Car insurance is necessary, but it can be confusing. Apart from the mandatory liability insurance, what else should you buy? And how much liability insurance should you carry? What other coverages are not required? How does your insurance premium get priced? Let’s try and throw a little light on the things that car insurance companies don’t often share.
Car or Driver?
Car insurance typically covers the car and not the driver. So if someone else drives your car and gets into an accident, the insurance will cover it. But all uses may not be covered. So, check the fine print. You could also exclude certain drivers who live with you from the policy if you don’t want them driving your car and hurting the policy cost.
Age
The youngest and oldest drivers are typically charged the highest premiums.
Type of Car
Your insurance premium depends on the type of car. What matters is its total value, the type of vehicle, and its safety rating. Other variables that impact insurance cost are the number of miles driven annually, where it’s parked, and the number of expensive extra features.
Driving Record
Every claim and even inquiring with your agent about a claim gets stored in a database. Any recent accidents or traffic violations get recorded too. These will make your insurance premiums go up. Even if you decide to switch insurers, they’ll have access to your records and will consider all details.
Insurance Reports
Insurance companies use two databases – Comprehensive Loss Underwriting Exchange (CLUE) run by LexisNexis and Automated Property Loss Underwriting System (A-PLUS) run by Verisk Analytics. Any claims you make remain here for five to seven years, and the Fair Credit Reporting Act allows you one free copy of your report every 12 months. If you spot inaccuracies or incomplete information, you can dispute and correct it.
Credit Score
People with poor credit scores are considered to be riskier than people with stellar scores. So insurance companies often hike premiums for people with poor credit.
Residence
If you live somewhere with high crime rates, car theft, and vandalism, your insurance premium will be higher. In some states, it is 64% higher than others.
