If you believe that all auto insurance is the same, then ask yourself, how can auto insurance premiums fluctuate so drastically from driver to driver, and insurance company to insurance company? The answer is simple — it’s all about the risk.
The process of setting premiums for auto insurance is no different than any other type of insurance, in that costs are based on risk. In this case, risk refers to the likelihood that a policyholder will make a claim, and the estimated cost of that claim.
Let’s examine a few individual factors that can affect your auto insurance premiums:
• Your automobile: Insurers consider several risk factors associated with your vehicle’s particular make and model. For example, some fare better than others in collisions, resulting in less severe injury to the occupants and damage to the car. On the other hand, newer, more expensive vehicles may cost more to repair or replace.
• Use of your automobile: The more a vehicle is on the road, the more likely it is that an accident could occur. Therefore, insurers consider many factors including how much you drive and how far you drive on a regular basis, and whether you drive to work each day.
• Where you live: If you reside in a large metropolitan centre, insurers will consider that compared to a smaller rural setting for example, more vehicles on the road and more congestion could mean that accidents and vehicle theft are more likely to occur.
• Your driving record: Just as having a clean driving record for many years will help keep your premiums down, accidents, speeding tickets or other moving violations will contribute to an increase in your premiums.
• Other factors: Premiums can be affected by provincial regulations, taxes, and the features offered by specific insurance programs, such as accident forgiveness benefits or loyalty discounts.
When setting premiums for group insurance programs, insurers will calculate the risk associated with the entire group to which you belong as a driver. Looking at the CARP Auto & Home Insurance Program for example, you have thousands of good drivers with a history of fewer claims. In this case, less risk can mean lower premiums.
“We consider the fact this program is available exclusively to CARP members”, explains Barbara Spreen, Director of Underwriting, Zenith Insurance Company, underwriter for the CARP Auto & Home Insurance Program. “As a group, CARP members have proven to be more responsible drivers. That’s reflected in their premiums.”
Even with group programs however, there is no one-size-fits-all method of determining auto insurance premiums. Each policyholder’s premium is based on their individual driver profile, the amount of coverage selected, and the factors listed above.
If you think you may be paying too much for auto insurance and you’re ready to compare, consider the risk variation described above. For more information and to request a free, no-obligation quotation from CARP Auto & Home Insurance, simply click here or call toll-free: 1-888-249-6324.
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