How does an insurance company calculate auto insurance premiums? Why does my auto insurance policy cost so much? Can an insurance company raise my premium because of tickets or accidents? Is it okay to let a friend borrow my car? Will my car be covered if my friend is in an accident? You have questions, and we have answers!
How Does an Insurance Company Calculate Auto Insurance Premium?
Your auto insurance premium is based on three primary factors:
- How long you’ve had your license.
- How many miles you drive in a year.
- How many accidents or tickets you have
The insurance company can also use a variety of secondary factors to determine premium, but the most important secondary factor is the frequency and severity of claims the company has experienced in the area where you live. Since claim experience differs between companies, the premium charged by insurance companies can greatly vary. That’s why you need to shop around.
Why Does My Auto Insurance Policy Cost So Much?
Auto insurance costs more for people who have little driving experience. Accident statistics show that newer drivers and drivers who are teenagers and young adults have an increased likelihood of accidents. As you get older and gain more driving experience, your premium will go down. However, you won’t enjoy lower premium rates if you get too many tickets or have too many at-fault accidents along the way.
Can an Insurance Company Raise My Premium Because of Tickets or Accidents?
Your premium is partially based on your own driving experience. If you have tickets or at-fault accidents, you will be charged an additional surcharge based on the type of ticket or accident for which you have been cited. The more tickets and accidents you have, the higher your premium.
What Can I Do to Save Some Money on Auto Insurance?
Comparison shopping is the best way to save money on auto insurance examples of this include:
- Savvy shoppers who keep a clean driving record will be able to find the best insurance deals with good companies.
- Taking larger deductibles and lowering limits; however, make sure that you are not putting your financial future in jeopardy by choosing low limits and high deductibles.
- Auto insurance needs to be a priority in your budget, not an afterthought.
How Do You Pay for Auto Insurance?
When an insurance company offers coverage, the full premium is due up-front. However, most insurance companies offer payment plans. These payment plans require a down payment and usually charge a small service fee for each installment. Brokers and agents may also offer premium financing options from premium financing companies. Read these contracts very carefully, as you may be responsible to pay the full premium amount to the premium financing company even if you cancel your auto policy in the middle of the term.
What Happens if I Don’t Pay My Premium?
The insurance company is only obligated to give you 10-day notice of cancellation due to non-payment of auto premium. What this means is if your premium is not in their office and applied to your account by 12:01 a.m. the day that it is due, the insurance company will send you a 10-day notice of cancellation. This gives you the chance to pay the insurance before your policy is cancelled. If the company doesn’t have your money, you don’t have the coverage, and they will not send out another notice telling you that you have been cancelled. You can see why it is very important to make sure your payment is made in plenty of time.
I am Going to College in Another State, Do I Have to Make Changes to My Policy?
You will have to give the insurance company your new mailing address and the principal address where your car will be garaged. If your insurance company does not operate in the state where you will be attending college, you will have to get new insurance in that state.
Is it True if I’m a Full-time Student with a B Average That I Won’t Pay as Much for Auto Insurance?
Some insurance companies offer special “good student” discounts. The idea behind the discount is that students who are busy studying and getting good grades are less likely to have the time to drive around partying and getting into accidents. Not all insurance companies offer good student discounts. Contact your insurance company or company representative and ask.
Is it Okay to Let a Friend Borrow My Car? Will My Car Be Covered if My Friend is in an Accident?
It’s not a good idea to let your friends borrow your car for the following reasons:
- Most standard policies will cover a friend who has borrowed your car; however, if a friend borrows your car on a regular basis, the insurance company most likely will not pay for the loss.
- Some policies exclude coverage when someone other than you drive your car.
- It pays to read and research your policy to see how your insurance company responds when an accident happens.
What Do I Do if I Am in an Accident?
There are a few important steps you may need to take right after getting in an accident:
- You need to exchange personal and insurance information with the person or person(s) involved in the accident.
- Write down names, phone numbers (work and home), license numbers, driver’s license numbers, and insurance company names and policy numbers.
- Make sure you take down witness information as well.
- You may want to carry a cheap disposable camera in your glove compartment to take pictures of the accident scene and damage to the cars and other personal property.
- If there is bodily injury, call the police and ambulance if necessary. As soon as you can, call your insurance company and give them the details of the claim.