Risk management and pricing is the core of insurance. Companies allocate huge reserves to make sure they take every possible available information and calculate the premiums accurately. This is the only way a company can remain competitive and profitable. They utilize statistical probabilities and programming technology to help them be sharp and get it right.
That is why premiums have been steady for a long time while all the costs have been going up. Companies find a new way of calculating risk and separating good drivers from the bad ones. As they get sharper and sharper they can have cost savings and reduce the amount of losses. When you are a bad driver who has already had several accidents you have two choices. You either pay the high premiums or go without the coverage. A few people accept the consequences and pay the additional costs while others may decide to buy the minimum cover they can get by.
There are so many factors that affect how your rates are determined. Driving history, claim records, age, gender, type of automobile insured and credit score are only few of the well-known ones. Mileage and for what purpose you drive your vehicle is another one and it is what we are going to discuss today.
When you are getting a quote you will be asked questions about the way your automobile is used or you will need to make a selection from multiple choices. Generally, you may see two choices; commute and social use and pleasure only use. When you are using your car for a daily work commute your use is heavier than when you take other transportation to work and your car sits at home. Pleasure only is a light use of automobiles. It includes doing your shopping taking children to school and even taking road trips for holidays. But you shouldn’t be using it for commute every day.
Another measure used to calculate the premiums and auto usage is the yearly mileage. When you drive as much as anyone else you get charge like anyone else. When you are driving a lot less you paid lower premiums. And when you are driving up and down the country racking thousands of miles every year you paid a lot more than an average driver who only travels about 13,000 miles a year.
Mileage is pretty easy to understand, calculate and check. Obviously there is no way of knowing exactly how many miles you will travel every year at the start because the premiums are charged at the start. So, a rough estimate is acceptable and few miles here and there will not make a huge difference. But there are set limits used by many companies. When you are driving less than 3,000 miles a year you are considered a light auto user and get large savings. You are unlikely to have an accident when you don’t get on the roads.
Average American motorists travel about 13,000 miles a year. So, a few thousand miles above or below deserves attention and adjustments in the premium.