understanding your insurance policy

understanding your insurance policy

3 Main Reasons Why Car Insurance Rates Vary Widely

by Tuĝba Van Den Heijkant

Different insurance companies use different factors to rate the costs of car insurance. You and your friend could have the same car model insured by the same company, but you may end up paying widely varying insurance costs for the same policy.

Some factors used to determine insurance costs like age and gender are beyond your control. However, others like safe driving, maintaining good credit, and choosing insurance companies with the cheapest rates are within your control.

Below are some most common reasons for disparities in auto insurance rates.

The Level of Coverage You Choose

The level of auto insurance coverage you choose will significantly impact your insurance's overall cost. For example, if you choose policies with minimal levels of coverage, you can pay up to half the amount of someone who opted for a full coverage car insurance policy. 

As expected, the higher the level of coverage you choose, the more benefits you gain in the long run. For instance, a full coverage policy entails collision and comprehensive coverage policies, which protect your car against theft, vandalism, or damage in a crash regardless of the cause. You're the one to weigh between the additional benefits and the costs involved before choosing your level of coverage.

Your Characteristics

Your insurance company will often check your details such as age, gender, education level, and marital status before determining your insurance cost. For example, if you're younger than 25, you're considered inexperienced thus more likely to cause accidents. Therefore, you'll pay higher rates if you're younger than 25.

Female drivers are typically given lower rates than male drivers. In addition, some insurance companies will charge married drivers less than separated, widowed, divorced, or single applicants. If you're highly educated, you're also likely to be favored as most insurance companies believe highly educated people file fewer claims.

Your Credit Score History

Another significant factor used to determine how much you pay for your car insurance is your credit score history. If you have maintained a culture of paying your bills on time and gaining high credit scores over time, then your chances of paying less for car insurance are high.

However, this is only applicable in select states, as some states ban credit score history when determining the cost of insurance. Suppose you have a poor credit score and live in a state that uses credit score history to determine the car insurance cost; it would cause you to have higher insurance premiums. You may end up paying as much as double the regular price.

For more information about auto insurance coverage, contact an insurance agency.


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understanding your insurance policy

You keep a copy of your insurance policy in your file drawer, but do you know how to read and understand the policy? Having an insurance policy will protect you from losses, but it won't protect you from all losses. To get a better understanding of what your policy will and will not cover, read through this blog. You will learn about all different types of insurance policies and learn the terminology used in the documents that you have read. Hopefully, by the time you have read through the content here, you will know exactly where your insurance policies are lacking so you can make changes.