8 Must-Know Tips When Shopping for Auto Insurance

How Insurance Auto Rates Are Determined

Companies use a complex set of algorithms to determine your insurance rate. Two factors apply underwriting and rating. Companies will assess risk when underwriting your policy, using a risk rating system. The rating system helps the company assess the risk so they can determine a rate, which is based upon what they could expect to encumber if you are involved in an auto accident. The most influential aspect of this system and your rate is the claim frequency. The more claims – or higher value claims – that you make, the higher that your annual premium will be.

Everyone is different, and we all need auto insurance coverage. If you fall into a lower income bracket and have an older car that is not financed, you’ll benefit from a higher deductible and a lower monthly premium. If you are making a lot of money and have a newer financed or leased car, you’ll benefit from higher coverage limits and a lower deductible, but you will pay a lot more for your premium. Often, your financial situation will determine what insurance company you can afford to use, or what company that you want to use because they offer higher coverage limits.

Leased, Financed and Owned Vehicles

 

Whether you lease, finance or own your vehicle will also change the rate you can hope to pay. Leased and financed vehicles have to carry full coverage, which costs more, and you will want to consider upping the coverage limits to protect yourself in the case of an accident, property damage or medical payments. If you own your vehicle outright, you may better benefit from a higher deductible and no collision coverage, but you’ll still want to pay out for the medical payments and property damage.

Don’t Forget About Gap Coverage

For those seeking auto insurance who are financing or leasing their vehicles, look into gap coverage. If you are in an accident and the car is totaled, the insurance company usually only pays the “market price” of its current value. Typically, this is much less than what is owed on the car. Gap coverage adds a small monthly fee to your premium but covers you if you total your car by paying the difference in value. Always consider this option, so you don’t get stuck with a car you can’t use but are still paying each month on.

Use an Auto Insurance Rate Comparison Tool

As mentioned above, the internet has made things far easier to research during the modern era. And you don’t necessarily have to go shuffling about from website to website to generate quotes. Instead, use a rate comparison and quote tool like the one offered by Nerd Wallet (you can easily research a lot of other insurance quote tools with a quick search on Google). This tool lets you enter your details and then collects quotes from dozens of auto insurance companies. Before you take out a plan and sign on the dotted line, make sure you read the last two tips first.

Check for Special Discounts You Can Use

You may be applicable for special discounts on insurance, something that may require that you speak to an agent about.

Lastly, don’t presume that the insurance company you are considering is on the up-and-up. Always take the time to vet them before you consider using them. This involves researching the company online to find out what other customers or past customers had to say. You may find that the company you like has a flawless reputation. Or you may find that, to the contrary, they are sticklers when it comes time to pay out on claims.

One vital resource that you can use in this regard is the Better Business Bureau. Check the rating of the insurance company in your state before you get under contract. This way, you can enjoy the comfort of knowing that you are covered by a forward-thinking company in the event that the unthinkable occurs.