Factors That Affect the Cost of Liability Auto Insurance

Before you race out to purchase the automobile of your dreams, you need to ensure you can pay for the required insurance. The rates of different types of coverage such as liability auto insurance vary depending on the insurance provider you choose. However, you may not realize some of the factors that insurance companies take into account when they determine liability auto insurance rates. While you are comparing auto insurance rates to find the best deal, make sure to review the following statistical components used by many insurance.

CREDIT HISTORY

Many drivers don’t realize that failing to pay their bills on time can hike up the cost of their liability auto insurance. The majority of insurance companies review the credit history of prospective clients to help them determine the cost of their premiums. The reason is that individuals who suffer from a poor credit history are more prone to filing accident claims. Therefore, the insurance companies often charge these drivers more for their auto insurance.

TYPE OF VEHICLE

The make and model of vehicle you drive can also affect the cost of your liability auto insurance. That’s why driving a fast sports car will almost always result in higher premiums than if you drive a trusty sedan. Insurance companies look at factors such as a particular vehicle’s cost of repairs, safety records and likelihood of being stolen. Therefore, if you want to lower your auto insurance premium, you may want to consider purchasing a vehicle that has been proven safe and reliable.

GENDER

Unfortunately, the statistics regarding gender and auto accidents are bad news if you’re a young male. Because statistics show that men younger than 30 end up in more accidents, these individuals end up paying a higher premium for liability auto insurance.

DRIVER AGE

Younger drivers almost always pay much more auto insurance. However, the good news is that your premiums will drop significantly after you reach 25 and have a good driving record.

LIFESTYLE

Believe it or not, individuals who have children or are married tend to be involved in fewer accidents. Therefore, if you fall into either of these categories, you will most likely pay lower premiums for your auto insurance. If you only use your vehicle to travel back and forth to your nearby workplace, you may be able to negotiate a lower premium. Many companies will charge less if you live two miles or less from your workplace. However, you may end up paying a higher premium if you live in an area that has a high crime rate.

DRIVING RECORD

One of the most important factors that determine your auto insurance rate is your personal driving record. You may pay more if you have moving violations such as speeding, but you will pay even higher premiums if you are involved in any motor vehicle accidents. In addition to the damages caused, you may end up paying a higher rate for your auto insurance. Depending on the severity and frequency of accidents in which you have been involved, your insurance provider may cancel your auto insurance coverage.

ADDITIONAL INSURANCE COVERAGE

Certain types of auto insurance such as liability insurance cost less than collision insurance. However, you also need to consider what would happen if you were involved in a serious accident and had purchased only liability coverage. You could end up losing everything you own to pay for the necessary medical expenses.

The factors used by insurance companies to determine your liability auto insurance rates vary with each state. The criteria also changes frequently, so you should check with your local insurance provider to find how they determine premium rates. Some states have decided to stop using some of the factors listed above. For example, in 2008, Massachusetts passed a law that prohibits insurance companies from considering factors such as gender, marital status, education, income, occupation, age (except for drivers older than 65) and credit history.