your credit score as part of the criteria for calculating your insurance premium. Insurance companies see people who take good care of their financial situations, as typically a more careful type of driver. Commonly, the better your credit score, the lower your insurance premium will be.

Article Source: http://EzineArticles.com/8335629

How to Cut the Cost of Car Insurance

How to Cut the Cost of Car Insurance

Less desirable and low value cars are cheaper to insure

When I was 17 I wanted to own a Ferrari and live life in the fast lane. Even if I could have afforded the car, then I couldn't have afforded the insurance to cover it. At 17 you are brand new to the world of driving and statistically you are more likely to make an insurance claim. Mixing high-powered cars with inexperienced drivers is not something car insurance companies are super-keen about, the chance of a claim shoots through the roof with the price of the premium following it. When you are young and inexperienced, buy a low-powered, low value car to try and keep your car insurance premium to a minimum. If it is worth less then it will cost less to fix/replace when in your youthful exuberance you crash it. The same logic actually applies to everyone, the lower the value of the vehicle and the lower the car insurance policy will be in most cases. Sports and premium cars will always cost more to repair in an accident so the insurance will reflect this. New cars now feature myriads of anti-theft and driver aids that in many cases will help to reduce the cost of insurance so keep an eye on the spec sheet when looking at a new car. A good rule of thumb is that less desirable and low value cars are cheaper to insure.

Age is a concern

I mentioned it above and it bears repeating. Generally the younger you are the higher your car insurance premium. This is down to inexperience and the youthful belief that bad things will never happen to you. The statistics say otherwise, which is often a shock to an unsuspecting young driver who ends up in a crash wondering how it happened to him...Driving experience and age are usually linked and that leads to a method of reducing your insurance premium - whatever age you are you will benefit from advanced driving courses and many car insurers offer discounts for these qualifications. It may only be a five - 10 per cent saving for the course but on a premium of £1000 it's worth having the saving and it will remain with you for years, so it should be a good investment, not to mention make you a better driver.

Keep adding to the no-claims bonus

The more years you can accumulate without making a claim the better as most car insurers will offer a discount on your insurance for this. Effectively you are proving you are good business to have and because you haven't made any claims then you are a good risk for them to underwrite. There's nothing you can do here but keep your nose clean and don't make a claim. If you own a low value vehicle and dent it parking, you'd be advised not to make a claim on comprehensive insurance because it would reduce your no-claims bonus, likely to be for a small amount of money and you may even end up paying for most of it depending on excess. In that case, provided you have not caused damage to any other vehicles or property, keep quiet, fix it yourself and your saving on no-claims bonus will be sweet the following year - in time, when you have built up three or more years no-claims bonus, you can actually protect your bonus, meaning even if you make a subsequent claim you will not lose your bonus.

Convictions aren't cool

If you are an inner-city teenager then an ASBO may be a badge of honour. Insurers are less impressed by convictions though, so it is best to avoid them if you can. Minor speeding offences are certainly not in the same category as serial killer though, so if you have a couple of points it will not be the end of the world or have a major influence on your premium depending on the insurer.

If you've got a garage, use it

What are garages for? If you ask the average person they'll probably say for storing all the kids' toys, the home gym, bicycles, the freezer and tumble-dryer. I have news for you all; the garage is designed to house your vehicle when you are not using it. The fact that it puts a physical barrier between any opportunist thieves and your car is a real good thing and car insurance companies will recognise this and reduce your premium if you park in a garage overnight. Using your garage will save you money; it doesn't get any easier than that.

Anti-theft devices

Most modern cars come with immobiliser and alarms factory fitted and if you notify your insurer it will check to make sure they are to approved standards and will apply discounts if applicable. You can get other devices that slosh around in the passenger footwell until you park and then fix to generally your steering wheel or gear-stick. These are mechanical devices and some do attract further discounts if used, just do your homework before buying. Thatcham is the organisation which grades security devices and generally a decent mechanical security device will feature its Thatcham approval very prominently along with any premium discounts you may expect, so choose carefully.

Use a reputable broker

Car insurance is very big business with around 30million+ vehicles on the UK roads, so there is a wealth of car insurance companies to choose from. Ironically, the big names you are familiar with are probably in your head because of massive marketing campaigns on television, on-line etc. Regardless of the message, those marketing campaigns need to be paid for and that means they may not actually have the best rates, although the sheer scale of some of these businesses means prices will be keen due to buying or underwriting power. The best advice is to compare a couple of different prices from different companies. Call the insurer and then call a comparable competitor and then perhaps a small car insurance broker. Each one will ask you if you have a price already and you should tell them what it is. Generally if they want the business they know what to beat. The moment you get a broker saying they can't match the price then you are probably close to the best market price or else speaking with a broker that is not a specialist in the area.

