How is an Auto Insurance Policy Rate Decided?

Insurance companies decide auto insurance rates based on a number of factors along with associated risks. You may be able to change these factors, but it helps to know them to estimate the approximate cost of the auto insurance.

How well you drive is the most important deciding factor for the insurance company. This indicates your safety record, previous insurance claims, and traffic violations. Companies check if you drove without auto insurance for some years.

This increases their risk exposure and you may end up paying a higher premium. Therefore drive safely and never drive without auto insurance.

Age is another important factor that determines the insurance rates. Companies charge higher premiums for those under the age of twenty-five, due to the higher probability of accidents. Older drivers are usually safer and may benefit from lower insurance premiums.

Women drive more safely than men drive and may get some discounts on their auto insurance. What you do for a living also determines your risk profile and the insurance rates. A person in a stable occupation will pay less auto insurance than one is a risky job.

Your area of residence determines how much you will drive to and from work, the chances of theft and accidents. Therefore, those in the country pay lower insurance than those staying in the city. The more you drive, greater are the chances of collisions or accidents. So companies charge more if you drive more than ten thousand miles a year.

Insurance premium depends on the amount of coverage you want. Greater coverage implies higher insurance. You can pay a higher deductible before commencement of the policy to get a good reduction in your insurance premium. Decide upon the deductible depending on your budget.

The type of car is another major factor to determine insurance rates. A more expensive car will have a steeper insurance premium than a mid-range car. Having more than one car, more years of driving experience and the purpose for which the car is used can get you lower insurance rates. It helps if you have antitheft devices and a locked garage to park your car.

Insurance companies check your credit score to determine your risk profile. A poor credit score implies more chances of a default and higher premiums. Therefore, curb unnecessary expenditure on credit cards to maintain a healthy credit score.

Once you are aware of these factors, you can search online from various insurance companies for the best rates and then make a final selection.