Top Auto Insurance FAQs

Shopping for car insurance, especially online, can be fairly simple. However, there are basic things that you have to know to make sure that you have the best coverage at the most affordable premium rate, but also to have an understanding of the car insurance fundamentals.

The following are FAQs to help you understand how car insurance works.

1. Does my credit score affect car insurance rates?

Many car insurance companies use your credit score to determine your car insurance premium rate because your credit score shows your eligibility to get extended credit from bank. With a low credit score, you are least likely to be found eligible for a new line of credit. Your car insurance company increases your premium because with a low credit score you pose a higher risk of filling a claim than a driver with a good credit score. Therefore, the risk that your insurer accepts for providing you with adequate insurance coverage is higher.

2. Does filing a claim increase my car insurance premium?

Car insurance companies accept a certain risk to provide adequate car insurance coverage. By getting involved in a car accident and, especially, if you are at fault, the insurance company considers that it is even riskier to provide you coverage. This translates into higher car insurance premium rate.

Generally, car insurance companies do not raise premium rates after the first claim. But, if there is a record of reckless driving, speeding tickets etc. or the claim amount is serious, the insurer may decide to increase the premium, or even cancel the coverage. Generally, at-fault accidents that cause major car damages or claims for personal injuries pose high risk of increase or policy cancellation.

However, if your car insurance policy includes accident forgiveness, your premium won't be raised, even if you are at fault. Typically, this feature is valid if you have two accidents within five to ten years. Otherwise, you car insurance premium will increase, but not considerably.

3. Does raising my car insurance deductible lower my premium?

The deductible is the amount you will be required to pay on an insurance claim. For your insurer, the deductible amount indicates how much of the financial responsibility you are willing to accept, but also how likely you are to file a claim. If you have a high deductible, it means that you will pay more out of your pocket if you file for a claim. So, if you raise your car insurance deductible, most likely you will be filling for fewer claims.

For your insurer, raising your deductible it means that you are a low risk client. For instance, for a low deductible of $300 and $2,500 damage, the insurer will reimburse you for $2,200, whereas for a high deductible of $1,200, the insurer will only refund $1,300. Because the risk factor is lower, the insurance company also lowers your premium rates.

4. Does my age affect my car insurance premium?

Age matters to insurance in general. Particularly, in car insurance, the younger you are, the less reliable you are considered and this makes you a high risk client for the insurance company. Teen drivers under 21 lack driving experience and are more susceptible to reckless driving. This can cost the insurer a lot of money in bodily injuries and car damages. So, teen drivers have higher car insurance premium rates.

Depending upon the state in which you live, once you reach 21, or you have five years of driving experience, car insurance premium rates are automatically lowered, even if there are accidents in your driving record, provided they are not too many relatively to your age.

When you reach the age of 25, you are considered an adult driver and you most likely have 10 years of driving experience, considering that in most states people generally begin driving around the age of 15. At your 25s, and provided that your driving record is good, you are eligible for discounts in your car insurance premium rate.

Sources:

http://www.carinsurancecompanies.net/how-does-your
-credit-score-affect-car-insurance-rates/

http://www.autoinsuranceremedy.com/premiums-
increase-if-i-file-claim.html

http://www.ehow.com/info_8037116_filing-car-
insurance-go-up.html

http://www.mycarinsurancerates.com/raise-my-
deductible-and-lower-my-car-insurance-rates/