A word of caution on price comparison sites

There are plenty of price comparison sites around which promise to drive the cost of your insurance policy down - Money Supermarket, Go Compare, Confused etc. They certainly do help reduce the cost of insurance as most of the major players are fighting for business on the same platform. Where these price comparison sites do not perform so well is actually advising you on the sort of policy that's best for you or your car. Would comprehensive be cheaper and more suitable than third party fire and theft? The point is you cannot ask the price comparison site for any advice, that's where car specialist brokers have the edge. Compare it to buying a new house, would you buy one without a survey? You might and then when it subsides into the sea you'll be praying your insurance will cover it...the point is you shouldn't buy insurance without talking with an expert either.

Pick up the phone

The internet is a great shopping and selling tool, you know my feelings on that from previous articles...but I suggest if you speak to a real person at a brokerage then you have a much better chance of getting cheaper car insurance. They can ask more questions, clarify your requirements and if needed they can even delegate the rate (set the price themselves) if they really want the business. There is no substitute for human contact, just make sure you speak to at least three different brokers to get a true comparison.

Got a nice postcode?

If you live in a postcode where there are few thefts and claims then your insurance premium will be lower than living somewhere that is a known crime hotspot. If you can afford it, move to a posh area and you'll benefit from lower insurance premiums. Not the easiest way to save on the cost of insurance for sure...

Mileage and use

The more miles you drive the more chance you have of being involved in a claim. It's simple statistics. The fewer miles covered, the less your insurance premium should cost. Don't tell lies though, if you exceed the stated mileage by a distance then it could invalidate your insurance.

Married with kids?

Insurers like selling car insurance to married couples mortgaged and with kids and jobs. You are very easy to credit check and generally display responsible behaviour which hints at a lower risk for the insurer. That can reduce your car insurance quote.

Don't modify your car

We all see the bling bling cars that haunt Supermarket car-parks late at night and whether you like the tacky neon colours and loud exhausts is neither here nor there - the fact is that any sort of modification is likely to hike your car insurance premium. Modifications can draw attention, invalidate warranties and in the case of loud exhausts, can also be illegal (if above the noise limit). If illegal, then it could invalidate your insurance as well. The fact is that car manufacturers spend a lot of time developing their products so they work well and if you modify them then it's all out the window and your insurer will be scratching his head wondering what he should charge - and it will almost always be more than a standard vehicle.

Article Source: http://EzineArticles.com/2395148

How to Find Cheapest Car Insurance - 6 Things You Need to Learn About

How to Find Cheapest Car Insurance - 6 Things You Need to Learn About

Finding cheapest car insurance is not an easy job and requires a lot of research work for any normal person seeking a cheap insurance plan. The type of insurance that you want or need will be a factor in the cost of your insurance; your choices are fully comprehensive, third party fire and theft and third party only, there is not much point in getting fully comprehensive cover if your premium works out at more than the value of the car.

But don't be discouraged, because the cheapest car insurance really does exist. However, when you are looking for insurance for the cheapest price, there are several things you need to keep in mind before making your final decision.

Know the Coverage You Need and comparing coverage types that are the same. The most important thing to keep in mind when purchasing insurance is to make sure you get the coverage you need. While foregoing coverage could help you find the cheapest car insurance policy in the short term, it could leave you paying more out of pocket in the event of an accident. The first step in buying insurance is to know how much coverage you need. When you are looking for the best deal on your insurance and you are checking out various companies, make sure that you are comparing coverage types that are the same. The only way to get an accurate account of companies offering the best possible rates, you need to make sure that you are comparing identical types of coverage as well.

Check out the company and its history thoroughly before agreeing to a policy. You don't want to be dealing with a company that has poor customer service and treats its clients poorly. The Better Business Bureau can provide you with information regarding whether or not the company has had any complaints filed against them. If there are a great deal of complaints, you should probably look elsewhere for car insurance. This company probably isn't right for you. You should also look into hidden charges when you compare cheapest insurance. You might not know it, but the insurance company may be charging hidden fees in the policy being offered to you.

Comparing rates car insurance company online. Find the cheapest insurance quote online and get your insurance coverage and insurance policy fast by comparing rates of major insurance companies online. It is for those who have no records of claims for past four years or more. You must find out the cheapest group insurance company for new cars before you buy your policy.

Compare policy features. I would advise anybody shopping for insurance to compare deals not just on price but also policy features, some of which may be outlined in the small print. Some two percent of participants in the survey named breakdown cover and a no claims bonus as the part of a deal most important to them.

Contact an insurance specialist. The cost of your car depends on several factors it is wise to do a little research on this in advance. The best way for cheaper insurance quote will contact an insurance specialist that can find the cheapest insurance car, which was shown on your needs. The cost of the vehicle is determined by several factors, such as the value of the car, like your car, what kind of security measures in your vehicle, which are the owner and driver of the vehicle.

Comparing Multiple Car Insurance Quotes. The best way to find the cheapest insurance is to compare multiple insurance quotes. Your rate can vary by hundreds of dollars from one company to the next, so the only way to find it is to shop around. As you comparison shop for insurance for the cheapest price, don't be fooled or confused by the abundance of discounts available. If you have a spotless record in terms of never filing claims, you have the right to a no-claims discount, which might lead to the cheapest insurance coverage.

