A Guide to Understanding Your Car Insurance Quotes

The Covid-19 pandemic has significantly impacted the auto insurance industry since its onset in 2020. Most of the American population prefers to work from home as part of health safety measures. And as a result, they drive a lot less than usual. With fewer miles covered, auto insurers have had no option but to offer attractive rates and discounts to customers.

But what about those who drive long distances for specific reasons? Does it mean that they get stuck with higher rates than their counterparts? Not necessarily. There are many ways to reduce your auto insurance premiums, and one of them is comparing car insurance quotes at least yearly. After all, how will you tell if there are better options out there if you stick to one insurer?

Before you request quotes from different insurance providers, you must first understand the quote itself and its particulars. This is crucial in choosing the right coverage based on your needs. Let’s dive deeper into understanding the main components of an auto insurance quote.

Understanding Common Auto Insurance Terms

Picture this scenario: You’re requesting a car insurance quote from an insurance agent over the phone, and they utter words like “premium” and “deductibles,” and you have no clue what they are referring to. This is why you need to be familiar with the insurance jargon to choose the best coverage for your needs.

Let’s look at some of the common insurance terms you'll come across when requesting auto insurance quotes.

At-fault: This term is applied to the one in the wrong in an accident. The at-fault driver probably hit another car or someone’s property.
Premium: This is the amount you remit for your car insurance coverage. It’s either paid monthly or yearly.
Actual Cash Value: This is the replacement cost of your vehicle without factoring in depreciation.
Liability Insurance: This is a minimum legal state requirement for car insurance. It protects you and your assets if you cause an accident that leads to another person’s injury or property damage.
Collision Insurance: This covers your car’s repairs or replacement costs after an accident.
Comprehensive Insurance: This coverage pays for any damage to your vehicle that results from vandalism, theft, or natural calamities.
Full Coverage: This includes liability, collision, and comprehensive coverage for your vehicle.
Claim: This is an official request for financial reimbursement from your insurer when your car is damaged or when you suffer injuries.
Deductible: This is the sum you’d pay out-of-pocket to cover insured damage. Assume your deductible is $500, and your car racks up a $3,000 repair bill after a collision. In this case, you will need to foot the first $500, and your insurer will pay for the outstanding $2,500.
Diminished Value: This is the variation in the actual market value of a car before and after a mishap.
Additional Insured: This refers to an individual or a group that a principal party covers. For example, teen drivers are usually covered under their parents’ insurance policies.
Limit: This is the maximum compensation you will be paid for a covered claim. If the claim exceeds your coverage limit, you will have to pay for it out of pocket.
Totaled: This describes your car if the repair bills after an accident surpass the actual value of the car.
Exclusions: These are the things that your insurer will not pay for and are usually distinctly expressed on the declarations page.
Declarations Page: This details the specifics of your insurance coverage, including your monthly premiums, term duration, and cars and persons covered.

Auto Insurance Quote Defined

A quote is a price estimate for coverage with a specific car insurer. It’s based on the details you provide to the insurer, such as your vehicle details, residence, driving record, and so on. Each quote is typically adapted to mirror the details you provide to the insurer. The price estimate is generated based on your:

Personal details
State mandatory minimum liability policy
Any optional coverage you want, such as comprehensive, collision insurance, or gap insurance

We’ll go into more detail on these factors below. You need to provide correct information to get a quote that will be about the same as the actual cost of the policy. Insurers process the information you give to determine the level of risk you pose to them.

For example, how likely are you to file a claim? If you’re categorized as high risk, then your quote will be higher. Likewise, if you’re deemed low risk, you can expect to pay lower premiums.

Car insurance quotes differ from one insurance company to another, even if you feed them the same information. This is because there’s no specific way to assess risk. Some insurers will be keen on your credit history, while others may not look at it. Others may consider your gender, while others will not. So, the final quote will differ, depending on your insurer.

What’s more, quotes constantly change. A quote generated today and another one generated six months ago from the same car insurance company may not be the same. There are a host of variables that may influence the changes. For instance, a city that experiences an upsurge of car accidents, resulting in more claims, will see the insurer adjust the rate higher in that town.

Information Needed for a Quote

You can request a car insurance quote online, in person, or over the phone. Most companies provide quotes online. Others have local outlets where you can walk in and speak with an insurance agent. Regardless of the route you choose, you can expect to be asked to provide the following:

Personal details: These include your name, gender, date of birth, ZIP code, occupation, marital status, and Social Security Number. If you want any family members covered under the policy, you will need to provide their details, too.

Car Information: You will be asked about the year of manufacture, vehicle identification number (VIN), design, and model of your vehicle. You will also have to give information on miles covered per year and any safety features that you may have installed. And do you own the car, or is it being financed or leased? You will need collision and comprehensive insurance policies for leased or financed vehicles.

