Insurance companies have a simple business plan. It is to take in more money in premiums than it pays out in claims. It is a matter of risk management. Insurance companies must access the chance of a disaster happening. If you watched (and who didn't?) the tsunami recently in Japan, you saw cars by the thousands being washed up by the giant waves ending up in one giant junk yard.

Each of those cars destroyed in the tsunami most likely had auto insurance. Did or will the insurance pay off and replace the cars? It depends what is in the policy, the fine print. Low-cost auto insurance may not cover natural disasters. Those that do cover natural disasters such as a tsunami may have limitations. Adjusters have to find the vehicle and explain to each customer what they are or are not entitled in compensation. No mater what happens next you can bet your Aunt Ruthie's antique rocking chair that insurance rates will go up.

The rate you pay for auto insurance depends on 1. The Insurance Company, 2. Your age and the age of each driver, 3. The driving history of each driver, 4. The make and model of the car, 4. The training of the driver (such as AARPs driving course), and 5. The area where you live.

Insurance companies have widely varying rates. You will pay more for the same services at different insurance companies. Younger drivers are more prone to accident. A driving course at high school may lower a rate. Some companies give lower rates to students with high grades. But the bottom line is that younger means more costly insurance.

If you have been in an accident or two, it will affect your rate. A current policy may not be continued or even cancelled by the insurance company. You may be thrown into an insurance pool to be able to obtain insurance which you will pay for at a much higher rate. And after the new company carries you for one year, they will drop you like a hot potato even though you had no accidents during the year.

Some cars are more prone to being stolen or high repair costs. You can study up on which cars an insurance company hates or loves. But most of us are stuck with what we have and we are not going to let an insurance company dictate to us what car to buy or not to buy.

Your locality determines your insurance rate. Factors like the possibility of having an accident, the number of auto thieves or vandals, and the possibility of a natural disaster may come into play.

Remember that it is your car that is insured. If you are not the driver and your car is involved in the accident, you are probably covered. But you may lose your insurance because of the accident. Some companies like AARP (Hartford) now permit an accident without cancellation. I had Hartford years ago after an accident kicked me into the insurance pool. They covered me the required one year but then I was that hot potato. AARP dictates to them what coverage they will provide to AARP members.

There are a number of ways that you can reduce auto insurance cost. Talk to local insurance agents before you go online. You may be surprised to find that a rate with a local company is lower than the big braggart on television who claims low rates. If you belong to an organization, check to see what they offer. Your company may belong to an organization where you can obtain low rates. When we lived in New Jersey, at times we used New Jersey Manufacturers insurance.

Talk to your friends. What insurance are thy using and how much are they paying. You must compare apples with apples so make sure you are looking at the same coverage between companies.

Fly Old Glory!