Auto Insurance: Factors Affecting Rates

Insurance premiums are also called insurance rates. Here are some of the major factors that affect insurance rates and what you can do to lower them:

Increase your deductible. A deductible is the dollar amount you pay before the insurance company pays your claim. By increasing your deductible, you increase your share of the risk to insure you. It may seem counterintuitive -- paying more when you want the insurer to bear the risk of loss but what you really want to insure is the risk of a large, catastrophic loss.

Eliminate or reduce unnecessary coverage. Some auto insurance such as collision or comprehensive coverage is aimed at protecting your vehicle and providing for medical expenses. If you have health insurance coverage and your insured vehicle is not very valuable, you may not need the extra coverage.

Drive a car with low theft loss and accident history. Check with the Insurance Institute for Highway Safety (IIHS/HLDI) for theft loss and accident statistics of your auto. In addition, your insurer is likely to offer a discount if you use a car alarm or other anti-theft device.

Drive safely. Safe driving is an important way to avoid accidents in the first place. Put another way, obtaining auto insurance doesn't give you license to drive recklessly and endanger others. Over time, a safe driving record means fewer claims and lower risk. Insurers will reward you for these good habits. Insurers are likely to offer a discount if your auto uses air bags, seatbelts, safety-harnesses, anti-lock brakes or running lights.

Drive less. Some insurers offer discounts if you limit the number of miles you drive or use alternative transportation to get to work. The fewer miles you drive, the less likely you are to have an accident and file a claim. Insurers often discount your rates if you use alternative transportation for work.

In essence, prudence helps to lower your insurance rates. Examples of financial prudence include paying a higher deductible or obtaining lower coverage limits. Examples of driving prudence include establishing good driving-safety habits, using vehicle-safety equipment and avoiding unnecessary driving.