Auto insurance premiums have consistently increased over the past ten years. As a driver, you most likely notice the change year after year. There are many common misconceptions as to why the auto insurance rates continue climbing and never seem to drop significantly, regardless of a how long you have been driving conviction or accident-free. One reason why rates have steadily increased over the last decade is the rise in cost to insurers for liability and accident benefits.
Most people know and realize the potential for vehicles to be stolen, vandalized, and damaged in accidents. However, other losses that are less talked about are liability and accident benefits claims. When drivers or passengers are injured in an accident, there could be a small payout for a minor injury or there could be years worth or physio and attendant care that the insurance company is financially responsible for settling. These claims can result in hundreds of thousands or even millions of dollars to pay out by those insurance companies involved. There has also been a large number of fraudulent claims reported in these categories of coverage, and unfortunately, we all pay the price for to cover this crime. Some may argue that they should not have to pay for someone else to be defrauding the system. You may agree that this is not fair, however when you go to the mall and buy a pair of jeans, you may not realize it but you are also paying for the people who have stolen jeans from that store. Shoplifting inflates the price of all merchandise we buy.
Think of your auto insurance premium as a pool of funds. Everybody pays their premiums and it all goes into one pool. When there is a loss, we take money from that pool to pay for the claims.
Your auto premiums are divided into different categories of premium, rates are more simple than it may appear to look on your intimidating renewal paperwork. Rating for auto insurance is based on the driver of the vehicle, how the vehicle is used and the type of vehicle itself. For instance, you will pay a different liability premium depending on the vehicle you drive. The year, make, and model of your vehicle will also determine the final cost of collision and comprehensive coverage.
When shopping for vehicles, many people question what the cost of the auto insurance would be – there are several things to be considered. A vehicle that is larger or higher off the ground means you may be less likely to get injured in the event of an accident so the accident benefits portion of the policy will tend to be less expensive, any vehicle that is small and compact is going to save you money on gas but you will pay more in insurance premiums because of the increased risk or exposure to more severe injuries.
When shopping for a vehicle with economics in mind, contact your Erie Mutual Insurance agent or representative. We can provide you with options for the insurance you need to keep you and your family safe on the road.
Article Written by Jennifer Belu
Erie Mutual Insurance Account Executive
Please contact us with any questions you may have about this or any other topic related to your insurance.