In 1769, the French engineer, Nicolas Joseph Cugnot, built the first steam-powered motor vehicle. Two years later, Cugnot crashed one of his inventions into a wall—constituting what is generally considered to be the very first “car accident.” It took over 100 years for the first automobile insurance policy to come into being—the year was 1898. In those days, the policy was intended to cover drivers against accidents with horses.
Auto insurance, although not required in all states, generally covers cars and people against more than just accidents. Possibilities of theft, damage from natural disasters and potential injuries to passengers, pedestrians, and other drivers demonstrate the importance of proper coverage.
In today’s mobile society, navigating the options, terminology, and varying costs for personal vehicle insurance can be like finding your way through a maze. Understanding the possible coverage “pathways” will help you make the best decisions for your personal situation. The following simple definitions can help you understand the basics of auto insurance:
Factoring Auto Insurance Rates
Although the word “accident,” by definition, means “unintentional,” many accidents are the result of negligence by at least one driver. Consequently, they create higher insurance costs for everyone. These higher premiums particularly affect individuals who may be considered at greater risk of having an accident. Here’s a quick look at some of the factors that may affect your automobile insurance costs:
Age Matters. Since younger drivers account for a greater proportion of accidents than older drivers, premium rates are generally higher for drivers under age 25. However, elderly drivers have the second highest rate of fatal crashes, which also contributes to higher insurance premiums.
Points for Safe Driving. A safe driver rating plan, or some variation of it, rewards drivers with clean driving records, and penalizes those with a history of accidents and/or violations. Thus, the driving records of operators listed on your policy directly affect your automobile insurance premiums.
Where You Live. Population density and the number of vehicles on the road are two other important factors that help determine your insurance costs. Accidents are more likely to happen as people and cars vie for limited space on the road. Territories (a town, a large city, a county, or some defined geographical subdivision) are rated based on the losses, or “risk” profiles, for such areas. Premiums are weighted by the record of insurance losses, such as accidents, theft, and vandalism, as well as the history of police enforcement of traffic laws in each given territory.
Your Vehicle. Since the potential for mechanical failure could be reflected in the year, make, model, and condition of the car you drive, relevant vehicle information is used to determine rates on particular automobiles. An automobile’s potential usage and exposure to hazardous situations will, in all likelihood, be factored into the premium.
How Can I Lower My Costs?
Whether you are studying for your driver’s license exam, or can remember driving a Model A, you might benefit from tips on how to save money on your auto insurance and remain adequately covered.
Although situations vary, the following measures may help you reduce costs:
Teenage Drivers and Your Insurance
Getting a driver’s license is one of the great “rites of passage” for America’s teenagers. However, what is exciting for teens can be less thrilling, financially, for parents. A teen driver can increase the cost of insurance for the family car, possibly even doubling your current rate.
Why is the increase so large? According to the National Highway Traffic Safety Administration (NHTSA, 2002), the accident rate for teenagers is triple those of other drivers. Therefore, if you have a teen behind the wheel, check with your insurer to see if you are eligible for any of the following discounts:
For over a century, automobile insurance has helped compensate motor vehicle drivers, owners, passengers, and other injured parties for losses resulting from accidents. Sufficient coverage for property damage and liability plays an important role in your protection plan. Keep in mind that ensuring proper coverage does not have to have a negative effect on your wallet. Through frequent reviews of your current policies, and an awareness of potential discounts, you may be able to save money and stay adequately insured.