How Much Does Car Insurance Cost?

By Cellina LaForey

  • Overview

    How Much Does Car Insurance Cost?
    How Much Does Car Insurance Cost?
    When it comes to purchasing car insurance, there are several factors that go into determining the cost for the coverage. Learning a little about how insurance companies underwrite car insurance policies helps drivers get competitive quotes for their auto insurance.
  • State Requirements

    Each state sets its own minimum liability limit each vehicle owner must carry. By state law each driver must prove financial responsibility when operating a vehicle that is licensed for use on public roads. Proof of such insurance is required before one can register a vehicle. The cost for such coverage varies by state. .
  • Increased Liability Limits

    While the state mandates a minimum required amount of liability insurance each car owner must have, the minimum limit may not fully protect a driver's interests in the event of a liability claim and an ensuing lawsuit. Therefore, it is recommended that drivers increase their liability limits. The additional cost per thousand dollars of coverage outweighs the out of pocket expense in the event of insufficient liability limits.

  • Physical Damage Coverage

    The physical damage portion of a car insurance policy is not a state mandated coverage. Lending institutions, however, require drivers to purchase physical damage coverage to protect the institution's financial interest. The cost for physical damage varies depending on the type of car and the car insurance deductible. The higher the deductible, the lower the premium cost. Conversely, a low deductible means that the insurance company will pay more per insured claim, and therefore will pass the cost onto the policyholder in the form of higher premiums.
  • Underwriting Information

    Each person's underwriting information affects the cost of the insurance policy. Underwriting information includes personal information such as driving record, driver age, number of years driving and loss history. Having moving violations, a suspended license and several auto insurance claims negatively impacts the cost of car insurance. Therefore, the cleaner the driving record, the better from a cost savings standpoint. If you have a less than perfect driving record, you can mitigate the financial damage by taking a driver's safety class. Doing so shows the insurance company that you're serious about improving your driving record and taking the class makes you eligible for a safe driving discount.
  • Vehicle Type

    It goes without saying that some vehicles cost more to insure than others. If you're looking to insure a high-priced luxury car, look to spend more for your insurance. Similarly, if you purchase a high target car, which is a car that is likely to be stolen, your car insurance costs will be high. For example, in the year 2007, the most frequently stolen car was the 1995 Honda Civic according to State Farm Insurance Company. Therefore, if you're looking to insure a 1995 Honda Civic, expect your car insurance to cost more than if you had chosen a car not on the to 10 most frequently reported stolen list.
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