car insurance rates
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Understanding Car Insurance Rates
In America, drivers are required by law to carry a minimum amount of liability automobile insurance coverage. This does not mean, however, that you should not pay careful attention to your policy terms and coverage. On the contrary, every automobile owner should know how insurance rates or premiums are determined so that they can guard against being penalized and charged higher rates due to driving habits that can easily be adjusted.
There are basically five major sections to the auto insurance contract. These include: Declarations, Coverage, Exclusions, Conditions and Definitions. The two you need to understand best when shopping for insurance are your Declarations and Coverage sections.
The Declarations page of your policy will list personal and specific information that is unique to you. Here you will find your vehicle identification number, policy number and your policy duration. The declarations page will also list the names and ages of the drivers within your household and the make and model of your automobiles. Depending on the driving records in your household, this information could effect your rate.
An outline of your Coverage will also be outlined in your policy. This is the part of your policy that outlines what your insurer is agreeing to provide in exchange for your premium payments. Listed here will be sections such as Liability (or the portion they will cover in the event of an accident), Medical Coverage (which outlines a dollar amount that they will cover per accident/person), Uninsured Motorist (this is coverage that safeguards you against drivers who are either not insured or under insured), Collision (this is the coverage for any damage to your vehicle resulting from an accident you caused) and Comprehensive (which covers damage to your automobile in instances from damage caused by natural disasters and theft or vandalism). Your choices in these categories will also affect what premiums you pay. Choosing a higher deductible will lower your monthly premiums.
Basically, each insurance company implements their own rating system, but there are some general guidelines that all companies tend to use when deciding rates. These guidelines are used to determine the individual rate for the insured. Perhaps the greatest influence on how you are rated will be what is referred to as claim frequency. Claim frequency measures are used to categorize drivers into groups relative to the number of policies the company carries in that group. Persons who share similar characteristics with high claims groups are then charged more for their insurance coverage. This is one major reason you should definitely shop around for your coverage.
Insurance companies will also use other criteria to determine your final premium rate. Most insurers give discounts for good behavior. Incentives that may be considered by the company and yield better rates could include rewarding a good driving record, good school records, lack of recent accidents or having no recent accidents.
Rates will definitely vary from one company to another making it worth your time and energy to shop around for the best one for you and your situation. -