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
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
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
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.