WEDNESDAY, JANUARY 24, 2024
When researching auto insurance, you might search for average auto insurance rates in your area to learn more about what you are likely to pay. However, when you contact your insurer for a quote, you might find that your own premium quote is much higher or lower than the average you saw online. That’s because premium averages are just averages, and the multitude of rates paid by drivers of all shapes and sizes are what go into calculating them.
Sometimes, you might be shocked to learn that you are paying a significantly high premium, and you might wonder why. The reason is that when determining your premium, your insurer will weigh various risk factors (that every driver poses) to determine your chances of filing a claim and costing them money. Those who have higher risks of costing the insurer money are therefore likely to pay more.
Who is more likely to file an insurance claim?
When an insurer has a client who files multiple claims, or even a relatively small number of expensive claims, that policyholder is a cost burden to them. That’s why they usually have to charge these drivers more for their coverage. Most insurers prefer to cut this cost risk off at the pass, so as soon as someone new buys a plan, they want to gauge how likely that person is to file a claim, and they will charge them appropriately.
Among those typically considered high-risk drivers are 16 – 25-year-old males. Typically, this is because:
- Young adult drivers do not have the experience behind the wheel to make them truly safe behind the wheel.
- Men are statistically more likely than women to speed or engage in aggressive driving.
- Young drivers are usually among the most at-risk groups to experience speed-related or fatal vehicle accidents.
That’s why it’s easy to see why insurers must make wise investments in these clients, and that might involve charging them more money. Still, age and gender are just two of many factors that might influence auto insurance rates. Other factors often include:
Location of the Insured Vehicle
If you live in areas with a high cost of living, you’ll likely pay more for insurance. Additionally, if you live in communities with high accident risks or high traffic volumes, then you are likely to pay more too. For example, drivers in urban areas usually pay more than rural drivers. Rates can even vary from neighborhood to neighborhood in the same locality.
The Insured Vehicle’s Make and Model
Brand new, expensive or specialty vehicles (like sports cars or customized vehicles) will all cost more to insure. There are also certain vehicles that are statistically more likely to be stolen. As a result, it’s easy to see why these drivers will likely be higher investment risks to their insurers.
Vehicles with high safety ratings, on the other hand, typically cost less to insure because they are known to present lower accident risks. If you want to save money on car insurance, you may want to purchase an older vehicle with a high safety rating. Keep in mind, as vehicles depreciate with use, your rates might drop too.
Credit Scores of Insured Drivers
Credit scores are a way for the insurance company to see how reliable you will be in paying your bills in full and on time. For example, those who are deeply in debt, or who have a history of not paying bills (including their insurance premiums) are likely to cause the insurer to wonder whether they will be reliable customers. A good credit score, on the other hand, always equals better financial opportunity, including the opportunity for lower insurance rates.
Accident History & Driving Records
Your driving record is one of the most acute influencers your insurance premiums. A wreck will lead to an insurance payout in most cases, and the insurer will now have proof that you are a cost risk to them. Some statistics estimate that one wreck might raise your rates by as much 41% on average. More severe infractions, like DUIs, often cause rates to skyrocket even more. Nevertheless, it’s possible to find insurance carriers that insure nonstandard drivers, and they can help you optimize your benefits.
Coverage Limits of the Chosen Policy
The more coverage you have, the more expensive your insurance will be. There are some coverages you must have as required by state law. Still, you should always purchase more than just the minimum coverage, because the more coverage you have, the better your benefits will be when you are in need.
Still, you can buy too much insurance, which will leave you paying more for benefits that are not the right fit and too expensive to help you in any way. That’s why your agent will work with you to make sure you get the best balance of coverage first, and then help you find the policy that offers you the best value for these benefits.
For more information on factors influencing premiums, contact one of our agents today.
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