When you buy a car, it won’t always be the cost of the car itself that eats up your finances. Often this will come down more to the other associated expenses, including things like the cost of fuel and the cost of insurance. While fuel is directly related to the amount you use your car however, the amount of money you spend on your insurance will depend on how good you are at hunting for the best deals and at making yourself more easily ‘insurable’. To do these things, you need to first understand how insurance companies make their decisions regarding insurance rates. Here, we will look at how insurance companies work and how you can bring your premiums down by understanding this.
It’s safe to assume you understand the basics of insurance premiums, but for the sake of argument let’s go through it again. Essentially, insurance companies will choose how much to charge you for insurance based on how likely you are to have an accident. These companies are of course out to make a profit, so they need to charge you more over the course of your policy than you are likely to cost them.
As such then, an insurance company will look at various statistics and features to decide whether or not you are liable to have an accident. Your demographic will come into this of course – as younger men are more likely to have accidents than middle-aged Mums for example. Something you can do to help this though is to take extra driving lessons, such as a pass-plus, in order to improve your driving knowledge and experience.
Note as well though that insurance companies will often raise premiums across the board to account for rare cases where they have to pay out more than they earn for a single customer. If you fall into a good demographic then (such as middle-aged female drivers), consider using an insurance company that caters exclusively to that group.
Likewise, the type of car you drive and any modifications you may have made will also have a bearing. Certain modified cars risk making you seem like a ‘boy racer’, while having a car that’s very expensive suggests that any damage will also be more expensive. If you want to keep your premiums down, you should buy a cheaper car that isn’t capable of such high speeds.
On top of this your driving record will impact on your insurance costs – if you have had accidents in the past it will make you more likely to have them again. A no-claims bonus will work the same way by potentially demonstrating that you have gone a certain amount of time without an accident. Points on your license/your no claims bonus are the equivalent of a credit rating but for car insurance rather than loans.
As insurance pays out for damage to your car, sometimes (if you get fully comprehensive insurance), things like off-road parking can help you to save more money still. Even living in a less bustling area can help.
By doing everything you can to prove that you won’t be likely to have an accident, and that it would be relatively cheap if you did (by getting a less expensive car), you can keep your insurance premium as low as possible.
This post was written by guest contributor Samantha Brave. An avid blogger and a gadget lover, Samantha writes for 4SafeDrivers.com.
Photo Credits: Dave Catchpole (CC BY 2.00)
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