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What Affects the Cost of Auto Insurance?
Auto insurance rates vary from company to company, driver to driver, car to car, and coverage to coverage.
When you apply for auto insurance, companies consider a variety of factors to determine the risk you represent and the likelihood that you will experience an accident or loss. The company then groups you with policyholders with similar risk characteristics (i.e., tiering), and assigns a rate based on the driving and claims history of your risk group. Not all companies consider the same factors when determining your premium (the amount you pay for insurance coverage), but there are some common factors that impact rates:
Driving Record
If you (or a member of your household) have a driving record that includes motor vehicle violations, suspensions and/or at-fault accidents, the price you pay to obtain insurance might be higher. Insurance companies may consider you (or a member of your household) to be a high-risk driver and charge a higher rate than a driver with a “clean” record (free of accidents and violations). Each company has underwriting guidelines to determine what type and how many accidents and violations during a specific period constitute a high-risk driver. (Remember: Insurers assign insurance eligibility points for accidents and violations, and having seven or more may make it difficult to remain in the voluntary market.)
Vehicle Type
The make, model and value of your vehicle affects the cost of your auto insurance premium. Generally, an older vehicle will cost less to insure, while a high performance or luxury car will cost more. The cost to insure different makes and models of vehicles can vary among insurers, so be sure to check with several insurers to get the best price and coverage for your needs. Companies may offer discounts for vehicles with safety features, so check with your insurer or producer for details, especially when you are considering purchasing a vehicle.
Geographic Area
Where you drive and keep your vehicle also influences your premium. The number of claims filed by policyholders in your territory will affect the rates charged by insurance companies.