Many consumers don’t know what insurance companies look at when calculating the premium amount for car insurance. Believe it or not, auto insurers do not simply pull up your auto insurance rates from thin air.
You can get the best insurance rates by learning about the factors that may affect your premium. Also, how to use these factors to increase your chances of getting the best rate.
Factor #1: Your driving record
No surprise that insurance companies look at your driving history. In order to assess or estimate your risk, they do this. What exactly are they looking at? Insurers will check your driving record for any traffic violations or at-fault accidents. They also look for claims that have been made within the last three to 5 years. You can bet that your auto insurance will be more expensive if you have any marks on your driving record.
Good news! Marks against your driving record usually fall away in the eyes of your insurer after three years. By driving defensively and avoiding small claims, such as hail damage, you can avoid being penalized.
Factor #2: Previous insurance coverage
The agent who is going to represent you when you apply for car coverage under a new insurance company will most likely look at your past insurance coverage. The agent will ask about your past insurance history, including whether or not you have paid your premiums in a timely manner, the number of claims you filed with your former insurer, and any other issues that might increase your likelihood of being insured.
Insurance rates will increase if there are any issues with your insurance policy. Unfortunately, if your previous insurance coverage is not valid, you will be charged more for car insurance until you have established an insurance history.
Good news! You can avoid these penalties in the future by paying your premiums on time, avoiding filing small claims and maintaining a respectful relationship with your insurers.
Factor 3: Your Credit History
Recent research by Conning and Company shows that 92 per cent of the nation’s top 100 insurers factor credit history into their auto insurance premiums.
While insurers will look at your credit scores directly, they are more interested in how you used your credit history. To determine your insurance score, insurers will examine the length of credit history, amount of revolving and late payments.
Critics and consumers accuse insurers of using credit scoring to increase auto rates. However, it’s surprising that there are so many statistics supporting the use of insurance scoring. Studies have shown that those with poor credit file 40% more claims than those with better credit. Your credit history is also used by insurers to determine if you will be able to pay your premiums on the due date. This and other reasons are why insurance scoring is here to stay.
Good news! You can improve your insurance score by paying your bills on time, paying down high existing balances (such as those on credit cards), and having your car insurance premium automatically withdrawn from your account every month.
Bonus tip Insurers tend to grant discounts for customers with automatic bill pay!
Factor #4: Geographic location
Are insurers allowed to charge more for you based on where you live?
Statistics show that metropolitan areas are more likely to experience car accidents, theft, and vandalism. These factors can increase the likelihood that your insurer will cover you. You may end up paying more for car insurance if your home is in a major city than if your home was in a suburb or in a rural area.
Good news! While your premiums may go up in urban areas, you can score discounts if your car is kept under a carport, garage or parking structure. Your agent should be aware of all safety precautions, including any electronic theft deterrents.
Factor #5 – The Car in Question
Most people are surprised to learn that insuring a new car is more expensive than one that has been on the road a few times.
How is that possible?
Your premium should drop if you have all the anti-theft and airbag devices that are standard on new cars. However, newer cars can be more costly to fix and replace. This will affect the amount of coverage you have to pay.
Good news! Don’t discount discounts! Your agent should be aware of any safety features or air bags in your car. You can also avoid future premium surprises by getting an estimate for your insurance before you buy that luxury coupe.
Factor #6: Car use
Your insurer doesn’t care how often you drive your car, but it does. This may seem minor, but an insurer will care about how much you drive your car. The more accidents you have, the higher the risk for them.
Good news: Okay, there’s not much you can do about this one. You can save a few bucks by living closer to your job. However, if this is not possible (and it sometimes isn’t), you can make up the difference by asking for additional discounts, cash incentives, and rebates. Your insurer will likely not increase your premium for this.
A Powerful Consumer is one that is educated
The insurer will ultimately make the decision on car insurance rates. However, these tips can help the consumer tilt the scales in their favor.