Ever wondered what criteria the insurance companies use to determine your auto insurance rates? Or why two drivers driving the exact same vehicle can be charged dramatically different rates? This article will help answer your questions. Here are seven of the most common factors used by your insurance company to determine your insurance premiums.
You, the driver
A driver’s age, gender and marital status are common factors used in determining insurance rates. Statistically, youthful, male drivers traditionally under the age of 25 – have a higher propensity for accidents, and will typically be charged higher insurance rates.
Your personal driving record
Car insurance is priced to cover the costs of future claims, based on past accidents, violations and years of driving experience. The more accidents and traffic violations you have, the more likely you are to be in an accident and, thus the higher your premiums will be. Likewise, a newly-licensed driver will pay more for insurance than a more experienced driver.
Your Credit Rating
Most insurance companies take your credit rating into account to determine how much to charge you. Studies have shown that your credit rating is a very effective predictor of the probability of accidents and claims in the future. As a result, having bad credit, declaring bankruptcy or having a couple late payments can have a disastrous effect on your insurance premiums even doubling it, in some instances!
Your Zip code
A primary basis for calculating insurance rates is your residential zip code. Insurance rates will typically be higher in urban areas, where there is more traffic, and thus a higher probability of accidents. Urban areas also tend to have higher incidents of auto theft and vandalism.
The year, make and model of your car greatly impact your insurance rates. If your car is relatively expensive to repair or replace, if it causes more damage to other cars in an accident, or if it has higher risk of theft, you will be saddled with the higher the insurance premiums. However, any safety features or anti-theft devices will offset the cost of your insurance.
Your Annual Mileage
The higher your annual mileage, the higher the risk of accidents, and the higher your insurance rates will be.
The higher your coverage limits, the higher the premium you will pay. On the other hand, choosing higher deductibles on your collision and comprehensive coverage will lower your insurance premium.