WHY is it that the cost of your insurance premium increases every year, even when you are insuring the same items year after year? Only by understanding how insurance works, can you help yourself towards reducing your insurance costs monthly or annually.
When you insure your vehicle, luxury cars or cars with large engines, it will attract higher premium costs. This is because they are more expensive to purchase and any replacement parts will be more expensive, compared to a small car, if your vehicle is involved in an accident – with your insurance company paying the costs for the repairs. People driving sports cars are assumed to be high risk takers, hence the chances of getting into an accident are higher.
By asking the right questions, you can reduce the cost of your insurance. Using an insurance agent or broker can also help you reduce your regular premiums. For instance, some insurance companies may offer you a discount where you have an excellent driving record, free of any speeding tickets or accidents.
As the cost of homes, vehicles and most items that are insurable increase every year, insurance companies will increase costs to cover their risks. The risk to an insurance company is the possibility of meeting a claim from one of their insured customers.
When you consider car insurance, there are a range of factors that will influence the insurance premiums and some of these you cannot change. Your age, your gender and your prior claims record will reflect upon the premiums offered to you by insurance companies. For young drivers, premiums will be extraordinarily high because the majority of accidents are caused by people driving in the first few years after passing their driving test. You are a higher risk to your insurance company if you have recently passed your driving test.
The rates charged by insurance companies can vary considerably and often depend upon how much they have paid out in the previous years and the size of those claims. An insurance agent or broker can provide your salient information to a range of insurance companies and find out who is prepared to offer the best deal for the best coverage.
By offering to pay a larger first amount of your own money (a deductible) towards an accident claim, the insurance company should be able to reduce your annual premium.
Where you drive an extremely old car with a very low value, you may not need to insure its replacement value because the cost of the insurance may be more than the car is worth. The law requires you to purchase insurance cover against damage to other cars and individuals, and the purchase of this insurance alone, rather than fully comprehensive, should reduce your premiums.
It is better to consider the cost of insurance of a vehicle, before you complete the purchase. Consider the make and the model that you are purchasing, the cost of repairing it as well as its overall safety record as these will be some of the indicators for what the insurance costs will be. How likely is your car to be stolen? Favourite cars are stolen more often than bland, boring models. You will get more miles to the gallon, have lower insurance premiums and reduced repair bills when you choose a car that is less likely to be stolen.
By Samuel Rosenberg
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Samuel Rosenberg is the founder and CEO of Axcel Finance Ltd., the leading regional microfinance institution. Share your thoughts and email your questions to [email protected]