Car Insurance Defined:
Auto Insurance is a type of insurance consumers purchase for their owned cars, trucks and other motorized vehicles. In the United States, all owners (to whom the vehicle is registered to) are required to obtain some form of car insurance—a failure to obtain car insurance and proceed to operate a vehicle on the nation’s roads or highways is a felonious act—penalties for operating a vehicle without insurance will vary by state. The primary use associated with car insurance is to provide protection, in a monetary sense, against losses incurred as a result of a traffic accident. Car insurance therefore provides reimbursement coverage against all losses—including costs associated with medical treatment and costs of vehicle—that stemmed from the accident.
The specifics associated with that the policy protects against and the price of coverage will vary based on the prospective purchaser’s characteristic and case profile. In a general sense, all car insurance companies will evaluate a prospective purchaser’s likelihood of getting in an accident—the more risky a driver is the higher the cost of coverage. A car insurance policy can cover some or all of the following instances or items—the insured party, the insured vehicle and third parties associated with the incident. Different insurance policies will specify the circumstances under which item (and to what extent) are covered.
How does a Car Insurance Company Price a Premium?
Depending on the jurisdiction, the insurance premium offered by a car insurance provider will either be mandated by a governing body or determined by the insurance company, in accordance to a regulatory framework established by the government. When the premium is not mandated by a governing body, it is derived from the calculations of an actuary based on statistical data. The premium can fluctuate depending on a number of factors that are said to have an impact on the expected cost of future claims. Such factors may include the characteristics of the vehicle (the top speed of the car for instance), the coverage selected by the insurance applicant (deductible, limit of the policy, covered perils), the profile of the driver (driving history, age, gender) and the usage of the car (predicted annual distance driven). These characteristics are grouped together to create a driver profile, then subsequently evaluated to a yield an effective premium, which in essence, compares the expected cost of providing coverage to an applicant versus a profit margin that the insurance company would like to realize.
How does Age affect my Car Insurance Premium?
As a result of driving statistics (young drivers are more likely to break the law and get in accidents) and the general inexperience of youthful drivers, car insurance for young drivers is typically attached with a high premium. Furthermore, teenage drivers, who typically have no driving record to evaluate, will have a higher premium, because as a result of the lack of driving experience, the insurance company cannot properly assess the risk of the candidate. That being said, car insurance for young drivers may be offered at a discount, depending on the nation’s driving laws and the car insurance company’s policy. In the majority of nations, car insurance for young drivers is offered at a discount if the individual undertakes further driving training on government-approved training grounds or courses.
In addition to completing additional driving classes, premiums attached to car insurance for young drivers may be diminished for a number of reasons or achievements. For instance, in the United States, a number of car insurance companies offer a grade discount to students with outstanding academic records or marks. To further promote education, car insurance for young drivers will be offered with a lower premium by various companies if the youth lives far from home and is reliant on a car to get to school. Although discount opportunities are available, in general, car insurance for young drivers is far more costly than coverage given to adults. Typically, insurance premiums will be lowered when the individual reaches the age of 25.