How Does Risk Lead to Low Auto Insurance Rates?

There is a relationship between low auto insurance rates and risk in an auto insurance policy. The more risk that the driver assumes, the more likely the insurer will provide low cost auto insurance rates. But insurance companies don’t like risk, and whenever a driver tries to share some of the risk with the insurer, the rates are certain to increase so it is always better to compare the insurance rates from more than one insurance companies.

What Risk Can a Driver Assume for Low Auto Insurance Rates?

  • Higher deductibles. The deductible is what a driver pays to the insurance company in the event of a claim which reduces the overall cost of the claim. Paying more to the insurer reduces the company’s risk in any individual claim and leads to lo auto insurance rates. The risk to the driver can be substantial. If a driver is prone to multiple insurance claims, that could mean paying a $1,000 or $1,500 deductible out of pocket each time there is a claim.
  • Lower liability limits. Liability limits are divided into three parts and pay for bodily injuries for a single person injured in an accident, the injuries of everyone hurt in a wreck and all property damage in a wreck. Lower limits – perhaps something like $10,000/$25,000/$5,000 – lead to low auto insurance rates. The risk here for the driver is that a wreck he or she causes leads to claims above the liability limits in the policy. The driver at that point could be sued for any damages above the liability limits.
  • Refused coverage. One simple way to save money is to refuse coverage. Declining towing and emergency roadside services coverage often makes sense because many drivers receive those services elsewhere. But refusing collision or comprehensive coverage is a greater risk. Certainly, doing without collision and comprehensive coverage will save quite a bit of money. But the savings comes at the risk of an accident where the driver is at fault or fault cannot be established or there is a rental car insurance involved. In that case, there is no money to repair or replace the driver’s vehicle.

Lowering the Insurer’s Risk Also Can Lead to Low Auto Insurance Rates?

Sometimes, low auto insurance rates are the result of the insurance company lowering its risk, rather than the driver taking on more risk. In the case of discounts, insurance companies reward drivers with discounts for reducing the insurance company’s risk of having to pay out for a claim. Drivers who want to maximize the discounts they qualify for should ask an insurer company about all available discounts. Some of the most common discounts are given for:

  • Multiple insurance policies
  • Safe occupations
  • Driver safety courses
  • Low mileage
  • Living in safer locations
  • Vehicle safety features
  • Certain group memberships
  • Rental car insurance

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