What are auto insurance rates?
Well simply stated auto insurance rates are the ‘factors’ insurance companies use to determine what your particular auto insurance ‘Premium’ (the money you pay for an insurance policy) will be to cover you and your auto(s). So maybe the better way to explain rates is to explain the factors that determine your auto insurance rate.
OK, follow me here; factors are further defined as the ‘guidelines’ insurance companies use to decide what rates are, hence what your Premium will be.
Guidelines are very important to the insurance industry as they define their risk. Guidelines define risk in such ways as auto insurance rates or simply put, what criterion insurers use to determine what price they will charge you to insure you and your car.
Listed here are the general guidelines insurance companies use to define risk or to charge you for auto insurance coverage:
A good Driving Record is paramount for getting cheaper car insurance. Once an insurance company checks your driving record (and all insurance companies do) they will notify you of any error in any ‘Quote’ (the stated price for the service of offering insurance coverage to you) or Premium being charged to you; so if you purchase insurance from an insurance company based on a quote you received from them, your insurance premium may be increased to reflect the number of accidents and moving violations within a 3 to 5 year period according to their guidelines.
A solid Credit History can lower your car insurance costs. ‘Credit Scoring’ (your credit worthiness) is used almost exclusively by insurance companies today to determine your initial auto insurance rate. That’s right, your financial history is now a major factor in insurance companies guidelines in determining your Premium.
Age is a major factor in determining the cost of an individual's premiums. Insurance companies are particularly interested to know if the insured is 25 years of age or younger. On average, insured’s under the age of 25 incur a higher insurance rate and pay higher premiums than their older counterparts, (senior citizens can sometimes pay even less).
Theft. If your vehicle falls into a high-risk category determined by insurance companies, expect insurance rates to force your insurance Premium higher.
Gender. Generally auto insurance costs less for females than it does for males (only under age 25). This is because the number of accidents they get into is lower, (recent statistics show this factor may be changing).
Driving Experience. Insurance companies research past driving records and look for ‘points on your license’ (accidents and moving violations) to determine insurance rates. A driver that has a bad record of driving will pay more in Premium than an individual with a positive driving record with years of experience driving.
Value. The value of the car and the type of car that an individual drives will also determine insurance rates. Insurance coverage will cost more for expensive vehicles such as Mercedes and Jaguars when compared to less costly cars, like your average Chevrolet or Ford.
Model, age, engine capacity and VIN (vehicle identification number) number are reviewed when evaluating a vehicle. They all play a significant part in the computation of insurance rates.
Insurance rates are affected by how you use your car. Know the classification of your vehicle(s). Do you use your car to ‘Commute’ to and from work? Is one of your cars used strictly as a ‘Pleasure’ vehicle? Do you use your car for ‘Business’ (such as a Realtor)? There are several factors here that may affect your Premium, so be sure and review these important distinctions with your agent.
Place of residence is another factor in determining insurance rates for typical car insurance premiums.
The area's rate of car theft is also considered by an insurance company in determining an insurance rate.
Security is an important method to saving money on car insurance. In order to achieve this, people should consider augmenting the security of their vehicle to reduce the premium they are charged. It is a standard method of reducing the cost of coverage for your vehicle and lowering your insurance rate.
As you can see, auto insurance companies take a lot of things into consideration when determining auto insurance. A lot of people really don’t understand the huge risk an insurance company takes on when insuring you and your vehicle(s). Besides the factors above, insurance companies have to consider injury to people, property damage, and legal ramifications as well. So all and all auto insurance is a risky undertaking for insurance companies.
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Disclaimer: Content and illustrations represented and provided here-in are for informational purposes only. This information should not be misconstrued to be considered Insurance or Binder Coverage for Insurance. Always consult a licensed insurance agent in the state of Texas for specific insurance coverage types and needs analysis as insurance policies in Texas vary.
Sources used to gather content for this Article and all Articles provided in this Series include:
The Costlow Insurance Group, Inc. /
www.costlowinsurance.com
a. The Insurance Information Institute /
http://www.iii.org
b. The Texas Department of Insurance /
http://www.tdi.state.tx.us
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