Auto Insurance Rates – It’s Really All about You

Auto Insurance Rates – It’s Really All about You
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    Most people think that car insurance rates only depend on the make and model of the vehicle and its price tag.

    While these are definitely factors that are taken into account while deciding the policy rates, car owners would be surprised to know that there are a large number of personal factors that insurance companies take into account while deciding the premium that a particular customer has to pay.


Essentially this means that while two people could own the same make and model of the car, the insurance rates they are paying could be drastically different. Some of the top personal factors that can impact the insurance premium of your car:

The Driving Profile

Factors that are extremely critical for insurance companies are how much you drive per year and your history of accidents, making claims and traffic tickets. The reason is not hard to see; if you drive less, your chances of meeting with an accident and making a claim are also commensurately less. If your driving history is flawless, it means that you are a careful and disciplined driver, which is really good news for the insurance company as the chances of accidents and filing claims are also low.

Personal and Professional Profile

Your age and occupation, besides the area of your residence, are of great interest to insurance companies because each of them has a direct link to the risk they are exposing themselves to by selling you auto insurance. The risk analysis and the premium rate decision by insurance companies are done on the basis of long-term actuarial information that is essentially a pattern of behavior of drivers of different profiles. It is easily understood why a teenager is going to have a higher premium than a driver who’s middle-aged; however insurance companies do not base their rates on assumptions but on statistics that prove teenagers are more prone to accidents than 40-year olds do.

Insurance 101 – Personal Auto Coverages

Insurance companies are also interested what you do for a living. For example, a salesman is likely to travel more than an accountant so accordingly the chances of a salesman meeting with an accident are deemed to be more than that of the accountant. In the eyes of the insurance company the salesman is more at risk simply because he spends more time on the road. Where you live is also vital information for insurance companies as trends pertaining to accidents, thefts, vandalism, lawsuits, as well as the cost of car repair and medical care can have a significant effect on the risk exposure to the company.

The Car and the Coverage

The more the cost of a car, the more expensive it is to repair it so insurance companies peg their premiums quite a lot on the sticker price of the vehicle.  If you opt for more cover it is natural that your insurance premium will be more. It may be very tempting to have a really low deductible, which is the amount you have to contribute compulsorily if you make a claim. However, if you do this, the insurance company has no other option but to counterbalance the increased risk by increasing the premium amount.

Your Credit Score

Actuarial studies reveal a link between credit scores and the propensity to make auto insurance claims. The higher the credit score of a car owner, the more the chances are that he will be more financially disciplined. When a person is financially disciplined, it is very likely that this restraint spills over into other activities such as driving. Thus, the probability of his meeting with an accident is also deemed to be lower. However, the practice of using credit scores for deciding premiums has generated controversy, and a number of states have started regulating this practice.

Money Management reference:

Lower Transportation Costs


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