Risk Factors and its Effects on Car Insurance Premiums

by Bianca Villares


The premium that drivers pay for auto insurance depends on certain factors, specifically called risk factors. Based on previous driving records, miles driven per year, age, etc, a driver’s risk factor is evaluated and is directly proportional to the insurance premium he or she must pay.

To make sure you pay the lowest premiums possible, think about these factors and what you can do to make them advantageous for your situation:

Driving Violations and Accidents
Insurance companies have one thing in mind: a significant number of accidents or moving violations equals to greater accident risk. Some insurance companies even penalize drivers with a bad record, which usually lasts for a number of years. Bottom line is, the more driving violations you have, the higher the premium. If you want your premiums to decrease, keep your record clean.

Vehicle Type
This is where insurance companies and car owners understand each other’s demands. Car owners of the latest, most expensive models usually get insurance with better coverage, which means higher premiums. Cheap cars cost less to insure because car owners have the option to disregard other types of coverage that are not applicable to their vehicles.

Occupation
No, they don’t check your salary. Not yet, at least. For insurance companies, a significant relationship exists between the business use of your vehicle and the premium you must pay. If your job description includes long hours of driving such as being a door-to-door salesman, expect a higher premium.

Credit Rating
A better credit rating will save most drivers from higher premiums since many insurance companies believe that poor credit history is susceptible to higher risks.

Geography
The place where you reside can also dictate your insurance premiums. Living in congested cities or areas with a lot of traffic prone to vehicular accidents raises the risk factor of drivers. High crime rate, specifically of vehicle thefts, also leads insurance companies to charge higher premiums.

Education
Drivers with higher educational attainment are charged with lower premiums.

Others
Years of driving experience, lower miles driven each year, theft protection devices and multiple cars and drivers also offer opportunity for premium discounts.

Some factors which cannot be adjusted, such as age, gender, and marital status can also affect a driver’s risk factor. Most insurance companies see drivers under the age of 25 with higher potential risk of being in an accident. Women are also considered as safer drivers than men, while a married person has lower premiums compared to a single one with the same driving record.

By calculating your risk factors, you can easily get lower premiums which could save you a lot for the years to come. Just remember though, each insurance company has a different take on insurance premiums, so it’s always best to compare the rates of multiple companies for your particular situation.

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The Basics of Insuring a Used Car

by Bianca Villares
Car insurance protects owners from liability and financial problems in the event of an accident or theft. In both cases, getting a car insured follows basic guidelines. If you intend to insure a used car, you may want to narrow down your options. Since used cars are less valuable, you should carefully consider what type of insurance and how much coverage you should get.

Here’s a list of the basic insurance options available for car owners.


Bodily Injury and Personal Property Liability

These are mandatory in most countries. These two components insure and provide financial protection for the policyholder. In the event of an accident resulting in injuries or damage to the property of other parties, the policy enables the at-fault driver to pay for the damage. Most countries and states require a minimum level of coverage. If you’re willing to pay more, you can opt to get a liability coverage which exceeds minimum requirements.


Medical Payments and Uninsured Motorist

Unlike the liability coverage, medical payment coverage is not required in some countries. Since it pays for medical expenses of the policyholder and his passengers injured in a vehicular accident, drivers with adequate health insurance may not need this. The Uninsured Motorist covers injuries and damage incurred from accidents where the at-fault motorist does not have any car insurance. If buying these types of insurance is optional in your country, consider your needs and existing financial commitments.


Collision and Comprehensive

Collision and Comprehensive policies are usually taken on brand new vehicles because of their higher values. For used cars, you should still consider them.

Comprehensive and collision covers the cost of repair or replacement of your vehicle due to collision or other accidents and even theft. The cost of damage incurred through vehicle or object collision is paid through Collision coverage, while Comprehensive pays for the damage caused by an accident other than collision such as theft, vandalism, or fire.

The car’s value is important in assessing the need for this coverage. You should evaluate your car’s total worth compared to what you will have to pay out of your pocket for the premiums.

Identify the insurance that works best by understanding your needs. Determining the value of your vehicle can help you choose the most cost-effective coverage, saving you real money while protecting you from liability at the same time.



About the Author:
Bianca Villares is a member of the IBC Japan Research Team, a company that specializes in exporting used cars from Japan. She holds a Bachelor's degree in Mass Communication.

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