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            You probably see insurance ads all the time that say "Save up to $350" or "Save up to 15%." Why? Why would some insurance companies be cheaper than others when they all basically offer the same thing?

         Let’s discuss why different companies charge different rates for the same level of coverage. To find out how changes in coverage affect your rate, please visit our page http://www.eLowerMyRate.com

         First, let's talk about how insurance companies decide what your rate will be. When you ask a company for a quote, they ask you a lot of questions. They want to know how old you are, how long you've been driving, how many accidents and tickets you have. To you, this is a bunch of pretty personal data. To the insurance company, these are all "rating factors" or "rating variables." That's a fancy way of saying that they send all of those factors into their computer servers. Their computers then use each of these things to spit out a quote.

         At one level, all of this is pretty easy to understand. If you have more traffic accidents or tickets then your quote is going to be higher. If you are older or have been driving longer, your quote will be lower because more experienced drivers have fewer accidents. So, if insurance companies basically use the same factors (age, accidents, tickets, vehicle type, etc.) how come some cost more than others?

Expenses & Your Rates

Simply put, some insurance companies are more efficient than others. Like any other business, some companies are lavish with their salaries and are not very careful with controlling their costs. Others pinch every penny in hopes of eeking out a bit more profit and money savings for their policyholders. Some have invested in modern computer systems that save money and time in processing your paperwork. Generally, those that are the most efficient are able to pass some of those savings onto you.

Different Formulas

Surprisingly, expense differences are not the main reason that insurance rates are so different. The main reason you can save hundreds of dollars by shopping your policy is that companies use very different formulas to determine how likely you are to cost them money on a claim. Some companies have found in their data that older people are much, much less likely to have accidents. Others have found that people with better credit scores are less likely to get into a wreck. Even when they agree on a risk factor (a DUI is always bad for your rate), they disagree on just how much better or worse a risk that makes you. The example below illustrates how little differences in each of these factors could turn into a huge difference in your premium.

Here is an example of a single, 22 year old male with 1 speeding ticket who drives a Ford Mustang. This is a simple example; in reality there are many more factors and the formulas are much more complex.

Company #1

Base rate: $600

• Age: +10%
• 1 Ticket: +0%
• Single: +10%
• Sports Car: +20%

Total rate: $600 + 60 + 0 + 60 + 120 = $840 for 6 months

Company #2

Base rate: $500

• Age: +20%
• 1 Ticket: +20%
• Single: +20%
• Sports Car: +40%

Total rate: $500 + 100 + 100 + 100 + 200 = $1000

In this simple example, Company #2 actually has lower expenses and a lower base rate. However, this company really likes "clean" drivers who have no tickets or accidents, are married, and drive conservative cars. So, in this case, our younger driver with one ticket and a sports car would be much better off going with company #1. Another driver, who has the clean record and conservative car that Company #2 likes, would do better going with them.

So, clearly, it's often not right to say that one company is "cheap" and another is "expensive" just because you know somebody who got a quote from that company. It may be that the company really liked (or really didn't like) something about the person who got the quote. You may have very different results based on the risk factors that you have compared with your friend

So, the obvious question. Now that you know how it works, why should you care? Well, since each insurance company decides in a different way how to put all of the risk factors together and come up with a price, that creates an opportunity. For example, AAA  may think that married people are lower risk, so they might give you great rates if you're married. PROGRESSIVE might not think that one ticket is much worse than no tickets, but TRAVELERS might think that one ticket is much, much worse. All of these are just examples and are not descriptions of these companies' real rules. But, you get the idea. You need to get quotes from a few different companies to get the best rate. Because you have no idea what they are looking for compared to one another.

Things Change, You Change

You really don't know who is going to give you the best price. The only way you can find out is to get quotes from a few different companies and see how they compare. That's exactly why we thought our comparison service would be helpful for consumers.

        One thing you should keep in mind is that the insurance company that is right for you at as a 25 year old may not be the right company for you when you are 35 or 45. Who you are, as far as the insurance companies are concerned, changes over time. As we said earlier, some companies really favor older, more conservative drivers. Other will have higher rates for younger drivers with worse records, but maybe not have much of a penalty. Some companies really punish you for having a bad credit score. So as your credit score changes, in either good times or bad, you may be better off with another company.

         There are tons of things that change in your life that can change your car insurance rate. As you get married or divorced, as your children turn 16, as you buy different cars, move to different places, etc. the "great deal" you got two years ago may no longer be the best choice. Once again, the only way you can ensure that you are getting a good deal is shop around. We recommend that you shop at least once per year. Get at least three quotes and compare them to your current policy. You may be able to save a few hundred dollars a year that way. Not a bad wage for less than an hour of work.

If you read the article How Insurance Pricing Works you know that there are a lot of things about who you are that affect your rate. These are generally things you can't easily change (or wouldn't change just to get a cheaper quote) your age, your marital status, your driving record, your credit score, etc.

There are also a number of choices that you can make that directly effect the amount you pay. We'll discuss those choices in more depth in this article.

Deductibles

One of the choices that you'll face when you get a quote is what your deductibles should be. Let's start with a brief description of what this is. When you buy insurance, the insurance company is basically making a promise that they will be responsible if you get into an accident (collision coverage) or if your car is damaged by some other means (comprehensive or other-than-collision coverage). If you get into an accident, the insurance company pays your claim up to the limits you have purchased (more on that later), minus the deductible. That is the amount they "deduct" from the payment, or said another way, the amount that comes out of your pocket. Usually, the deductibles are $250, $500, or $1000.

