Buying car insurance is one of the most confusing things you'll ever do. Many people believe that they do this on purpose, so you'll just be happy to sign whatever contract they put in front of you so you can finally escape from such a horrible experience. While there is certainly some truth to that, the bottom line is that insurance is a very tricky product. There are a lot of variables that effect the price. The key to understanding insurance is understanding what those variables are.
The bottom line is that the less of a risk you present to the insurance company, the less you'll pay. Some variables you can control, some you can't. Which are which? Read on.
The first one is your record. The better record you have, the cheaper your insurance will be. This means no accidents, and no tickets. Statistics show that people who crash their cars in the past have a big chance to crash their cars in the future.
The second is how old you are. Younger people tend to crash more. It's not fair, but that's the way it is. Obviously, you can't control this. Another thing you can't control is your gender. Some areas are forced to charge people the same regardless of gender, but it's good to know going in.
Next is where you live. You could be the safest driver in the world, but if you live in a crime ridden neighborhood where people are street racing every night, you're going to be considered a higher risk. While this may expensive to change, you can change it.
Another risk factor is how much your car is worth. If your car is worth fifty grand, it's going to be more expensive to repair or replace than a five hundred dollar clunker.
The last factor is the actual insurance company. Different companies charge different rates for a lot of different reasons. The only way to tell is to shop around as much as possible. Just keep in mind that different companies tend to specialize in different risk groups. So your buddy who found the best rate at company X doesn't mean that you will. Just know what all of your risk factors are, and keep shopping around until you get the cheapest rate.
While it's certainly not fun, understanding how insurance works and how to get the best rate can save you hundreds of dollars a year. And in such a tough economy, that's a lot of money.