How Insurance Companies Assess Your Risk
The cost of motor vehicle insurance is determined by the level of cover – the more cover taken, the higher the cost will be, and the level of risk. When you buy motor vehicle insurance, the following factors are considered:
How old you are at the time you get your insurance policy will affect the price of your premium. The younger you are the more you pay because statistically drivers under the age of 25 are more likely to have an accident. Once you hit that magical time of life called 25 or over, the cost of your insurance can drop quite a lot. However, it will generally rise again when you’re over 65—because statistically, seniors, like younger drivers, have a higher accident rate.
Sorry to say guys but studies have been done that show men drive more aggressively than women and are prone to have more accidents, and the prices they are charged for insurance premiums reflect this. Overall, women pay 12% less than males with a similar age, location and driving history.
If you have a spotless driving record with not even the slightest scratch of your car you will most likely pay a lower premium than someone who has had a few incidents. Some car insurance companies even reward safer drivers with ‘safe driver discounts’.
Cars that cost more to repair cost more to insure and cars that have been modified or ‘pimped out’ cost more again. Cars with extra safety features will normally cost less to insure because the safety features result in less claims and lower claim amounts. So before buying a car you might want to research the average prices for insurance for that make or model to avoid any unpleasant surprises.
If you live in a neighbourhood that has a statistically high crime rate you will have to pay a higher premium than someone who lives in a safer area with (of the same age, same driving record etc). People who live in and near cities pay more than people who live in rural areas because there is more traffic with a bigger chance of having an accident.
When it comes to choosing your policy it can be hard to figure out what’s a reasonable price to pay. So make sure you get plenty of quotes from different insurance companies or talk to a broker to find the policy that covers your needs at a price that suits you best. It’s also important to remember to read the conditions to see what’s covered and what isn’t.
In terms of how your vehicle is valued, most insurers will offer two choices – market value or agreed value.
Market value — this is what your car would be sold for on the open market at any given point in time.
Agreed value — this is a fixed value agreed to between you and your insurer.