There are many factors insurance companies use to determine premiums. Quite a few are beyond personal control. These factors would include an insured’s gender, age, residence, and perhaps even marital status. Several areas are under personal control.
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One area that does have a direct effect upon the amount of premium paid is choosing a deductible. People seeking to pay lower premiums can choose a higher deductible. Other factors include the kind of vehicle to be insured as well as your driving history.
Premiums can also be called policy payments. This is the amount an individual pays to obtain an insurance policy. That amount an individual pays is dependent on the factors noted above. Additionally, whenever a person is involved in an auto accident, the amount of premium required to be paid can increase.
Other factors determining the amount of premium include other scenarios that are well within personal control such as making sure to keep your policy in force at all times. Drivers ticketed for not having insurance will be targeted as greater risks requiring a higher premium payment. Also, in order to keep premium amounts in check, always make payments on time.
Careless drivers receiving many traffic citations such as excessive speeding, reckless driving or driving under the influence may also be subject to hefty premium increases. Purchasing a costlier vehicle, perhaps a sports model, will also contribute to increased premiums.
Maximum Premium Raise has a Limited Timeframe
Despite the reason an insurance policy premium may be increased: accident experience, traffic violations or as a result due to frequent lapses in coverage, the insurance company can only apply higher premiums rates for a three-year maximum. That is as long as no other infractions like one triggering the original increase take place.
This means that if your premium was raised due to being in an accident, if you are accident-free for the next three years, your policy premium will be decreased at the end of this period. Keep in mind that the clock ticking off this three-year period initiates on the date the premium is increased by the insurance company, not the violation date.
Failure to Pay Increased Premium
Adding the proverbial insult to injury is when the insurance company adds an additional premium increase when an insured fails to pay the previously imposed increase resulting in a lapse. The premium will again increase, and you might be subject to being dropped by the company. Driving without insurance carries mandatory state-imposed fines, as well.
Individuals driving without insurance or following a pattern of paying late and causing coverage lapses are considered high-risk clients. Therefore, personal driving habits and payment history also have a great impact upon how insurance companies set premium increases. Leaving one company for another may not help since when acquiring high-risk status individuals carry this baggage to whatever company they look to find coverage.
Companies Raise Rates Consistently
Logic would seem to dictate that high gasoline prices at the pump would result in a nationwide decrease in driving. Following the logic, it could be believed that less driving causes fewer vehicle crashes; thus, insurance companies are now experiencing fewer claims. This should, if following the logic, result in companies lowering premiums.
However, many companies are asking state insurance authorities for huge increases. According to Forbes Magazine online, automobile insurance rates rose 10% between 2008 and 2010. Yet, just like all other industries throughout the country, the insurance industry is also subject to financial demands due to the current economic downturn experienced in the United States.
Rates are going to continue to rise in the near future because of two main factors. Prices do naturally rise in time for any services and goods, so slight auto insurance premium increases are expected.
Secondly, no one actually can predict when the current economic crisis will end. So the reality for insurance premiums continuing to rise higher in the near future is a distinct possibility. According to the magazine report, drivers can expect an additional 4% increase throughout 2012.
In states like Michigan, companies asked for an average 56% increase; California received increase requests for 39%.
The effect was not centered upon but a small group of policyholders. Millions of auto insurance policyholders were subject to enormous increases. This compelled the federal government to launch an investigation.
Insurance Companies Need to Maximize Profits
Every insurance company management team is tasked with the chore for maximizing profits to benefit stockholders. They take a good, hard look at how Americans are affected by the current poor economy.
While more people find it difficult to afford insurance premiums, companies consistently seek methods for making profits. Increasing premiums, within the legal limit mandated by the state is one method for creating a profitable bottom line.
The insurance industry seeks permission from states for premium increases citing several reasons validating these requests. Cost for vehicle repairs and medical treatment for motorists involved in accidents is always in the rise nationwide. Pharmaceutical companies are constantly increasing drug prices. Insurance companies invest in statistics gathering to obtain the data needed when making requests before a state insurance board.
The pressure placed upon the insurance company is considerable. At one side are government regulators looking to reign in what appears to be an ever-increasing financial burden placed upon the nation’s drivers. On the other side are insurance company stockholders seeking not just to maintain a good investment, but also to continue reaping profits from ownership.
Insurance companies claim auto policy rates have been either flat or on the slight decline in the past several years.
This has been due to vehicle manufacturers including many safety features as standard in current vehicle production. Nationwide campaigns during the past decade focusing upon drunk drivers have had an additional impact on annual driving safety statistics.
This has resulted in the insurance industry lobbying for deregulation. This lobby also claims increased competition has kept premiums lower. Yet there are significant differences from one vehicle insurance company to another. These differences are not simply policy costs but weigh in such factors like customer service. Every company spends a lot of money on advertising claiming to have the cheapest insurance around, as well as the best service.
The best way to make sure you are billed premiums under the legal maximum is to do some comparison-shopping. When savvy consumers obtain several insurance quotes the truth about which company has the cheapest can be answered.
In fact, this process can also give consumers a good idea about an individual company’s commitment to high-quality customer service.
Ask Around for Insurance Providers
Long gone are the days where a consumer simply opened up the telephone book to find an insurance company. The referral process presents the best method for finding acceptable companies by:
Ask relatives and friends – Personal contacts within your family or circle of trusted friends can be the best sources for obtaining insurance company recommendations. Always ask these sources what compelled them to hire the company.
Ask your neighborhood mechanic – Professional mechanics or managers of auto repair, body shops, and dealership customer service personnel have a good perspective concerning insurance companies. Typically, they hear all the war stories when it comes to dealing with insurance companies. These professionals can recommend companies that are easy to deal with even when it comes to paying claims.
Look at company advertising – Insurance companies paying top dollar for national ads have a great deal invested in marketing.
Look at the ads and jot down the information so when contacting the company you have fuel for a policy and rates conversation.
Get Quotes for Comparison
Always solicit insurance policy quotes from at least three to five providers. You do not want to receive quotes from too many companies since the time digesting this amount of information may be troublesome. Three to five quotes from recommended companies should give you enough to look at and plenty from which to make a choice.
It is important when being interviewed by each insurance company that you deliver the same answers to the same questions posed by each provider. Make sure to be consistent whether conducting this process online or by telephone. This will be the best and fairest method for receiving comparable quotes.
Service is a Consideration
The focus when examining any insurance policy usually targets premium pricing. You should examine pricing comparing similar policies. However, one area usually overlooked is the cost for customer service. It is an intangible seldom considered, but needs to be.
- How does a prospective company handle claims?
- Does the process demand a great deal of your personal time?
- Is there a streamlined, automated service that actually cuts down on the time spent involved in the process?
Check with the Complaint Department
Never make a policy buying decision without first checking a prospective company’s complaint handling record. Perhaps a specific company can afford to offer low premiums far below the state legal maximum because its customer service is lousy or non-existent. Always rely upon a quick check with the local Better Business Bureau or the State Department of Insurance where you live to see what types of complaints and frequencies an insurance company has experienced.
You can check the company’s financial standing by checking with A.M. Best. This company rates providers. A good rating would be A+ or better. In addition, check with J.D. Powers for a company rating compiled based upon input from both previous and current customers.
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