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Car Insurance Premiums

Car insurance premiums are a mandatory and necessary expense for motorists. If you plan to drive, you must carry car insurance. As is the case with most consumer purchases, the price and product can vary so it is wise to compare policies before paying for car insurance premiums.

What exactly are car insurance premiums?

Car insurance premiums are periodic payments to the companies that will keep your vehicle covered in cases where there are accidents or damage to your vehicle.

Unlike other consumer commodities that generally have a set price, car insurance premiums differs greatly between drivers and companies.

Companies set their rates and subsequently their car insurance premiums based on risk. This risk is the financial risk that will be absorbed by the coverage provider in case there is an accident. It is a statistical figure that is based on the chances or odds that a particular driver will have an accident. The reason that this is important is because accidents, even minor ones, are extremely costly. The more accidents that are incurred by a driver will result in the more money that is paid to the company in terms of car insurance premiums.

Young drivers under the age of 25 statistically have a much higher accident rate than older drivers, hence higher car insurance premiums. Since their risk is much greater, they can expect their car rates to be much higher. Unfortunately, all young drivers are grouped into one category leaving them without a lot of control over their rates. A young driver can have a spotless record but because of their age, they can expect to pay higher car insurance premiums.

Car insurance premiums and your driving record are closely tied together. This should come as no great surprise to drivers because the worse that their driving record is, the higher the risk that the companies will rate them.

How do car insurance premiums and your driving record affect how much you will pay?

There are numerous factors that will be added into this calculation. Obviously, a driving record that is free of accidents and claims will command a much lower rate than one that has a lot of incidents on it. Therefore, if you are a safe driver and can avoid accidents, you can save a lot of money on your car insurance premiums.

How much will one accident increase the car insurance premiums?

For most drivers, an automobile accident is inevitable at some point in their driving career.

Is one accident that disastrous to your driving record and the company?

If you are involved in an accident that is your fault, almost always your car insurance premium will increase. This is because the company will have to pay to cover the expenses of the accident. However, there are other elements that are figured in and is going to cost you more money because of this.

If your car insurance premiums coverage was not sufficient to cover the cost of the accident, your company will, more than likely, require you to increase the rate amounts. As the coverage amount is increased your premiums increase will increase at a comparable rate.

The amount that your car insurance premiums will increase differs by company. Some companies prorate the increase to your car insurance premium by the amount of time that a policy holder has been with the company. It is a 15% surcharge for those that have been insured for less than 3 years, 10 % for those less than six, and so on.

Basically, if you have an “at fault” accident, you are at the mercy of the company on how much your car insurance premiums rate will increase. Your only option is to look for other companies that will insure you.

How long will your car insurance premiums and your driving record be affected by an accident?

Depending, again on you company, an accident can stay on your record from 3 to 7 years. Therefore, one “at fault” accident can increase the premiums for up to 7 years; this can be substantial. Car insurance premiums and your driving record can be affected not only by accidents but by moving violations as well. Most states assign points to a driver’s license based on the severity of the infraction and, if enough points are amassed, then the license can be suspended. All of this information is then put on the driver’s record that is public information. Since it is public information, companies can and do have access to this information and they will periodically review the driving records of their policy holders and make adjustments to their policies.

States and companies vary on the amount that they will raise the premiums resulting from moving violations. Some states have laws against companies raising rates after one ticket while others don’t. Since states differ, it is hard to illustrate a common charge but Tennessee does offer an example. A ticket in this state will end up costing the driver $775 per year. The breakdown is as follows: $581 will be the increase in car insurance premiums and, if they had a safe driver discount, it will be lost; this amounts to a 25% savings or $194 a year. The average increased car insurance premiums cost will be about 20%.

Most companies do offer a safe driver discount, usually about 25%, for drivers without accidents or moving violations. If you do receive a ticket, the savings and the discount will generally be lost which makes the ticket even more expensive. If additional violations are received, plan on the premiums going even higher and, in worst case scenarios, policies can be cancelled or not renewed.

Car insurance premiums are a costly expense to most households so drivers need to strive to get the lowest rate possible. The cleaner that your driving record is will equate into the less that you are going to have to pay to insure your car.


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