How do you choose what your deductible should be? Which will save you more money? The answer to this one is: it depends. If you choose a higher deductible, say $1000 rather than $500, your premium amount will be lower. Why is this? Your premium is lower because the insurance company doesn't have to pay as much if you have a claim. The other side of this is pretty clear. If you do have a claim, you pay more than you would have with a lower deductible. Here are the factors that you should think about in choosing your deductible.

First, answer this question: does your credit score and driving record accurately reflect how much of a risk you are. Let's say you've got great credit and have never been in a wreck. But, you've had tons of near misses since you don't really pay attention when you drive. You've really just been lucky. In that case, your probably better off with a low deductible, since your clean record is likely not going to continue and you are more likely to have a claim. On the other hand, maybe you have had a few really unlucky traffic tickets and an at-fault accident, but are really a very careful driver who almost never comes close to an accident. In that case, you may opt for a higher deductible since your premiums will reflect those of a much riskier driver than you actually are.

Another factor to consider is your financial situation. No matter how risky your driving is, you need to consider your finances in making your deductible choices. Let's use a simple example to illustrate this. If your job requires you to have a car in working order and you could not afford $1000 to get your car repaired after an accident, then you need to have a lower deductible. This will cost you more money on your premium, but it will be more manageable since you will pay that over time rather than all at once. On the other hand, if you are very comfortable in your finances and could afford a larger one-time hit, you may be better off with a higher deductible based on some of the factors we discussed earlier.

Limits

Another set of choices you have that effect your quote are the limits on your policy. There are two major limits on most polices. The first is the Bodily Injury limit. This is the amount that the insurance company will pay for injuries to others in an accident that you cause. The second is the Property Damage limit. This is the amount the insurance company will pay for property that is damaged (such as other cars) in an accident that you cause. Simply put, the lower the limits you choose, the less money the insurance company has to worry about paying out in a claim. Less risk for the insurance company means a lower premium.

There is a temptation to choose low limits to save money on your premiums. Many people just think of insurance as something the government makes you get and they choose the minimum limits allowed by the laws in their sate. If you have assets to protect, however, choosing low limits can be a foolish choice and cost you more money in the long run. Remember, here at the Finance Center we are all trying to save money overall and not just get you the lowest premiums. If you save $50 per year on your premiums but end up losing your house or business because you chose the state minimum limits and were at-fault in a big accident, you would not be able to say that you saved money. We'll be the first one to say that its very hard to predict what may happen in the future. But, if you have a house, business, or other assets, you would be better off opting for higher limits. Then, save money by comparing different companies' rates for those same higher limits. Without doubt, some of the companies will offer better deals than others even if you have chosen a high level of protection for your family.

Additional Coverage Options

Most insurance companies offer a number of optional coverage choices. One common coverage option is rental car coverage. If you have this coverage your insurance company pays you a daily amount to use on a rental car while your car is being repaired. In deciding on this coverage, you should think about how you actually use each car and what would happen if you got into an accident. If one car is just used for weekend pleasure driving, you probably do not need rental car coverage. On the other hand, if you use your car to commute to work every day and have no other transportation options, the coverage may be important. Also, like the deductible, you need to think about your financial situation. If $30/day for a rental car would be affordable for you, you can save money on your premium by declining the coverage. If that would put your budget over the edge, then better to pay a little bit more every six months as part of your premium.

Other optional coverage choices can be thought of in a similar way. Towing coverage is a good example. Generally, this coverage pays for towing your car from the scene of an accident to a repair facility. You should consider this similar to your deductible. You may never use the coverage. But, if you do end up needing a tow, you could end up paying hundred of dollars. Can you afford that all at once? Or, would your rather pay a smaller amount over time? Those are the kinds of questions you should ask yourself in considering these types of coverage.

About The  eLowerMyrates.com

The question we hear most is this: "if I'm looking for insurance, why wouldn't I just use a search engine?" Search engines are great for almost anything. They make it easy to find books, DVDs, computer parts and pretty much anything else. The problem with search engines is that they they have to do the same thing for every type of product. The search engine is just a computer. It doesn't see any difference between a book, a printer, a telephone or an insurance policy. Those are just words that people type in.

We're different. We've been in the business for many years and know what makes insurance different than a pencil or a wallet. The first thing that's different is that not all insurance companies are the same. The search engine doesn't know which companies have "A" ratings, which are fly-by-night, which have good rates or easy quote forms. We do. We work with companies that have good ratings, offer simple quotes and provide good service. We monitor the feedback we get from users and have even stopped doing business with companies that we didn't think were providing good service.

The other major problem with using a search engine to find insurance is all of the listings you have to look through. When you type in your search, you're likely to get college papers, spam sites, even sites that are a scam. And, since insurance is sold by state, you'll have no idea whether each company provides insurance where you live. Finally, as you try to dig through the companies listed on the page, you would be lucky to find more than one line of text about each company. That often is just not enough information.

Here at IFC, we make it much easier to find what you are looking for. You select the product you want on the home page, type in your zip code and then select the "get quotes" button. That will bring up a list of companies that serves your area for the product you are looking for. Each listing shows the name of the company and has a full text description of what they offer. Read the description of each to see which ones you like and get a quote from all that fit your needs. It's that easy! No more sifting through search listings and filling out long quote forms just hoping that you'll find what you want.