May 2, 2011

How Auto Insurance Companies Change Rates Due To High Gas Prices

America's current economic crisis has millions of people seeking ways to save money. With prices rising on everything from food to electronics, these money-saving missions look bleak for many. But when it comes to high gas prices, people are probably unaware that they may be getting a break. Though you probably won't see falling prices at the pump anytime in the near future, auto insurance companies may provide big savings because rates tend to get better as gas prices get worse.

Gas prices have been on the rise for several years. Consumers respond to this trend by walking, driving less, carpooling, opting for hybrids and other small vehicles, or even depending on public transportation to get where they're going. At almost $4 per gallon in most places, driving has become a major part of household budgets as consumers realize that they work several hours each day just to pay for fuel. As a result, many people can't afford to drive as much as. This is a huge plus for insurers, though.

Auto insurance companies consider a person's annual mileage when calculating premiums, so cutting back a little bit each week can save a consumer money. Insurers see it this way: The less time you spend on the road, the less likely you are to file a claim for being involved in an accident and the less money they have to pay for property damages and personal injuries for a number of people.

Small and fuel-efficient car sales tend to rise when gas prices increase, too. Not only do the owners save on fuel, but insurance companies also deduct costs for other reasons. Even if you purchase fuel-efficient vehicles to offset high gas prices, insurers believe that you make these choices because you're a safer driver - less likely to have an accident and cost them money. When insurers see that these small changes can save their money, they can transfer the savings to customers.

Once these individual changes become a national trend, insurance rates may start to fall for everyone. As companies see costs for claims constantly decrease, many large insurance companies can afford to lower quotes. Other insurers will then have to lower premiums to compete in the saturated auto insurance market.

Regardless of trends, though, don't expect a break from your insurance company if you're guilty of a blemished personal driving history. Speeding tickets and other traffic violations, like accidents or driving under the influence, may negatively affect your insurance rate, which means your premiums may be costly. Insurers may see you as an unsafe driver, and thus a high-risk client who needs to pay more.