There are many ways to reduce your auto insurance rates. You can buy a vehicle with a positive CLEAR score (Canadian Loss Experience Auto Rating); you can also install an alarm system to your car; you can also increase your deductibles and eliminate unnecessary coverages. Safe driving habits are the best way to reduce your premiums in the long-term. Many consumers are surprised at the impact it can have on their car-insurance rates.
Below, we’ll briefly explain how insurance companies determine policyholders premiums. If your insurer allows it, we’ll explain how one collision can cause your rates skyrocket. You’ll also learn how to avoid accidents that could otherwise negatively impact your rates for many years.
How Auto Insurance Companies Calculate Premiums
To calculate the premiums of their policyholders, car insurance companies use formulas. These formulas consider many factors, which helps insurers assess the likelihood of future claims. Because many vehicles are more likely to be stolen and have higher repair costs, it is important to consider the make and model of your vehicle. Age is also taken into consideration. Young drivers who have less experience behind the wheel may be more likely to file claims than those with greater driving experience.
Your driving record is one of the key factors that will determine how much you pay for your premiums. Are there any tickets on your record. Is there an at-fault accident on your record? These details and others are crucial to an insurance company’s ability assess your future claims. Poor decisions are more likely for a driver who has been cited for speeding and is involved in an accident. These decisions can increase the likelihood of another accident, for which the insurance company must pay claims.
One Accident Could Lead to High-Risk Rates
At least one person is responsible for every auto accident. Car insurance companies may feel differently if two drivers collide and one of them is found to be at fault. To determine the amount of compensation for injuries and property damage, they must identify the at-fault driver.
Insurers will usually increase the rates of the at-fault driver after a collision because the cost of such an event is high. The exception to this rule is if your policy contains an “accident forgiveness” clause. The rate rise does not pay for injuries or damages caused by the accident. It is a rate adjustment to account for the higher risk that the insurer assumes you will have an accident-related claim in the future.
A driver with a clean driving record will often see her premiums go up after an accident. It is also a reason to practice safe driving habits.
Here are a few safe driving habits to practice
You will find most tips to driving safely intuitive. It’s normal for people to become accustomed to their driving habits even though they increase the chance of an accident. It is easy to forget the lessons we have learned since getting our full driver’s licenses. Keep these 4 reminders in mind:
- You should allow space for your car in front. You should keep two car lengths between you and the vehicle in front. You’ll have more time for reaction if the other vehicle suddenly stops.
- Keep your eyes open. It’s easy for people to get lost while driving long distances. They tend to stare at their cars and not take in the surroundings. This is a mistake. Instead, look at the sides and front as well as your rearview mirror. You should not fixate on one point for more then a few seconds.
- Pay attention to the speed limit. Speeding tickets will be issued to your driving record. This alone could increase your car insurance premiums. Speeding increases your accident risk. Respect the posted limits.
- Pull over if you’re exhausted. Your reaction time drops significantly when your mind is tired. In extreme cases, your vision might become partially impaired. You might consider pulling over to the side of a road and stretching your legs. If necessary, take a quick nap. It will make you feel much safer once you get back on the roads.