Thirty years ago, a typical automobile insurance policy could be purchased for several hundred dollars a year. Prices of most products have risen over the years but the cost of insuring a car has gone up faster than most other prices.

 Cars are more complicated today ◦ Computer controlled breaks, air bags, etc.  Medical Technology adds to the cost of auto insurance ◦ New treatments save lives, equipment and drugs are expensive!  Fuel Effeciency = Lighter Weight ◦ Accidents involving lighter cars can result in more serious injuries and damage.  Americans injured are more likely to sue ◦ Juries are awarding victims larger amounts

 The # of personal injury lawsuits grew by 30% between 2000 and 2005  Average award for injuries suffered in an accident: $201,000 -> $407,000  By 2005, the average award for wrongful death in an automobile accident was over 1 million dollars!

From statistics, insurance companies know that certain characteristics make some policyholders bigger risks. From the insurance companies point of view, risk means the chance that the policyholder will have a loss that requires reimbursement. The company will charge higher premiums to risky policyholders.

 Insurance Companies classify drivers by ◦ Age ◦ Gender ◦ Marital Status  Ex: companies know that young males have more accidents than young females or older males.  If you are a man under the age of 21, you will pay more for your insurance, even if you have a good driving record.  Married people average fewer accidents than single people. So single people pay more for insurance.

 Statistics show that more claims come from some locations than others. Insurance companies divide states into rating territories, such as cities, parts of a city, or rural areas.  If you live in a territory that generates more claims, then you will pay more for insurance.  More accidents take place in urban than rural areas. A basic insurance policy in rural Nebraska will be much less than a policy in Boston, Washington DC, or Los Angeles.

 Your driving record is an official list of your accidents and traffic violations and it has a lot to do with the cost of your premium.  When a police officer gives you a ticket or you cause an accident, a point may be added to your record.  A point on your record can increase your premium about 10%. Two or three points can increase your premiums percent.

 If you accumulate too many points, your insurance company will drop you and you may have trouble finding another company willing to insure you.  State Law requires all drivers to carry auto insurance, your state will assign you to an insurance company if you can’t find one.  As an ASSIGNED RISK, you will have to pay very high premiums for your coverage.

 SIMPLE: The more claims you make on your policy, the more you cost the company, so your premiums will be higher.

You can reduce your premium costs by simply controlling some of those factors.

 Drive Carefully  Be a Responsible Driver  Drive a Moderately Priced Car  Companies might offer discounts for certain safety features on your car (Air bags and Anti Lock Breaks)  Be a good Student  A-B Average could earn you a 5-10% discount  Live just outside the city limits  Increase the size of your deductible