So, when you are looking for the cheapest car insurance, there are many things to consider. Keep each of these things in mind when you are looking for insurance that is cheap, and not only will you find a great price, but you'll find quality insurance for your needs as well.

Article Source: http://EzineArticles.com/2356183

Cheap Car Insurance Is Easy To Get Online

Cheap Car Insurance Is Easy To Get Online

Car insurance is an added expense over and above the considerable expense of owning and maintaining a car, particularly when you consider all the other types of insurance that are necessary in today's world, so it is only natural to want to get cheap car insurance without compromising on coverage. Luckily, cheap car insurance is well within your reach, provided you know how to get it.

The Internet is the best place to start when shopping for cheap car insurance. Insurance companies are now geared to provide you with a quote online but you will still need to shop around and compare quotes, and keying in your details separately for each insurance company you want a quote from can be a hassle. The answer is to use an insurance company that allows you to get multiple quotes online. You enter your details online, and the insurance company will draw up individual quotes for a number of insurance providers (sometimes as many as eight) and send them to you all in one go. How cool is that? You will even save on your phone bill because you won't need to use the phone to get your quotes.

There are a number of other things you can do to reduce your car insurance besides getting cheap car insurance quotes online. You can increase your excess which will decrease your premiums on a monthly basis but substantially increase the amount you will have to pay out of your pocket when you claim. Accidents happen when you least expect them so you need to be sure you can afford to pay such a high excess if you go this route. All new cars now have to be insured before they leave the showroom floor these days but you can limit the amount of insurance you will have to pay by purchasing a cheap or moderately priced car. To insurance companies, cheaper cars mean cheaper repairs which means they will have to fork out less. The result is a lower premium for the consumer who buys a cheaper car.

Ensure that your car is parked in a secured area like a garage or lockable car port at night, and consider fitting additional security measures such as a gear-lock, as this can help you get a cheaper package. Speaking of packages, it is often cheaper to have a combined coverage package, where you insure your car, home and possessions with one insurance company than several separate premiums with different companies. Avoid driving a high-risk vehicle or expensive car if you can. High-risk vehicles are the makes and models of cars that insurance companies consider to be vulnerable to theft and hi-jacking, and your premium will be raised accordingly. Also, expensive cars tend to be expensive to repair, so you can expect your insurance premium to be higher than if you had a cheaper car.

As you can see, there are a number of ways to get cheaper car insurance, but cheaper is not always better because it can mean you aren't adequately covered. You need to be clear on what your insurance status is and what adequate coverage costs, and then decide how far over and above a reasonable insurance premium you want to go with extras.Car insurance is an added expense over and above the considerable expense of owning and maintaining a car, particularly when you consider all the other types of insurance that are necessary in today's world, so it is only natural to want to get cheap car insurance without compromising on coverage. Luckily, cheap car insurance is well within your reach, provided you know how to get it.

The Internet is the best place to start when shopping for cheap car insurance. Insurance companies are now geared to provide you with a quote online but you will still need to shop around and compare quotes, and keying in your details separately for each insurance company you want a quote from can be a hassle. The answer is to use an insurance company that allows you to get multiple quotes online. You enter your details online, and the insurance company will draw up individual quotes for a number of insurance providers (sometimes as many as 8) and send them to you all in one go. How cool is that? You will even save on your phone bill because you won't need to use the phone to get your quotes.

There are a number of other things you can do to reduce your car insurance besides getting cheap car insurance quotes online. You can increase your excess which will decrease your premiums on a monthly basis but substantially increase the amount you will have to pay out of your pocket when you claim. Accidents happen when you least expect them so you need to be sure you can afford to pay such a high excess if you go this route. All new cars now have to be insured before they leave the showroom floor these days but you can limit the amount of insurance you will have to pay by purchasing a cheap or moderately priced car. To insurance companies, cheaper cars mean cheaper repairs which means they will have to fork out less. The result is a lower premium for the consumer who buys a cheaper car.

Ensure that your car is parked in a secured area like a garage or lockable car port at night, and consider fitting additional security measures such as a gear-lock, as this can help you get a cheaper package. Speaking of packages, it is often cheaper to have a combined coverage package, where you insure your car, home and possessions with one insurance company than several separate premiums with different companies. Avoid driving a high-risk vehicle or expensive car if you can. High-risk vehicles are the makes and models of cars that insurance companies consider to be vulnerable to theft and hi-jacking, and your premium will be raised accordingly. Also, expensive cars tend to be expensive to repair, so you can expect your insurance premium to be higher than if you had a cheaper car.

As you can see, there are a number of ways to get cheaper car insurance, but cheaper is not always better because it can mean you aren't adequately covered. You need to be clear on what your insurance status is and what adequate coverage costs, and then decide how far over and above a reasonable insurance premium you want to go with extras.

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