Buying car insurance doesn’t have to be a chore if you know what to look for ahead of time. It’s much easier to compare car insurance rates once you know the basics – like the difference between premiums and deductibles, including how they influence one another.
The main challenge is choosing an affordable car insurance policy that satisfies your state’s requirement to carry car insurance, but to get the best deal, understand how car insurance companies price their services and the type of benefits you’ll receive in return.
Here’s a short breakdown of how to compare car insurance rates online to make your search easier and faster so you don’t have to shop around to save money.
The most important information to know about buying auto insurance online is that every policy comes with two primary expenses: the cost of premiums and deductibles. Knowing the difference between the two can ultimately save you a significant amount of money when you need to file a claim.
Premiums
A policy’s premium is a price you pay month to month to keep the insurance policy active. Some car insurance providers allow you to pay premiums in 6 months increments or annually, yet many drivers choose to pay month to month for financial convenience.
Deductibles
A deductible is an amount you have to pay before your car insurance company pays out any benefits whatsoever. Usually, a policy with a low, very affordable deductible will include a higher monthly premium; vice versa, a policy with a low monthly premium comes with a high deductible amount.
Premiums and deductibles are standard expenses, but what else goes into a car insurance policy price? The answers may surprise you if you’ve never taken the time to compare car insurance rates.
Essentially, insurance companies will base the price of premiums and deductibles on the following factors:
Generally, all of these aspects boil down to assessing risk, so here’s a brief explanation of each one to show you why they affect car insurance prices.
State laws
Most states in the U.S. have laws that require you to carry a minimum level of auto insurance. In fact, New Hampshire is the only state with a legal mandate to buy car insurance and keep the policy in good standing when you need to file a claim.
The catch is that certain states have passed additional statutes that make auto insurance more expensive to buy than nearby states. That’s one reason why it’s so critical to have a reliable way to compare rates side-by-side to get the best deal and the fair rate you deserve.
Vehicle make and model
You might not know that your vehicle’s make and model will also affect how much you pay for car insurance.
A simple rule of thumb is that cars with larger engines will cost more to cover; exotic vehicles like high-performance sports cars and large trucks will also come with a higher price tag. Notwithstanding those factors, the faster your car can go, the more you’ll have to pay for an auto insurance policy.
Age of the driver
As you might expect, the age of the driver counts too. That’s because insurance companies base their pricing on real-world statistics, sometimes updated in real-time, depending on the company. Even if a young person is a careful, safe driver for a few years, they’ll still pay more for auto insurance because the numbers strongly suggest that their cohort is at a higher risk of filing a claim.
The good news is that the age of the driver matters less once you reach the age of 25-years-old, but it becomes a factor once again after you become a senior citizen.
Driving record and experience
Your driving record and experience give the insurance company a pretty good idea of how well you drive on the open road. If you’ve been driving for a long time and you haven’t filed any claims or received any traffic tickets, you’ll probably qualify for the best car insurance rates from several providers in your area.
Credit rating
Not many people know that credit rating is another factor, depending on the insurance company you choose. Simply put, statistics suggest that car owners with lower credit ratings file more claims on average than those with higher credit ratings.
Credit rating isn’t the ultimate determiner, but it is a fact you must keep in mind to compare auto insurance rates properly.
High-risk traffic violations
If you’ve received a lot of speeding tickets over the years, expect to pay more for auto insurance with each subsequent high-risk violation.
Once again, an insurance company will want to determine whether or not you’re a risky bet to insure, so when you have a track record of violations, insurance providers must conclude that you’re more likely to file a claim - or have another driver file a claim against you.
Annual mileage
The distance you drive each year also counts. It’s simply a matter of statistics; the more you drive, the higher the risk that you’ll eventually file a claim. The good news is that some insurance providers give you a break regarding annual mileage restrictions.
Location
Another factor is your location, aside from the state in which you reside.
If you live in a densely populated, urban community, expect to pay a little more for car insurance.
If you live in a more rural community, you’ll likely pay less than someone who lives in a major city like Houston or Chicago.
Marital status
The number of people to be included in the insurance policy matters as well, so your marital status does play a part. At a minimum, ensuring a married couple means that the insurance company will have to cover two individuals with two different driving histories and records.
What usually happens is that an insurance company will “split the difference” on the risk assessment and base car insurance rates accordingly.
Married couples are also more likely to have dependents added to their policy at a later date, which certainly increases an insurance policies’ monthly premium and, perhaps, their deductibles.
Gender
The final way an insurance company decides how risky you are to insure is whether or not you’re male or female.
Statistically speaking, young males tend to file claims more often than young females. Thus, it’ll be more expensive to find insurance when the company places you in a high-risk category.
Once an insurance company sizes up your level of risk, they’ll offer you policies with different prices, depending on the level of services you want.
Essentially, your options are a full coverage policy or standard liability coverage.
Full coverage
Full coverage car insurance is simple enough to understand: it’s when your policy covers everything you need after you file a claim, including a rental vehicle, if you choose one of those types of policies.
As you might expect, full coverage car insurance costs more month-to-month and comes with a higher deductible than standard liability insurance.
So, if you’re looking for peace of mind, buying full coverage is preferable as long as you find a reasonable rate.
Liability coverage
Liability coverage works differently. The policy will only pay out benefits when the policyholder is not the party responsible for the incident in question.
For example, if someone runs a stop sign and causes an accident, you won’t be liable for the repairs.
On the other hand, if you’re the one who runs the stop sign and causes an accident, you will be liable for the damages, meaning your insurance company will not pay out benefits when you’re at fault.
Full coverage car insurance also comes with additional perks, but it depends on the carrier.
Some full coverage policies provide unlimited car rentals or include services like under-insured motorist provisions or extra bodily injury coverage.
In short, insurance companies base their prices on risk, but that doesn’t mean you have to accept a high rate!
Our platform makes it easy to compare auto insurance rates from several different insurance providers side-by-side in one place.