How Are My Auto Insurance Rates Determined?
September 21, 2017
There are multiple factors that insurance companies consider when determining your risk level and therefore your insurance rates. Some of these factors are more commonly known while others may surprise you. For your auto insurance, we have identified the following commonly used factors used by insurers when determining your rates and why they may impact the price you pay.
- Location – Where you live can impact your auto rates. Metro areas with more drivers, congestion and increased opportunity for accidents will likely mean higher insurance rates. Knowing where you live will also identify if you are in an area with high crime rate, stolen cars and vandalism, all of which can impact your rates as well.
- Age – Age will likely factor into your rates at two points in your life. Younger drivers are statistically more likely to be involved in automobile accidents due to their inexperience on the roadways and will therefore pay higher rates. Senior drivers are also more likely to be involved in accidents due to slower reflexes. A few states do not allow insurers to use age as a rating factor (CA, HI, MA).
- Driving Experience – Inexperienced drivers mean more risk so despite your age, your experience will be a factor in your rates. The longer you are on the road with a clean driving record, the better chance you have for lower rates.
- Driving Record – Your driving record is the most direct indicator of how risky you are to insure and therefore, how high your rates may be. Minor violations may result in smaller rate increases and the frequency of violations, big and small, will be a factor in your rates. Some insurers may opt not to insure you if you have multiple or more severe infractions as you may pose too much risk. The longer you maintain a clean driving record, the more discounted rates you will likely enjoy.
- Claims Record – In addition to your driving record, the number of claims and the cost of those claims may impact your rates.
- Gender – Gender is often used as a rating factor because data shows that males are statistically more likely to crash. The disparity in rates generally only applies for younger drivers as gender differences in fatality risk diminish with age. Currently five states do not allow gender to be used by insurers when determining rates (HI, MA, MI, MT, NC, PA).
- Marital Status – A study by the National Institutes of Health found that single, unmarried drivers were twice as likely to be in an auto accident as married drivers. For this reason, marital status can be used as a factor in determining rates. Married couples can also receive discounts by combining policies. Massachusetts is the only state that does not allow marital status to be considered when determining auto rates.
- Previous Insurance Coverage – A lapse in coverage can result in higher rates as insurers have found that those without a lapse in coverage are less likely to get into an accident.
- Vehicle Type – The type of car you drive can impact your rates. Several factors may be considered including the accident rate of your vehicle model, the theft rate, purchase price, repair costs and safety tests.
- Use of Vehicle – Using your car for business, to commute to work or school may be a factor in your rates. Using a vehicle for work or school raises your risk of an accident since you will be on the road more than if you use your car for limited personal use. The use of vehicles indicates your amount of time on the road and therefore your level of exposure risk. If you have a change in your vehicle usage be sure to alert your insurer. If you started taking the train to work, for example, you may get a reduction in your rates since you will spend significantly less time behind the wheel.
- Age of Vehicle – The age of your vehicle can also impact your rates as the physical damage costs are generally less due to vehicle depreciation. Depending on the type of vehicle, however, some cars may still be expensive to repair regardless of age, like vintage cars and collectibles. There are unique coverages and specialty carriers if you are looking to insure such vehicles.
- Annual Mileage – The less you drive the lower your risk of being in an accident. Therefore, the amount of miles you drive can impact your rates.
- Car Insurance Coverages + Deductibles – The more types of insurance you have with higher limits the more your rates may be as the insurer is taking on more risk by providing you more coverage.
- Credit History – One of the more controversial rating factors insurers may use is credit history. While this has received attention as being controversial, research has shown that those with lower credit scores are more likely to file claims, inflate those claims and even commit insurance fraud. This is why having a positive credit rating is so essential these days. However, a few states prohibit the use of credit scores as a rating factor (CA, HI, MA).
For questions on these or any other factors that could impact your auto insurance rates be sure to speak with a Brooks, Todd & McNeil agent. An agent can help identify areas where you may be able to save money now and over time as your circumstances like age, marital status, type of car, driving distance and frequency change.