Published: May 2013
The cost of car insurance depends on many factors, including the types of coverages you want included in your policy, the amount of your deductible and the limits of coverage. Things like the make and model of your car also can be taken into account, as well your driving record, age, where you live and more.
Auto insurance premiums are determined, in part, by what coverages you decide to buy. Your state specifies a required limit of liability coverage, and if you still owe money on your auto loan or if you have a lease, many coverages—like comprehensive and collision coverage—are required by your lender or the company that holds your lease.
The limit is the dollar amount up to which your policy will pay for damages for a covered loss. The deductible is the amount of money you must pay out of pocket in the event of a claim before your policy begins to pay for covered losses. You may be able to save money on car insurance premiums by raising your deductibles, but you should consider whether it's worth the savings. You need to make sure you can afford to pay your deductible in the event of a claim.
If you own your car outright, you are still required by state law to have certain limits of liability coverage, but other coverages, such as collision and comprehensive, become optional. In that case, you have the choice of whether you want to purchase collision and comprehensive coverage. While it may be tempting to save on monthly premiums by not selecting these coverages, you also should consider whether you would be able to afford to repair or replace your car in the event of an accident. If you are concerned about this, consider collision and comprehensive coverage, even if they're not required.
In addition to the types of coverage, deductibles and limits you have, there are some other factors that can affect the cost of auto insurance.
Where do you live? Auto insurers often take your geographical location into consideration when setting premiums.
What is your driving record like? Your driving record and history of accidents may also affect how much you can expect to pay for car insurance. This is one of the reasons why it's important to periodically obtain a copy of your driving record from your local Department of Motor Vehicles. If you discover any marks on your driving record that should have fallen off or are incorrect, you can address this issue with your DMV. It could make a difference in how much you pay for car insurance.
What kind of car do you drive? This is another factor that could impact your insurance rates. Most insurance companies charge more for a newer, more expensive car.
These aren't the only factors that insurance companies look at when determining how much your car insurance is going to cost. There are other factors involved, including everything from your age to what kind of anti-theft devices your vehicle is equipped with.