We all hope that we’ll never be in a car accident. But the reality is, whether it’s an accident or a chip in your windshield, something will probably happen to your car over its lifetime that will require filing an insurance claim. Hopefully you have the right coverage.
If you’re in the market for auto insurance, there are a few things you need to know about your car and your car use that can affect your policy and premiums:
Your Car’s Market Value and Depreciation
The minute you drive your car off the lot, it begins to depreciate. And some makes and models depreciate faster than others. What does that mean for you?
If you’re in an accident, your car’s market value will be a deciding factor for the insurance company when they determine whether to pay to have the vehicle repaired or to declare it a total loss. Additionally, your car’s current market value will establish how much you get paid if the vehicle is totaled.
Also, keep in mind that the more expensive the car, the higher the car insurance premium. And the older the car, the less collision coverage costs.
Your Driving Habits
Driving habits affect your insurance rate. Previous accidents, possibly even accidents for which you were not at fault, tickets and/or past insurance claims show an insurance company that, in theory, you may present a higher risk. That translates to a higher insurance rate or possibly even a refusal to insure.
Thankfully, time heals most wounds, at least when it comes to insurance companies. Traffic violations, accidents and previous claims drop off your record after a few years, lowering your risk to insure and with it your insurance premium. (Do be aware, though, that some issues, like DUIs, stay on your insurance record a lot longer.)
Stats on Uninsured Motorists
Even if you’re insured, motorists who are not still affect your insurance rate. If you get into an accident with an uninsured driver, your insurance company is then on the hook for everything. So, if you live in a state with a high rate of uninsured drivers (like New Mexico), your premium may be higher right off the bat. But, if your policy doesn’t include uninsured motorist coverage, you could quickly reach the policy maximum in an accident, and that could mean you have to pay out-of-pocket to cover all damages.
Your Car’s Size and Safety Rating
Better car safety ratings will reflect positively on your insurance premiums. Insurance companies operate on the idea that a safer car means a smaller chance that you will get into an accident and, if you do, that you or your passengers will be harmed. Anything that means the car insurance company will have to spend less money on you means smaller premiums.
So, what’s the point?
When buying auto insurance, you need to do a little bit of research about your car and where you are driving to get a good idea about what is (or is not) a good rate. Shop around so that you do not have to pay more for the same coverage just because of an insurance company’s brand. At the same time, do not skimp on insurance coverage just to save what works out to a few bucks every month. And, if you’re in the market for a new car, consider the cost of insurance to get a good idea of the total cost of ownership, which includes more than just your monthly loan payment.