Auto insurance premiums differ greatly from one insurer to another. The key factor in setting the auto insurance premiums is the cost to the company for paying off claims. The premium rate is also determined using several other parameters to know how much the company would have to pay in case of an accident or theft. Let us look at some of the factors that are taken into consideration by insurance companies when determining the car insurance rate. Insurance companies heavily depend on the current statistics to assess the risk factors and arrive at the premium rates for each applicant for car insurance.
Driver’s Age: People above the age of 25 are considered responsible drivers by the auto insurers. Drivers below 25 are known to be prone to accidents due to their inexperience, lifestyle and attitude. Teenagers are considered reckless and irresponsible drivers and hence the cost of their auto insurance is higher than others.
Gender: For young drivers the car insurance premium is lesser for women than male drivers as they pose less risk to the insurance company. Young men are found to be involved in fatal accidents more than three times as women drivers. So insurance companies view women as responsible drivers and are more obedient in following traffic rules.
Driver’s record: If you were involved in an accident for which you were at fault and got it in your driving record you may have to pay more for your car insurance. If you have more than one ticket or driving violation or DUI that will also will cause your premium to go up as they are classified as high risk drivers.
The car: Expensive, high performance cars and sports cars are considered high risk as they cost too much to repair or replace. Family cars and older cars will have lower premiums as the cost of repair is less for these cars. SUVs are the best examples for having higher insurance premiums as they are known to cause far more damage than any other car if involved in an accident.
Location: Where you reside in is also a factor that behind the cost of your car insurance. Accidents are more common than in the cities because of the heavy traffic. The car insurance rate is lower in small towns and rural areas because of the low accident rates. This is the reason why insurance companies charge higher for city residents for car insurance. If you live in a place where crime rate like thefts are high car insurance premiums are higher as the probability of claims is high.
The deductible: A deductible is the amount you will meet before the insurance company pays for the claim against your car insurance. In case of a claim the insurance company will pay the remaining amount. The deductibles may vary between $250 and $500. A higher deductible will typically reduce your car insurance premium rate.
Group Insurance: Premiums for group insurance like those taken by the employers or members of associations and retired people (ARRP) etc. will have lower premiums as the insurance companies also benefit through bigger volumes of policies.
Some other factors like your credit score, profession and memberships of certain clubs or associations, being alumni of certain universities and for certain credit card holders, special discounts are applicable and the premium rate is lower.
The insurance companies generally base their calculation of premiums on the probability of accidents and claims rate.