Most people often get confused with how insurance companies set their auto insurance rates and why the rates differ from one insurance company to another. What they do not know is the fact that these companies collect specific data that helps them determine how much of a risk a person poses and chances of them filing a claim. The company’s weight this data differently and come up with different calculations hence the different insurance rates. What are these factors that the insurance companies use? Here are the most common factors.
Location
Most insurance companies will start by asking about where you live since this determines the most base rates. Highly populated areas are prone to congestion and accidents and therefore very likely to have high rates of insurance claims. From your location, insurance companies will be able to know the rate of accidents, vehicle theft, vandalism, and other factors. These are the factors that will be used to determine the cost of your auto insurance. This guide to auto insurance is a very good example of a breakdown of auto insurance rates by state.
Gender
There are insurance companies that use gender to determine the costs of auto insurance since accident statistics differ from males to females. Males are more likely to be involved in an accident especially when they are young and more aggressive. Men are also known to drive for long distances compared to women and will even engage in dangerous behavior such as street racing and driving under the influence of alcohol. However, this changes as they grow older and auto insurance rates get comparable for both genders.
Age
The riskiest category of drivers to insurance companies is the young drivers. This is because statistics show that young drivers are often immature and can be easily distracted while driving leading to an accident. Elderly drivers are also affected by age since they have slower reflexes which can affect the rate at which they can be involved in an accident.
Driving Experience
It goes without saying that the chances of a new driver getting involved in an accident are higher than a driver who has been driving for years. A person who has not driven a car, whether they are 18 or 60 years of age, poses a higher risk to auto insurers. It, however, gets a little bit worse for young and new drivers. This is because apart from being inexperienced, they are immature and most likely to engage in dangerous behavior while driving. These people end up paying high auto insurance rates. A teenager in a custom turbo charged 1971 Pontiac Firebird Formula is going to be much more expensive.
Marital Status
Did you know that married couples are more likely to get lower auto insurance rates compared to single people? Well, married couples are less active on the road compared to single people. Most single people will be very active, driving from one place to another almost every other time. This raises the chances of them filing for a claim, hence they pay more compared to the married couples. Also, married couples can combine their auto insurance premiums getting huge discounts, hence end up paying less for auto insurance.
These factors are not uniform with all auto insurance companies and regions. They will differ from one company to another and will determine the auto insurance rates the companies offer. It is, however, advisable to do due diligence before deciding which company and premium to go for to make sure that all your requirements are met.
