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How Companies Determine Auto Insurance Premiums

By Compuquotes Team on March 27th, 2008
Auto Insurance

There are a lot of factors that come into play when your insurance company decides your premiums for auto insurance. Each of the insurance companies use different formulas and weigh these factors differently, which can translate into some major differences in premiums costs for auto insurance. Let's take a look at the factors that come into play with the deciding of auto insurance premiums.

Age
Drivers under the age of 25 are statistically at a higher risk for a collision than people over the age of 25, and drivers between the ages of 50 and 65 tend to have the safest driving records. For auto insurance premiums, the younger you are, the more expensive your premiums will be, and for a teenager, these rates can be astronomical.

Gender
Statistically, women are safer drivers than men.

Marital status
Typically, a married person will have a lower insurance rate than a single person with the same driving record.

Geography
The place that you reside in makes a difference as well. People who live in light traffic areas will spend less for insurance than those in high traffic cities for the simple reason that the cities have statistically higher numbers of accidents per capita. The theft and vandalism rate in your area will also impact your rates--if you live in a high-crime area, then you can expect a higher insurance premium.

Driving record
If you have moving violations or collisions on your driving record, you are at a higher risk for further accidents and your premium will increase. As your driving record improves over time, your premiums will go down.

Vehicle
The price and type of your vehicle will significantly impact your insurance premiums. A less expensive vehicle will translate to cheaper insurance rates, while a hot sports car will translate to much more expensive insurance.

Insurance claims
Your insurance record will also come into play with your insurance premiums. The claims you have made in the past will raise your insurance premiums and put you in a higher risk category.

Credit rating
Some insurance companies utilize your credit rating as another factor, although not all insurance companies do. Statistically, people with no credit rating or low credit rating are at a higher risk for collisions and claims on their insurance.

Occupation
Obviously, the more you require your vehicle for work the more insurance you will pay. If you drive around all day, you are automatically at a higher risk for claims and collisions.

Other factors that impact your insurance premium include:
Education
The distance you drive to work each day
How many miles you drive each yea
How many years of driving experience you have
Using the vehicle for business use
The limits on your coverage
The deductibles on your coverage
Theft protection devices (alarms)
Safety devices on your vehicle (air bags, anti-lock brakes)

All of these factors can either positively or negatively impact your insurance premiums and there is a lot you can do to lower your premiums. The best advice anyone can give you to find the best auto insurance premiums is to get a variety of quotes before you purchase insurance in order to get the best rate possible.

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

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