Auto insurance rates aren't random numbers that insurance providers make up. Rather, they're carefully-thought out calculations. Using company claim information and your personal data, auto insurance providers use their algorithms to make a well-informed guess on your likelihood of filing a claim.
Bear in mind that the riskier you seem, the more you'll pay for insurance. It's important to note that several other factors affect your overall insurance rate-some of which are within your control while many aren't. Here's a list of factors that will affect your insurance policy.
1. Vehicle Type
The kind of vehicle you drive affects your premiums because insurers consider variables such as the car's cost, the probability of theft, repair costs, and the vehicle's overall safety record.
When it comes to probability of theft, some vehicles are more appealing to thieves and a model that ranks among the top 10 most stolen will generate higher rates than one that isn't a likely target. However, you can lower the premium by fitting a vehicle alarm or other anti-theft features.
The car's safety rating also influences your insurance rates, so a high rating results in lower rates. Beware that insurers don't only consider the car's safety and the degree to which it protects occupants.
They also consider the possible damage a vehicle can inflict on another. In the event that a vehicle has a higher likelihood of inflicting damage on another and its occupants, some providers may charge you more for liability coverage.
2. Driving Record
A driving record reveals how risky somebody is as a driver. Therefore, a record featuring accidents or tickets is a red flag for any insurance company.
If you've obtained tickets, been involved in accidents, or made insurance claims previously, the insurer knows that you're more likely to make another claim than a driver who lacks blemishes in his or her record. Beware that if your record is bad enough, some insurers won't provide coverage at all.
Although you might be tempted to falsify the facts during application, don't do so. If the insurer discovers that you've provided incorrect information, it will recalculate your rates or may opt to rescind its offer.
For numerous insurers, credit-based scoring is one of the most vital and statistically valid tools for predicting the probability of somebody filing a claim and the probable cost of the claim.
It's important to note that credit-based insurance scores depend on information such as payment history, outstanding debt, and bankruptcies. For instance, regular, on-time mortgage and credit card payments have a positive effect on a score while late payments have a negative impact.
4. Claims Record
Insurance providers don't merely examine your driving record but also collect reports on the claims you've made with former auto insurers or with them.
Bear in mind that at-fault claims will probably lead to a surcharge while comprehensive claims and not-at-fault collisions may not. They will also analyze the payout because claims below a certain amount may prevent a surcharge.
Remember, the claims you've had are just as important, so if you've made three claims in a span of three years, insurers will perceive you as risky. Therefore, they'll either increase your rates or opt not to renew your policy.
5. The Amount and Type of Coverage
In almost every state, you have to purchase minimum liability coverage by law. The state-required limits are typically very low and most people must consider buying much more than what the state requires.
If you have a recent or new car model, you'll probably need to purchase collision and comprehensive coverage, both of which are dependent on deductibles; higher deductibles generate low premiums.
6. Marital Status
Married persons typically have fewer accidents than single ones; therefore being married can lower your rate significantly. Nevertheless, the rate at which it decreases is dependent on your former driving history.
Paying for auto insurance is an important part of car ownership, so whatever you can do to decrease the rate is useful for your budget. If you're curious about the premiums on your insurance, this guide highlights some of the factors that affect your policy.