Impact of Cheap Gas on Auto Insurance Rates
Correlation Between Auto Insurance Rates and Gas Price.
Has it ever crossed your mind that there can be a correlation between gas price and auto insurance rates? Before you start celebrating any time there is a drop in gas price in your state, you should try to also think the implication this might have on your auto insurance rates. The reason is that, gas price is one of the factors that insurance companies consider in arriving the auto insurance rates they will charge individual customers.
So, how does gas price affect auto insurance rates? I will try to explain to you in a simple way. Any time the price of gas drops, the gas becomes more affordable to motorists. Therefore, there is tendency for them to decide to buy gas. In such period, it means that we will have more cars on the roads. People who have been commuting to their work places may decide to drive. This makes driving to be more risky as the possibility that someone will hit your car becomes higher. If you park your car in the garage at home, the likelihood that someone will hit the car is very low if not zero. But if you drive, you may be very careful not to hit someone’s car, another person may hit your car.
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If you are the one that hits someone’s car, you may be more concerned as you will be the one to repair the car. But if you insured the car, the risk has already been passed to the insurer. But if the other party is the one in fault, he may personally repair the car or pass the costs of the repair to his insurer. You may likely see this one as ‘no case’ to you since you are not the one to pay for the repairs. But the insurance companies see it in a different way. Whether you are the one in fault or the other party, insurance company will still need to bear the cost as long as the cars are insured. For this reason of higher risk, insurance companies will like to charge higher premium to compensate them for this extra risk. From their experience, they understand that when there are more vehicles on the road, the rate of accident also increases. So is the rate at which people file for claims. Therefore, any time there is reduction in gas price, you should look forward for insurance companies to increase their auto insurance rates. This is one of the factors you may not have control over when trying to figure out how to reduce your auto insurance rate. And I don’t think it will be worthwhile for you to move to a state where the gas price is high.
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The rule is simple. The higher the gas price, the fewer people will want to buy the gas. This means there will be fewer vehicles on the roads. This will also lower the possibility of accidents on the roads. This will translate to fewer claims, thereby lowering the likely auto insurance rates. On the other hand, if the gas price is low, the gas becomes more affordable to more people. This will motivate more people to drive thereby making more cars to be on the roads. This increases the possibility of accident occurrence. This will definitely increase the claims on the part of the insured. And this will translate to higher auto insurance rates in order for insurance companies to be able to pay for the increased number of claims.