What Determines the Cost of Your Car Insurance Coverage?

Auto insurance works through the statistical analysis of covered driver’s potential to require service due to an accident or other covered circumstance. By pooling all of the drivers it covers, an insurance company can make sure it has the means to provide its services to customers who have claims, while still maintaining sufficient income to remain as a viable business and offer the cheap auto insurance many drivers seek. Therefore, the ability to accurately determine an appropriate insurance quote for your auto is one of the most important functions an insurer performs.

A Balance of Multiple Factors
To do this successfully, an insurer must statistically weigh multiple factors about each person it covers. By statistically weighing the risks for a specific covered group, appropriate insurance rates that are in line with the general insurance market can be produced.

Basically, the higher your statistical risk, the more you will have to pay for a given level of coverage. Some, but not necessarily all of the factors that an insurer considers include the following:

Driving History
How good a driver you have been in the past can have a significant impact on your auto insurance costs. If you have had a number of accidents or moving violations like speeding tickets, you will probably be considered a higher risk and thus will get a higher rate quote. Insurance companies will review your driving history for as far back as three to five years, but as your driving becomes more responsible, your rate may be lowered.

Demographic Information
Insurers will also look at your demographic statistics, such as your age and gender to determine your potential level of coverage risk. Younger drivers tend to have more accidents than more experienced drivers, for example.

They may even look at things like whether or not you are married or single, where you live, and even your level of education and what type of job you hold. All of these factors can provide accurate statistical data on coverage risk. For example, if you live in a highly populated area, there may be a higher likelihood of your being in an accident or having your car broken into or stolen. All of these factors have a cumulative impact on how much an insurance company will pay out to someone similar to you on a statistical basis, and can help the insurer to quote a market qualified rate that exposes them to an acceptable level of risk.

Personal Preferences
Other factors that insurers consider are based more on your personal preferences or circumstances regarding your driving habits. Unlike the factors discussed above, you may be able to make changes in some of these to secure a lower insurance rate.

Key among these is the type of vehicle you drive. An economical and less costly car will require a lower premium than an expensive and speedy sports car. That’s because a cheaper car is less likely to be stolen or involved in a serious accident due to speeding versus a performance vehicle. You’ll also save on gas with a more economical car as well!

Other Factors
Insurers also review many other factors in determining the premium you are quoted when you are seeking car insurance. Here are some of the more common ones that you should be aware of:

• Type of driving – If you drive mainly for pleasure or periodic travel versus commuting or as part of your job, you will likely have a lower premium.
• Credit rating – Some insurers use your credit history as an indicator of the potential risk you represent. The better your credit rating, the lower your premium is likely to be.
• Claims record – Even if you are not at fault, a history of many claims indicates that you may be a more costly customer than others.
• A driving record that is clean and free of accidents will hold far better for you than lots of tickets and/or accidents.
• Years driving – The longer you have been driving, the less likely you are to be considered a high risk.
• Safety and security equipment – If your car is equipped with certain features, such as side air bags or an alarm system, you may qualify for a reduction in your premium.

Can You Lower Your Auto insurance Premium?
One final point to take into account is the potential for variation in the premium analysis process used by various auto insurance companies. InsureDirect.com [link] makes it easy to get insurance quotes from leading auto insurance companies like [list companies].

Disclaimer: The contents of this and all articles provided by Insuredirect.com are for informational use only, as the specifics of any situation will vary with the circumstances. Do not consider the information provided in this article as a recommendation on purchasing any specific auto insurance, homeowners insurance or other type of insurance product, or to provide financial or legal advice. Without exception, all information is presented for information purposes only.

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Rev. V.1 - 11-14-2007