Insurance Insights: The Basics

Insurance adjuster in action

It’s safe to assume that all of us who gather at this particular rest stop/greasey spoon on the Information Superhighway love cars, be it for the way they look, the way they sound, the freedom they provide or the way they allow us to express our personalities and tastes by way of tuning. But regardless of who we are and what we drive, there is one thing we all have to think about: auto insurance. Many places (such as California) require it, but how does it work, and how are rates determined? Unlike hot dogs, it is safe to read about what goes into car insurance on a full stomach, so sit back and prepare to be educated.

Like any other form of insurance, auto insurance is there to bear some or all of the finanical burden you face when certain things go very wrong and you suffer a loss; in this case, the loss is vehicles and/or people getting banged up in a collision. In order to have this protection there when you need it, you pay your insurance carrier a rate they calculate is needed to cover their backside should they need to make a payout to you. How do they come up with that number? Make like a kangaroo that’s downed a whole case of Red Bull and jump!

 Age/Driving Experience

Young and inexperienced driver

Regardless of what craft or trade in which one is involved, mistakes tend to disippate with experience. Like it or not, screwing up is part of the learning experience. Perhaps nowhere is this more true than driving, as countless studies and statistics show that new drivers’ odds of getting in fender benders are noticably higher than those of experienced drivers. Eventually, once you’ve reached a certain age and you’ve kept your nose clean like we have, your premiums will start going down (though keep in mind that a lot of companies also offer good student discounts). If you’ve spent your youth as hell on wheels, though, that’s a problem, as you’ll see below.

Driving Record

Traffic stop

Generally, the more times a person is involved in crashes, the more likely he or she will be again. Ditto being written up for speeding and other violations. No surprise, then, that these sorts of things lead to higher rates. However, in many instances tidying up your driving for an extended period can lead to lower rates, and some carriers offer discounts if you take and pass classes on defensive driving.

Location

Urban traffic

Where you live has quite an affect on insurance rates, and not just for the amount of thefts in the area like you might think. Actuaries also look at crash statistics and population density when determining what kind of coverage you need. Rural areas tend to have fewer vehicles and thus fewer crashes than more urbanized areas.

Vehicle Safety Features

Airbags all around

Car safety has come along way since people in funny hats started putting loud, smoke-sneezing single- and twin-cylinder engines in modified carriages and buggies almost a century-and-a-quarter ago. Today we have anti-lock brakes, airbags, stability control and other hardware and software that reduces the risk of injury or death in a crash, if not reducing the risk of crashing in the first place. Suffice to say, insurance companies are rather fond of these features, and many carriers give discounts if your vehicle has some or all of these gizmos.

Now that we know the basics of auto insurance, we can start digging a little bit deeper. Subsequent articles in this series will examine things like how modifications and upgrades affect insurance premiums, and what it takes to ensure an exotic car. Until then, try to keep it shiny-side-up, m’kay?



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