Driving Record: You should reveal any prior accidents, tickets, or driving offenses on your record for the last few years to get the correct quote. Even if you hide this information, the insurer can still pull out this data anyway, so be honest when requesting a quote.

Existing Insurance Policy: You probably already have car insurance coverage. You will need to divulge the details of your existing policy and its expiry date.

State Minimum Liability Policy: This is the minimum amount of coverage that is legally mandatory in the state that you live in. It varies from one state to another. The minimum car insurance usually covers any damage you inflict on another driver, but not any injuries you may suffer in an accident. Car damage due to theft, vandalism, or weather elements is not covered in this particular policy.

What Factors Influence Your Quote?

The insurance company will need to assess your level of risk to determine how much you will pay for your auto insurance policy. To do so, they will do some digging about you. While each insurer determines risk using their own formula, certain factors will always affect your car premiums. These include:

Driving History

If you have an excellent driving record with no tickets or accidents, you can expect to pay lower rates. The fundamental aspect here is risk. A driver who has been involved in accidents or committed multiple traffic violations is more likely to file claims. Thus, they are categorized as high risk. New drivers also attract higher premiums because they have no driving experience and thus a higher chance of being in a road accident.

Types of Coverage

The more additional coverage and the higher limits you choose, the higher your premium. A policy comprising collision, comprehensive, and gap coverage will naturally cost you more than liability-only coverage. Decide on the type of coverage you want before requesting a quote.

Personal Characteristics

Car insurance providers will consider your age, gender, and marital status, among other factors, to determine assumed risk. According to statistics, male teen drivers are involved in more accidents compared to their female counterparts. So, insurers will usually charge higher premiums for young men below 25 years of age to cover that increased risk.

The rates come down between ages 30 and 50 because people in this age bracket are assumed to have more experience on the road. However, they dramatically rise again for drivers above 60, who are considered to have slower reactions and poorer eyesight. In general, women pay somewhat less than men, and married drivers are considered safer to insure than single motorists.

Location

Insurers also consider where you live to calculate your auto insurance rate. Do you live in a rural or urban setting? Statistics paint a grim picture of more accidents happening in urban areas than in suburban regions. So, drivers who live in cities will be charged more in car premiums.

Insurers also consider aspects such as theft and vandalism incidences in your ZIP code. For example, if many drivers from your neighborhood have recorded claims due to car theft in the past couple of months, the insurer will use this data to hike up your rates. Where you park your vehicle also matters. If you often park on the street, you will pay more premiums because of the increased theft risk compared to when you park in a secure garage.

Vehicle Type

The make and model of your car will determine how much you will pay for car insurance. Your VIN will provide the insurer with detailed information about your car and its accident record. Some cars rack up higher repair or replacement costs than others. For example, an SUV driver is likely to pay higher rates compared to a sedan driver. The age of your car is crucial. Newer cars have a higher value and thus are costlier to insure compared to older ones. On the other hand, you may enjoy great discounts if your vehicle is fitted with high-tech safety equipment.

Mileage

How often do you use your car? The more miles you cover annually, the higher your car premiums. The rationale is that if you spend more time on the road, you’re more likely to have an accident or develop mechanical problems.

Credit History

Insurance providers often apply a credit-based insurance score to calculate your premiums. It is a similar statistical tool to your credit score. It analyzes your credit history to forecast how likely you are to file a claim reimbursement. Some states, however, including Massachusetts and California, outlaw the use of credit history as a rating factor.

How to Get Cost Savings on Auto Insurance Quotes

On average, the American motorist pays more than $1,500 yearly for a full coverage policy. If you are keen on spending that much, you could find ways to lower your car premiums. While you can’t change your age and gender, several ways to get a cheaper car insurance quote exist, such as:

● Shopping Around: This is the best way to find great deals. Even if you’re content with your current insurer, you may find an irresistible deal out there. And since most insurers will raise your rate once your current insurance term ends, shopping around between terms can keep you from having to pay more.
● Applying Discounts: If you work in certain occupations, like being a nurse, doctor, or military officer, you may get great discounts on your car premiums. You could also earn discounts if you are a student with good grades or if you bundle your policies.
● Choosing a Higher Deductible: A higher deductible translates to a lower premium. Before you choose this, consider whether you have the means to cater for out-of-pocket costs if you file a claim.
● Saving With Telematics: Some providers offer telematics-based saving coupons that check how well you drive and how much distance you cover to give discounts.

Bottom Line

Never pay a dime to get a car insurance quote. If a provider suggests you pay anything upfront before you sign up for the coverage, then you should find an alternative. And before you request a quote, take a moment to check the reviews of your preferred auto insurance company. Read customer testimonials and any complaints on their website. Make sure you’re dealing with a reputable insurer, and consider the factors that go into the creation of a quote before you request one.