Friday, July 23, 2010


Are you trying to buy car insurance for the first time? It can be confusing and frustrating. How are the premiums determined? Where do you get insurance? Can you get insurance before getting your first car? Can you buy it with the car?

Here are the answers to your questions.

Factors in Determining Premiums

Car insurance companies base their premiums on 4 factors:

Who is the Driver Being Insured Basically, the insurance company is looking to see how likely it is that the driver will file a claim. The insurance industry has collected a lot of data and determined some statistical models that they use to determine their risk. The types of information that they will want to know about the driver are:
How old is the driver? Generally, very young or very old drivers are more risky.
How long have they been driving? Generally, the longer you have driven, the less risky you are. More practice makes it more likely that you will drive safely.
What is their driving record? Drivers that get tickets and have accidents will be more risky.
What is their marital status? Married folks statistically have less accidents
How many miles total will driven in next year? The less you drive, the less likely you are to be in an accident.
Type of vehicle being insured. Basically, the more conservative / safer cars have lower premiums because they are more protective of the driver and passengers. This keeps the medical, and other, costs down when an accident occurs.. Also, older cars have less value so they also have lower premiums

Where do you live? Every minute that your car is on the road, there is a chance that it could be involved in an accident. Two things determine how high this chance is for your car: how many miles you drive and the number of other cars that you could encounter. The miles you drive has already been answered as part of the driver information. The congestion number is determined by where your car is driven - where you live. Places with higher traffic have a higher number of accidents and this causes higher premiums.

Insurance company. Each insurance company has a book of business. The company needs to charge enough in premiums to cover their costs of claims and their overhead. If the company is running their business well, then they can charge less as premiums and still stay in business. A larger company can also balance the costs of one kind of insurance by the profits from a different kind of insurance. Since the companies are always adjusting their business, it makes sense to shop for new insurance occasionally to find out if your premium is still as cheap as you want it to be. If it is your first time getting car insurance, you can lower the premiums by doing the following:
Start on your parents policy. Your parents are likely to have a preferred plan, which is cheaper than standard or high risk insurance that a young person will be forced to buy on their own.
Keep a clean driving record
Check for good student discounts
Drive a conservative and/or older car
Buy only the minimum required coverage