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The Determining Factors of Auto Insurance

By Compuquotes Team on March 27th, 2008
Auto Insurance

There are several factors that ultimately determine the price of auto insurance. The largest factor in every state excluding California is the area in which you reside. This is called territorial rating. Insurance companies can legally break down the various localities in each state into what are known as territories. Some companies establish these territories by using zip codes, neighborhoods, towns, or counties.

Companies then use their statistical-gathering abilities to determine rates of auto insurance claims within each established region. Insurance companies use this pricing method because they claim most accidents occur within a few miles of where the vehicle is garaged or stored. The insurance company believes because of that statistical fact they can accurately determine their risk. The price of any insurance company is based on the risk of loss to the company.

From these statistics the insurance company determines a base rate, which is the starting point from where each person's premium will be established.

Statistics in the insurance industry also indicate certain members of the driving community are more likely to be involved in accidents than others. There are a few key factors that determine insurability as well as the cost of the premium.

The age of the insured driver is an important factor because younger drivers tend to be more accident prone. Drivers under the age of 25 tend to pay a higher rate in premiums than those aged 25 to 64. Also drivers over the age of 65 tend to have more accidents than those in the 25 to 64 age group.

Statistics have shown that there is a gender difference in the rate of automobile accidents. In most areas of the country young, unmarried men are the worst drivers statistically.

Married drivers are statistically less likely to have an accident than single drivers.

An important factor in fixing rates is what you use your car for. If you use the vehicle for pleasure, rather than 100 miles a day of business, you are likely to have a lower premium rate. Your mileage is part of the usage reviewed by your insurance company.

One of the obvious main factors of your insurance premium is determined by the kind of vehicle you are driving. If you need repair on a brand new Lexus SUV the repairs would be substantially more than if you needed repair on a ten year old Honda Coupe.

Some cars are safer, and tend to be driven by safer drivers, so that also plays a factor. Someone driving a Mustang is more likely to speed and wreck than someone driving a minivan. Also important car factors include the cars age, original cost, and ease of repair. If your car is worth the high costs of having full coverage, the cars Kelly Blue Book Value is very important to know every year when renewing your coverage.

Your personal driving record plays a major role in your insurance costs. If you have had many speeding tickets and fender-benders in the past, you are highly likely to get in more problems in the future. However if you have a spotless, or near spotless record you are likely to get a better deal on your premium costs.

See average annual insurance rates for more than 2,000 vehicles

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