Budgeting | Financial Planning | Personal Finance | Article
Buying Car Insurance: How Your Age, Gender, And Driving History Influences Your Premiums
by The Simple Sum | 28 Nov 2024
Understanding the ins and outs of car insurance is important. It’s not just about finding the cheapest rate – it’s about getting the right coverage for your needs without breaking your wallet.
It’s a long list of factors which you may not have thought of; from the type of car, you drive to your age, which comes into play when insurers calculate your premium.
Car insurance is a necessity for vehicle owners, not an option. However, the choices can be overwhelming. Are you adequately covered, or are you overpaying for unnecessary protection?
Whether you’re a first-time buyer or considering switching providers for better deals, here are some fundamental aspects to consider before committing to a car insurance policy.
Related
Understanding coverage types and limits
When shopping for car insurance, you’ll be told that there are various coverage types. But what exactly is coverage?
Coverage is the amount of financial protection you have in case of a car-related accident. Whether the accident is your fault in a collision, or another driver rear-ends you, your insurance coverage determines the amount you can claim for the damages or injuries.
Coverage comes in multilayers. As accidents happen in many ways, let’s peel off the layers to see what they cover.
The basic protection – liability coverage
This is the minimum insurance needed before you can legally drive. It covers damages you cause to others in an accident and comprises two components:
- Bodily injury liability: Covers medical expenses if you injure someone.
- Property damage liability: Pays for damage you cause to someone else’s property.
But this minimum liability coverage doesn’t protect you from your own damages and injuries.
Here are some additional coverage add-ons:
- Collision coverage: Pays for damage to your car from an accident, regardless of who’s at fault.
- Comprehensive coverage: Covers non-accident-related damage, such as theft, vandalism, or weather damage.
- Personal injury protection: Covers medical expenses for you and your passengers, regardless of fault.
- Uninsured/underinsured motorist coverage: Protects you if you’re in an accident with a driver who doesn’t have insurance or doesn’t have enough.
Each type of coverage has its limits – the maximum amount the insurance company will pay. Understanding these limits and deciding if they’re sufficient for your situation is crucial.
Factors affecting your premiums
When shopping for car insurance, you might wonder why your premium differs from your parents’ or friends’. Besides the type of coverage you opt for, insurance companies consider two categories when setting your rates: your profile as a driver and the car they are insuring.
Your profile
Insurance is about playing the odds, and these are the odds insurers consider:
Age
Your age significantly influences your insurance premium. Here’s why:
|
Gender
Mars vs Venus on the road It might seem unfair, but gender affects your premium. Men typically pay more than women. Insurers aren’t being sexist; they’re considering that men, especially younger men, are more likely to:
|
Driving experience
The longer you’ve been driving, the better. Most insurers prefer to see at least two to three years of driving experience. Practice makes perfect (and cheaper) because time behind the wheel usually means:
So, if you’ve had your licence for a while and have a clean record, you’re likely to see lower premiums.
|
Marital status
Believe it or not, being married could save you money on car insurance. Insurers often view married individuals as:
It might seem unfair to single folks, but that’s how insurance companies see it.
|
How you use your car
Your job and how much you drive can significantly impact your premium. Here’s why:
|
Your driving and claim history
This is a major factor. Your past behaviour on the road is used to predict your future behaviour. In Singapore, if you make claims, the record follows you for three years. Here’s what you need to know:
No Claim Discount (NCD) This is the “carrot” insurers dangle to encourage safe driving:
|
Your car
The vehicle you choose has a significant impact on your insurance costs. Make and Model: Not All Car Insurance Is Created Equal
Car’s Age: Newer Isn’t Always Cheaper
Engine Size: Bigger Isn’t Better for Your Wallet
|
Understanding these factors can help you make informed decisions about your car insurance.
While you can’t control some factors, things like safe driving, choosing the right car, and shopping for quotes can help you find the best rate for your situation.