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How Cars Drive Auto Insurance Premiums

Countless variables go into the calculation of auto insurance premiums. From your driving record to your credit score, these variables all work together to help underwriters determine how much you will pay for your insurance policy. One of the most significant variables is the insured vehicle itself. The properties of the car you drive and the way it is viewed by auto insurers in terms of risk will go a long way toward the determination of that all important annual premium. This is especially true of policies that include collision and comprehensive coverage.

Collision and Comprehensive Premiums

Industry experts tend to estimate that the premiums we pay for collision and comprehensive account for about half of the cost of an average policy. These costs can and do vary widely for a number of reasons, but just taking that average as a baseline, it is clear that the type of car you drive will have a tremendous impact on the price you pay for auto insurance. A large part of what goes into the calculation of comprehensive and collision premiums is the average loss history of the vehicle being insured. That average loss history tells the insurance underwriter not only how frequently a particular vehicle gets stolen, but also how often it is involved in accidents, how expensive those accidents tend to be, and so on.

Loss history gives underwriters important information about how much cars cost to repair when they are damaged as well as full replacement costs. In general, the model vehicle you choose will not move your liability premiums all that much one way or the other, but there are some cases where exceptions prevail. Most of them involve sports cars, which most everyone knows cost more to insure in general anyway, so this fact should come as no surprise. Sports cars are more likely to be involved in accidents as a general rule, and this fact increases your likelihood of being liable for damage to someone else's car. So driving a sports or high performance car may do more than just increase your collision and comprehensive insurance rates.

Save on Your Insurance Premiums

If you are car shopping and would like to include the element of auto insurance costs as part of the decision making process, you should investigate vehicle ratings by the Insurance Services Office (ISO). The ISO reports to the insurance industry on actuarial and statistical loss trends. The group publishes its findings in a manual utilized by the industry. The manual includes ratings for each vehicle based on average loss history. Each vehicle is assigned a number correlating with its loss history [1]. The higher the number, the higher the rating and the higher the premium the vehicle will usually receive.

These ratings are certainly not the only factors taken into consideration. Some insurers may rely heavily on them in setting their rates, others may only marginally refer to them, and still others may not use them at all. The group also does not disclose exactly what formula it uses to determine the ratings other than to refer back to loss history. A minivan worth the same amount of money as a sports car of the same model year is unlikely to generate the same level of theft losses as that sports car if both are parked in the same zip code and all other factors are equal. Another thing to bear in mind as a buyer is that insurance rates for different versions of the same vehicle with different options packages are likely to have much different loss histories and thus different insurance premiums attached to them.

To save on your auto insurance premiums, understand going into a vehicle purchase that many different factors can weigh in on the cost of your policy, and do the research necessary to ensure you end up with a plan that you can afford. The monthly payment you make on a car, truck, or SUV is only the first component of its overall cost to you as an owner.

Check Vehicle Safety Ratings Online

One way to ensure that you end up with a vehicle you can actually afford to ensure is to look at vehicle safety ratings and other similar data online. They are available on many major insurers' websites, and manufacturers also carry extensive safety information on their sites as well.

Obviously, beyond that you could also simply get some free quotes for insurance coverage on any car you're interested in purchasing. The more information you have on a vehicle, the more exacting these quotes can be. Take the time to understand how the make and model of the car you drive can influence the price you pay for your annual auto insurance policy premium.

[1] Retrieved 2010-04-13.



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