5 Things to Know About Car Insurance

1. It’s not as simply as it seems.

Your premium is the result of a fairly complicated formula, and in some cases different formulas are used by different companies and locations. Some common factors that influence your premium include:

• The age of the primary driver
• Driving record
• Type of car being insured
• Location
• Average driving distance

…to name a few. Basically, if you park or keep your car in a location with a high crime rate or drive your car more than average, you will probably pay a little more because you’re seen as riskier to insure.

Some insurers also use your Credit Based Insurance Score (CBIS) which factors in things like your credit history – yet another reason to improve your credit score!

Also note that rates on new model cars are based in part on the MSRP, since they lack the historical data of used cars and average accident occurrence and repair costs.

2. Vanity will cost you.

Whether you’re experiencing a mid-life crisis, or just want to look like you are, that sports car is going to cost you more to insure. A recent list of Insure.com’s priciest cars to insure for 2009 lists the usually suspects at the top: BMW M6, Dodge Viper and the Nissan GT-R. At the bottom of the list are the family cars – no one steals the family minivan, and it’s hard to qualify for nascar with one.

Another factor is the average cost of repair. At the top of the low cost of repair list for 2009 were Kia Sportage,Hyundai Santa Fe and Hyundai Entourage.

3. Remember: safety first!

Having two or more accidents will drive up the cost of our premium, and so will traffic and speeding tickets. In some states, these count as points against your license. Get too many points and you lose your license. But you can be far from losing your license and still have enough points to tack on another 30-50% to the cost of your premium.

The lesson here is clear – keep your nose clean. Avoid reckless driving, tickets and DUI/DWI’s.

4. You don’t need everything.

If you have enough of an emergency fund to be able to pay for car repairs out of pocket, or if your car is older than five years and the loan is paid off then you can save a bundle by canceling the collision and comprehensive coverage. If it’s not paid off, but you can afford most repair costs, then consider raising the deductible.

5. Don’t forget the discounts.

Common discounts include:

• Multi-policy discount (same insurer for auto and home owner’s or renter’s)
• Taking a defensive driving course
• Driving a car with certain safety and security features.
• Low-mileage discount if you drive less than 10,000 miles a year.

It never hurts to ask the agent if there are other discounts to be had – every percent helps.