4 Important Things To Understand About Auto Insurance

Posted on: 28 March 2022

If you own a car, you probably have some form of car insurance. But do you understand how your car insurance works? It is essential to fully understand how your car insurance works so that you can make sure that you have the coverage you need. 

Insurance Prices Vary by Company

It is essential to check around with different insurance companies and see what they will charge you for car insurance. Don't assume all providers will charge you the same because your driving history and vehicle are stable. Each insurance company has a different formula for evaluating and assigning how risky you are to provide insurance to, impacting your premium. You could save money by shopping around and seeing what different rates businesses will provide you with. 

Don't Let Your Policy Lapse

It is essential not to let your policy lapse. Your policy lapses when you don't pay your insurance premium and your insurance is cut off. Your insurance company will generally give you a little bit of a grace period if you are late with your payments and may work with you if you reach out to them about your specific circumstances. 

If you let your policy lapse, you will be seen as riskier to provide insurance to. That is why you always want to pay your insurance premium on time and why it is a good idea to pay for it in full when it renews every six months instead of making monthly payments. That way, you never risk your policy lapsing, which can drive up the cost of what you pay for insurance.

Higher Deductibles Can be Worth It

It is important to think about your deductibles. The higher your deductible, the less your premium. A high deductible shows you are willing to take on more of the financial responsibility to pay to fix your vehicle. This helps lower your premium. 

The thing with a deductible is that it's only something you have to pay if you need to make a claim. You will want to have a saving that is equal to your deductible. Use the money you save on your premium from choosing a higher deductible to build up your savings, so if you ever have to make a claim, you have the money on hand to handle it. 

Many Factors Impact Your Rates

Various factors impact the rate you pay for auto insurance. Factors such as:

  • Age 
  • Occupation
  • Accident history
  • Driving record
  • Home address
  • Miles drove per year
  • Type of vehicle
  • Vehicle safety features
  • Vehicle safety upgrades
  • Credit history
  • Driving courses

These are just some of the many factors that an insurance company considers when deciding what to charge you. Some are factors you can control, such as your driving record and the type of vehicle you drive; others are more out of your control, such as your age. 

It is important to understand how it works when it comes to insurance. If you have questions about your auto insurance works, talk to your auto insurance agent. Their job is to make sure you understand your policy and have the right coverage for your needs.