January 26, 2010

Why Do Auto Insurance Companies Offer Discounts To Policyholders

When purchasing any sort of insurance, whether it be auto, home or life insurance, the ultimate goal is to find the cheapest premiums combined with the best coverage. This can mean shopping around and investing the time to determine exactly what is available. In the world of auto insurance, one effective way of lowering premiums is to find a company that offers discounts to its policyholders.

Most auto insurance quotes are for the basic’ plan – that is, they do not include any discounts the company may offer. In order to see if a company does in fact offer any kind of auto insurance discount, a good idea is to speak to a representative either in person or by querying the company via email. In many cases, auto insurance companies will provide discounts to their policyholders based on a number of factors: One important factor will be the client’s previous driving record. A clean driving record will likely lead to a far lower rate than if several accidents have been reported and claimed. Another factor is the age of the driver. Typically, anyone over the age of 25 receives a reasonably large discount on their insurance simply based on their age and the fact that they have had a significant amount of driving experience.

Other factors may be less clear-cut. The type of vehicle that a client owns can most definitely influence the price of an insurance policy. The color of the vehicle influences the price as well. Some studies have shown that red cars, as an example, are involved in more accidents than those of other colors. It is therefore possible to end up paying too much for auto insurance simply based on the hue of a car’s paint. Also, the type of driving the vehicle is going to be used for will also make a difference in premium price. If the vehicle is claimed as only being driven occasionally, the cost to insure it will be less than if it is a primary vehicle.

One other important way that discounts are given out is when a client has other insurance policies with the same company. Often times companies will offer two or three different types of insurance. In the same way that a phone, internet and TV package can be ‘bundled’, so too can insurance policies, which leads to a reduced rate. Every company will have different criteria which must be met to give out discounts, and it is worth a prospective client doing the research to determine which company’s discounts most favorably suit their needs. This will allow them to find the most cost effective way to insure their vehicle.