Rating factors used to determine car insurance premiums

It’s a known fact that car insurance rates vary from person to person and company to company. Many

factors affect the way car insurance premiums are calculated. Though these factors are common to most

car insurance companies, they weigh them differently to calculate rates for their customers.

Here’s a list of the most important ones:

1. The car make and model

Not only are different car models rated differently by insurance companies based on their safety

ratings, how much they cost to repair or replace also affects car insurance premiums to a great

extent. Statistical methods are used to find out data such as which cars are stolen the most,

which cars are damaged the maximum in a collision, which ones have the most expensive

spares, the ones with more powerful engines etc. That’s the reason compact crossovers,

minivans and SUVs are the cheapest cars to insure this year, while Mercedes, BMWs, Aston

Martins and Pontiacs are among the most expensive ones to insure.

2. Number of drivers and their driving records

Every driver that is added to a car insurance policy is naturally going to contribute to higher

rates. The previous driving record of a driver indicates to the car insurance company whether

s/he is a high or low risk proposition. Too many tickets, especially of moving violations, escalate

car insurance premiums while clean driving records are encouraged with discounts and lower

deductibles. So, if you’ve been in any accidents in the past, it is bound to affect your car

insurance premiums.

3. Location

Urban areas have a greater density of traffic and are bound to attract higher car insurance

premium rates. Areas which show higher incidence of theft, riots, accidents and uninsured

drivers are also going to have higher rates. That’s why TX car insurance is higher than OH. Also

different state laws demand different coverage options and these have a direct bearing on car

insurance premiums.

4. Age and gender of driver

While women get into minor accidents, men get into more serious ones, so men pay higher car

insurance premiums. Mature men aged 45-65 pay the lowest rates while younger drivers,

especially teens pay the highest car insurance premiums; so experience behind the wheel does

matter!

5. Marital status of driver

Based on statistical analysis, insurance companies rate married people as mature and

responsible drivers. Single people are considered to be more risky propositions as they have less

to lose, so their car insurance premiums are higher.

6. Credit history of driver

Simple logic; if you have more money in your bank account and pay your loans on time, you will

pay your car insurance premiums on time too! Those with a good credit history are bound to be

less tempted to make claims against their car insurance companies, costing them less as

customers, hence they pay lower car insurance premiums.

7. Education and occupation of driver

A good grade in high school can get credits and discount on your car insurance premiums. Also a

“safe” occupation like that of a teacher shows you as lower risk proposition and so your rates

are lower. If you have consistent employment history, you come across as a more stable and

responsible individual with a regular source of income to the car insurance company and so are

charged lower rates.

8. Previous Insurance coverage carried/ first time driver

Since a first time driver lacks road experience, the rates are bound to be higher. Also, the

insurance company has no access to your driving record, so they don’t have any clue what kind

of driver you could turn out to be. Insuring you is a huge risk they are taking. This makes your

car insurance premiums high! Also, the car insurance coverages you were carrying previously, if

any, show the prospective new company whether you buy minimum coverage just to be legal or

are a serious customer!

9. How the car is going to be used

Whether your car is used for business, pleasure or commuting, where it’s going to be parked for

most of the day, is it going to be driven through crowded areas etc., affect the calculation of

your car insurance premiums. If the car is being driven for late night parties regularly for

example, you can expect to pay higher rates.

10. What coverages and limits you buy

This one is obvious! The more coverage you add to your car insurance policy, the more money

you pay, as you are transferring more risk to your car insurance company. However it’s better to

buy good coverage options for adequate protection. Rates can always be lowered by keeping

higher deductable options. Also shopping for car insurance quotes can save you money;

however ensure you check the financial stability and claim handling reputation of the car

insurance company that you go with.

While some factors that affect your car insurance premiums like your age, location, number of

drivers might not be in your hands, others like your credit and driving history, how you use the

car, where you park it, are things you can work around to get lower car insurance premiums.

Good luck!