By Dub Johnston
It is understandable to wonder why choice of vehicle affects the automobile insurance premium. After all, it is the driving skills of the individual that determines whether the vehicle will be driven safely or not. A bad driver should be charged high insurance premium irrespective of the choice of vehicle. On the other hand, a safe driver can drive any vehicle without any worries for the insurance company.
In such a scenario, why do we find variation in premiums based on the model, make, body style and the age of the vehicle when we buy car insurance? Car insurance is something that is required by law in most countries of the world. Insurance companies have to assess risks and charge the premium in such a manner that they meet all their claims and still earn profits for their investors.
A personalized and individual approach may be accurate but will just not work when dealing with hundreds of millions of people. Just take a look at any busy intersection. You will see hundreds of vehicles on the road. Can the insurance company accurately estimate the cost of insuring each and every driver individually? Obviously not. This is where statistics come to the aid of the insurance companies.
Statistics for different vehicles help the insurance companies and identify accident prone cars as compared to other safe vehicles. Middle aged individuals may opt for family sedans and may drive safely. On the other hand, youngsters may prefer sporty and fast vehicles. Such vehicles may be involved in accidents very often as compared to the former category.
Statistics helps arrive at a correlation between the number of accidents and driving skills. This is not a perfect combination but is certainly good enough to help the insurance companies assess premiums are properly.
The age of the vehicle is important because older cars made with obsolete technology may be less safe as compared to modern vehicles. A car that does not even have an air bag is obviously going to be a high risk affair as compared to vehicles that includes antiskid brake systems and seatbelts along with air bags.
You may get a raw deal when you buy car insurance but the variations get evened out when insurance companies deal with millions of customers. This is not the perfect solution but there is no other option which works as well as statistics related to the age, model, make and choice of vehicle.
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Dub Johnston is a respected authority on insurance topics and issues in Australia focusing primarily on aiding consumers in getting the best insurance deals.
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