Car Insurance Explained

With all auto insurance policies there are many options available but often the associated terminology can be confusing. It is possible to save money on your premiums so it is important that you understand the terminology and that you get as many quotes as you can. This can ultimately save you a few hundred dollars.

Shopping around is important because some insurers may concentrate on particular sectors within the car insurance market such as women, who are considered lower risk than men. Women may consider opting for a company that only covers women, which will be cheaper as they won’t be paying to cover men.

Those that consider themselves to be a low risk driver should seek out insurance companies that don’t provide cover to high risk individuals. This will be a big saving as again you won’t be paying to cover those in the high risk category such as convicted drink drivers.

Insurance companies will ask a lot of questions in order to provide a quote and it is important to answer these truthfully, for if it is found you were not honest at this stage it may mean a future claim being rejected. Here are some of the facts insurance companies may factor in when preparing a quote for you.

Driver’s date of birth
The insurance policy will be in the name of the main driver, so the younger the driver is, the higher risk they are deemed to be by the insurers. The insurers may also take this view on older drivers who have only had their licence for a year or two.

Additional drivers
Additional drivers will be a consideration, especially if you are adding a young driver to your policy as they will drive the price up significantly. It is possible to restrict the minimum age of other drivers using your car to save money on premiums, but this could be very costly should a younger driver have an accident in your vehicle.

Changing the excess amount
It is possible to select the amount of excess you would pay if your car was involved in an accident. This generally impacts the costs of your premium. For example, if you are confident you are a safe driver who is unlikely to have an accident, it may be worthwhile increasing the excess amount, whilst ensuring you can afford it should the unthinkable happen.

Overnight parking location
It is important for insurers to know where the car will be parked each night as this influences the level of risk. Should the car be parked in an area susceptible to high levels of crime, vandalism or natural disasters then insurers will push up the price.

Agreed or Market Value
The vehicle can be insured based on either its current market value or a value agreed upon by the insurer and the vehicle owner. Whichever value is agreed will be the amount paid out should the vehicle be stolen or written off in an accident, but you should bear in mind the more the car is insured for, the higher your premiums will be.

The insurance company will establish the market value of the vehicle from certain industry guides. However, if the car has been improved or fitted with expensive equipment it may be worth negotiating an agreed value.

Past claims
Multiple claims made during a set period of time can impact the quote given to you, with the period specified varying amongst insurers. It may be you will have to pay a higher premium or the insurer may not even be willing to provide you with cover.

Suspended Licence
Having a licence suspended or cancelled during a specified period will affect the quote. Again that specified period may differ between companies, but will certainly mean a higher premium or rejection from the insurer.

Ratings
Some insurance operate a rating system with Rating One being the best. For every year you don’t make a claim on your insurance the rating will improve, which is important as the top rating will give the driver a discount on their premium.

Car modifications
Modified vehicles are often considered by insurers as not being as safe as standard ones and therefore a higher risk. It may be the road handling is not as good, and insurers are also especially wary of cars modified to increase speed.

Other general questions
Insurers will need to ask other general questions most of which are obvious such as your full name, gender and address. They will want to know all about the vehicle such as its make, model, engine size, registration, transmission type, factory fitted extras and if there is any existing damage not repaired.

The type of insurance required will also need to be decided upon such as comprehensive, third party or third party fire and theft. Insurers will also factor in whether the car is to be driven for business or personal purposes.

As stated before, consider exactly what cover you need, shop around and always be completely honest in answering the insurer’s questions. You may also need to send a copy of any previous policy documents to the insurer.