Car Insurance Rates

Do you know what affects your car insurance rates? Image via harry_nl on Flickr

If you have recently gone through the process of reassessing your car insurance policy, you know that it can be a confusing and sometimes frustrating experience.  The difference between one company’s quote and another company’s quote can be minimal or massive and it isn’t always easy to compare apples to apples since companies package their products differently.  Since most companies use complex actuarial formulas to determine their rates and proprietary processes for quoting, you may not ever be able to understand why two policies that seem the same can carry such different price tags.

However, you do have some control over the cost of your car insurance if you understand how your decisions and your actions can impact the rates insurance companies are willing to give you.

Here is an overview of the 7 most important things that can affect your car insurance rate and which you can change to get a better price.

1.     You

Unfortunately, some of the factors that contribute to your auto insurance rates are things about you that you can’t change like your age or gender.   There are some personal details that affect your rates, like where you live and what you do for a job that can change how much you pay for car insurance.  If you are thinking about moving to another town or state, it may be worth it to find out if your insurance rates will be higher or lower in your new location.

2.     Your Car

According to the Insurance Information Institute, the cost of your car insurance is driven in part by the car you drive.  The insurance company looks at things like the original, replacement, and repair costs, safety rating, and prevalence of theft for your car to determine your rate.  This is why it costs more to insure a brand new car even if your driving record and coverage remains the same.

3.     Your Driver Profile

Insurance companies also look at how many miles a day you drive to and from work as part of determining how much your policy will cost.  The more miles you drive, the more likely it is that you will be in an accident and file a claim which makes your rates higher.

4.     Your Driving History

How you drive has a big impact on your car insurance costs.  If you have points on your license from past moving violations, your costs will be higher.  Companies consider your driving history as an indication of how safe a driver you are and safe drivers don’t do things that result in moving violations.

5.     Your Credit History

Depending on the state you live in, your credit history may be a factor in how much you pay for car insurance.  Insurance companies believe that people who are conscientious about their financial affairs are less likely to take risks behind the wheel.  Additionally, actuarial research has shown that how you manage your money can predict how many insurance claims you are likely to file and how big those claims are likely to be, according to the Insurance Information Institute.

6.     Coverage

The coverage you choose including limits, deductibles, and exclusions can have a big impact on the price you are going to pay.  If you choose comprehensive coverage, your costs will be higher.  If you choose a higher deductible, your costs will be lower.

7.     Claims

Your auto claim history is also a factor in how much your insurance will cost.  If you have a history of claims, your rate will be higher as past claims history can be an indicator of the likelihood of future claims.

While there are many factors that affect your car insurance rate that you cannot control, there are some things you can do to keep your cost low.  Drive carefully, stay on top of your credit score, and choose the right coverage for your needs to keep the price you pay for your auto policy as low as possible.

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Living Room Possessions

Do you know everything you own? Image via Flickr

You come home from visiting your parents to a yard full of fire trucks and a pile of rubble that used to be your family home. Everything you own is gone.  Could you sit down and make a list of every piece of property that was in your house?  Do you know when you bought each item and how much you paid for it?  How would you prove to the insurance company and the IRS that you did in fact own a 57” television or an antique desk owned by someone famous?  Most importantly, do you know that if you experience a loss, you will need to be able to do these things in order to get your homeowner’s claim settled to your satisfaction?  Once you look at it from this perspective, it is easy to understand why it is so important to create a home inventory before you suffer a loss.

How a Home Inventory Helps You

According to the Insurance Information Institute, there are three circumstances in which a home inventory can help protect you.   First, a home inventory helps you understand the true value of the things you own.  This can assist you in determining how much coverage you need when you are purchasing or renewing your homeowner’s or renter’s policy.  Second, if you have a loss, a home inventory removes the need to try and remember all the details of what was lost and provides an easy way to substantiate your claim.  In the aftermath of a personal tragedy like the destruction of your home, it can be difficult to remember everything you lost. This may result in you receiving less money that your claim is worth as the insurance company can only pay for the things you remember.  Third, the information and receipts kept with your home inventory can help you substantiate your losses on your tax return.

Where to Start

Creating a home inventory will take time and effort, but it can be as simple or complex as you decide to make it.  You can start with a notebook and a camera and go from room to room documenting the contents.  You can choose one of the many home inventory software packages available online to guide you through the process.  If the task feels overwhelming, break it down into smaller pieces.  Start with a room or a category of belongings.  Whether you start with your newest possessions or the most valuable ones, how you start matters far less than the fact that you are on the way to protecting yourself and your family.

What Should an Inventory Include

There are several things you need to include for each item in your inventory.  First, you need to capture the pertinent information about the item including what it is, a short description, where you bought it, when you bought it, how much you paid for it, and any make, model, or serial number.  Next, you need a photograph or video record that shows the item.  Last, you need the original purchase receipt, if you have it or an official appraisal if the item is a big ticket or high value item.

Where Should You Keep Your Inventory

One of the most important things about your home inventory is that you cannot keep it in your home.  Store a copy of your home inventory with a friend, family member, or in a safe deposit box at the bank.  When choosing a location to store a copy of your home inventory, you need somewhere safe that is easily accessible if you experience a loss.  Don’t forget to update your inventory as time goes by and your possessions change.

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