There are three major factors, which have an effect on your car insurance premium. Your credit rating is one of the first things that insurance companies look at while calculating your insurance premium. Your driving history is another item that the insurance company will investigate, prior to quoting you a rate. The final factor that will have an effect on your insurance premium is your age. It is important to understand that insurance companies work on a risk basis and therefor, they must assess your risk to profit ratio, in order to quote you a valid rate.
Why do auto insurance companies check your credit rating?
Many insurance companies use your credit rating to determine if you are a responsible person. Additionally, insurance companies spend money to get a client and need to be certain that the client is going to pay the premiums consistently. Many studies have shown a direct connection between a client’s credit rating and their likelihood to file insurance claims. You can use this to your benefit if you have a good credit score. It is very important to notify your insurance agency if your credit rating has improved recently. Your agent can then help you to possibly lower your insurance rates.
One thing that many people do not know is that your credit report will give the name of the neighborhood in which you live. If you live in a neighborhood that has a higher risk of theft, you will likely experience a higher insurance premium. On the other hand, you may see a slightly lower rate if you live in an area that does not see much crime.
How does your driving history affect your insurance rates?
Many insurance companies take a detailed look at your driving history before they supply you with an insurance quote. If you have too many tickets or accidents, you are considered a high-risk to them. Therefore, your policy premiums will be higher than average. They use the past to predict the future. If you have been in several accidents, then the provider may assume that your driving rituals put you at risk to get into another accident.
There are ways that you can show the insurance provider that your days of risky driving are behind you. First, contact the local Department of Motor Vehicles in your neighborhood and request a copy of your driving record. Enroll in a safe driving course that is, offered through the local police department or your insurance company. Once you attend the classes and receive the certificate of completion, you can fax a copy to your local insurance agent and they can look into providing you a lowered rate. Many companies offer safe driving discounts or cash back if you do not get into an accident within a certain time (usually 6 months or 1 year).
One-way to lower your insurance premium, even if you have a checkered driving history is to purchase a car that has numerous safety features installed. In addition, owning a solid, reliable car as opposed to a fast, sporty car will provide you with a much lower insurance rate. Make sure that you notify your insurance agent if you are driving, fewer miles than you were before. This may reduce your premium greatly. There are special discounts for those people that drive less than 30 miles per week.
How does your age affect your insurance rates?
This is one factor of the process, which you cannot control. Usually, it is more expensive for drivers under the age of 25 to get insurance. This is because they have less driving experience and are more likely to be involved in a car accident. Many times the elderly also experience higher insurance rates. As people get older, we tend to have more health problems that can cause us to get into more accidents.
Insurance companies do take into account that everybody is different and many companies do offer certain discounts to teens that show responsibility. A good student discount is for younger drivers that excel in school. Elderly people that have good credit ratings and great driving records will not see much difference in their insurance premiums. If there is a huge difference, you can contact your local insurance agent and ask if you may qualify for any discounts that might have been previously, overlooked. In addition, there are insurance companies that focus strictly on providing insurance for people that are over the age of 65.
Your credit rating, driving record, and age are all major items that most insurance companies are going to investigate before they decide how much to charge for your insurance premium. It is important to understand that insurance companies are in business to make money. They offer a service that is risk based so it is only natural that these companies would need to make rate determinations based on risk investment. Fully understanding how insurance works and what discounts you are eligible for, will help you to get the very best insurance rates possible.