What makes up your car insurance premium?
When we buy something we like to know what we are paying for. If a large coffee is twice as expensive as a medium you want to know what you are getting for twice the money. The same occurs when you buy a car. You expect the price to reflect factors like the age, engine size, brand, and similar variables that increase or decrease the value of the vehicle.
When searching for the right car we don’t simply ask for the cheapest car in the lot. We know that will probably get us a terrible deal that might not start the next morning.
Strangely enough we don’t seem to act the same way with car insurance. We either ignore it, pay too much or too little without spending enough time on understanding and working with our car insurance.
Understanding what makes up our premium, the cost of our insurance will help us decide what we need and what we don’t in our car insurance. This will help you save money now on your premium and potentially save you from financial ruin if you get the right insurance coverage and protect your interests.
What makes up your car insurance premium?
A car insurance premium is the monthly or yearly monetary value an insurance company places on your risk as a client. The risk you pose as a client depends on various factors.
1) What you are insured for. Getting insurance for a BMW or a Skoda does not come at the same price. Similarly, owning a family car is considered safer than owning a sports car. Some insurance companies will even price premiums based on the color and how “hot” the car is.
2) Your personal risk rating. This refers to your driving history, your credit history, unpaid fines, age and gender. As is well known being a women will get you cheaper insurance. The older you are the cheaper your car insurance premium will be up to early 60’s when your premiums will slowly start to rise.
3) The pricing policy of your car insurance. Insurance companies don’t only rely on statistical rules, they also adapt to the rules of economy all business must follow. That is one of the reasons why it is such a good idea to shop around. If a company has had a bad year, and have lost a lot of money they might either increase their premiums to protect their end of year profit or lower premiums to attract more business.
4) What coverage you get on your car insurance. You choose to a great extent what deductibles or limits you place on your car insurance. If your liability insurance has a maximum of 25,000 dollars your premium will be low but you better start praying you don’t get into an accident where you are at fault, because 25,000 dollars is not likely to get you far.
Be smart! Think about what makes up your car insurance premium and find ways to improve it!
2) The risk factor
Car insurance for car rentals, pros and cons.
Taking insurance has surprising similarities with gambling. Why do I say this? For various reasons.
You might not “win”
Just like in gambling or games of chance you might not win, or as in most cases you are unlikely to win so is the case with insurance policies. You are unlikely to need them. It can therefore be tempting to not spend something on something you might not use. This has caused many to feel that insurance is for pessimists and that it is better to make up your own insurance. So is it worth buying insurance? Many would say yes as the potential problems outweigh the expense of insurance by a large margin.
The higher the prize the more expensive the ticket.
Just as you don’t pay the same for the ticket of a million dollar prize than that of a bicycle in a supermarket you don’t pay the same by ensuring every piece of the service.
So what are the pros and cons of car insurance for rental cars?
The pros are easy to explain. Car insurance for rental cars can go a far way in protecting you from the eventualities of your travelling and local car use. However it might seem as a waste of money as you may never use it and the price of insurance often is larger than the actual car rental fee. The truth is that many times car insurance is a wasted expense as drivers are often covered by their own car insurances and insurances included in their credit cards. These insurances, especially the credit card insurance are classed as secondary insurances in the sense that they only become operational when the main insurance does not cover.
Some types of car insurance extras are rather useful and can be a good idea to purchase if you can. These are Collision damage waiver and liability insurance. Collision damage waiver protects you from car accidents and the damage to the car by waiving the deductible included in the insurance. Liability insurnace covers the responsibility you owe to others who are suing you for damages.
So what can you do to balance the pros and cons of car rental insurance. The best way forward is to contact your insurance company and speak to your broker before you go on a holiday. Ask him what your questions are and what you need from your insurance. They will clarify what is included and what is not with your other insurance details.
The best balance seems to be again the golden mean. Some insurance, at least the legal minimum is required to make a success out of your holiday. However if you spend too much your house becomes a forest and you must get more time to fix the car you are about to sell.
Be smart and make the right choices for car rental insurance. Make sure you understand all the ins and outs of the contract and thank the director if you happen to hear his name.