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How Auto Insurance Rates Are Calculated and What Factors Can Affect My Rate?
Every insurance company employs a team of actuaries. These people are some of the highest paid people in the industry. They calculate the risks taken on by their company and advise on the premiums to set. How do they do it? All insurance companies collect their own information through the claims they receive. This data is shared with all other insurers so there is a mass of data on how many claims are made, who makes them, how much money is involved, and so on.
The actuaries start off by dividing claimants into groups by age, gender, occupation, etc. Some groups have more claims than others. Then they look at what claims are made. How many traffic accidents, thefts, acts of vandalism, and so on. Are some vehicles more likely to be involved than others, e.g. do thieves target particular vehicles? Once the analysis is complete, every insurance company has a profile of risk for every type of policy holder. When you fill in the questionnaire to get your auto insurance quotes through this site, every question you answer puts you into one of these groups and sets the basic premium.
Who are you? Let us take some of the questions and see how they classify you. Younger drivers have less experience and are more likely to be involved in accidents but, statistically, young men are more accident-prone than young women. Once married, most drivers take slightly more care. The number of accidents decreases if the family has children. Where you live is vital. This may force you to commute long distances to work the more miles you drive, the greater the risk of accidents or there may be a high number of thefts and acts of vandalism reported in your neighborhood. Your area may be prone to hurricanes or flood damage which also increases claims. The other relevant factors are home ownership, your credit history, your occupation and your driving record. If you have put down roots and keep up with all your mortgage and other payments, you are responsible. This is reinforced if you are employed in a job with a good safety record and your actual driving record is clean. What will make your premium more expensive? If you have had a number of accidents or made other claims, or let your policy lapse and allowed your debts to get on top of you, your premium rate will rise. Single male drivers who live in a city with a high claims rate and drive high-powered vehicles will also have higher premiums. What will make your premium less expensive? The vehicle you drive has a big effect. The statistics show that some makes of car are more likely to be involved in traffic accidents or stolen. The best strategy is to buy a lower-powered vehicle, have safety features such as antilock brakes fitted, and go on a defensive driving course. Premiums will also fall if you take antitheft measures, e.g. fit a GPS tracking device, park the vehicle off the road at night, etc. Look carefully at the extent of the coverage you actually need. If you drive an older vehicle, it may be more cost effective to drop collision or comprehensive cover. You should also look carefully at the amount of the deductible to accept. There are discounts for higher deductibles, but can you afford to pay these amounts should you be unlucky and have two or more claims in a year? Finally, spend time checking out all the discounts available for having more than one vehicle insured with the same company or combining both auto and home cover.
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