Auto Insurance Quick Guide: How Rates Are Calculated
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Where do you live?
Car insurance rates are generally higher in metropolitan areas. Cities
with their considerably higher density of traffic and people, mean that
there is a higher likelihood of accidents, theft or vandalism claims.
What's your driving record?
Your driving record is based on the number of years you've been licensed
to drive, your previous insurance experience, and the number of at-fault
accidents (usually up to the last 6 years but sometimes even longer.) If
you drive safely and defensively to avoid convictions and at-fault
accidents, your premium will be lower than if you've had a conviction or
accident. In a nutshell, the better your driving record, the lower your
insurance rates.
What optional coverage limits and deductibles do you choose?
When you purchase your automobile insurance, you can select some of the
coverage limits and deductibles.
Most states require the purchase of at least a minimum amount of
coverage for Third Party Liability. If you choose a higher coverage
limit, you can expect to pay a correspondingly higher premium. If you
select a lower deductible, you'll also pay a higher premium. Why?
Because in both examples, you're asking the insurance company to assume
more financial risk if you're involved in an accident or claim. If you
select a lower limit of coverage or a higher deductible, you can reduce
your premium costs, but you also shift more of the financial burden of
liability and repairs onto yourself.