Auto Insurance – What Determines the Price of My Policy?

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How did your insurance company arrive at a price for your auto policy? Most likely, the price you pay to insure your car was calculated using a variety of information that is specific to you and your vehicle. Although insurance companies generally use the same information to determine the price they will charge for a particular risk, each company may apply different weights to the individual factors to make a significant difference to the final price.

Personal Characteristics

Age.

For individuals less than 25 years of age, the risk factor will be greater. Drivers over 25 years old can choose from a variety of age classes, such as 25-49 and 50-74.

Gender.

In most cases, insurance costs for younger drivers are higher than those of a similar age. Male and female prices increase beyond 30.

Credit.

The price of insurance is determined by credit. Credit has only recently become more important. In some states, credit has been challenged for the purpose of determining car insurance premiums.

Experience.

Rating factors include the number of years you have been continuously licensed in the United States. Some insurance companies charge significantly more for inexperienced drivers.

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Tickets & accidents.

An insurance company can use ticket and accident history to determine the driver’s risk. This will allow them to anticipate future claims. A driver who has been involved in multiple driving accidents is generally considered to be more at risk, and will therefore be charged more insurance.

Claims.

A person may have a few claims but that doesn’t necessarily make them more risky to the insurance company. Not necessarily higher risk are claims such as windshield repairs for rock strikes, towing or claim payments for non-at-fault accidents. Some companies use “claims frequency” to determine a customer’s personal insurance score. Multiple claims, even if they are not at fault, could impact the policy premium.

Where are you?

Prices for car insurance policies are partly determined by the location where the customer lives or drives. In theory, a policy in Cozad in Nebraska will be less expensive than one in Palm beach, Florida. It is obvious that Florida has a higher rate of traffic, car theft, storm damage and lawsuit risk than Nebraska. Therefore, the cost of car insurance should reflect this additional risk.

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How much do you drive?

A shorter driving time means less risk. On the flip side, someone who drives 100 miles per week is at greater risk.

Use the vehicle for.

The risk of injury to clients or business clients is higher if the vehicle is being used to transport them. A realtor driving prospective home buyers around in their vehicle all day may not only be on the road more, but also exposes themselves to injury. When the vehicle is used in business pursuits, insurance coverage costs will increase. To provide comprehensive protection against risks that are unique to business use, additional coverage may be required.

You may have other people living with you.

Insurance prices are determined based on risk exposure. The insurance company might charge you more money if there are other licensed people living in your home or having access to your car. This is based on the other persons driving record and insurance coverage. Additional drivers who are not listed to the insurance company on the initial application, and are involved in an accident, may not be covered by the insurance company.

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Cars Characteristics:

Engine size.

There are many car models that come in different configurations. The insurance company will price a Ford Mustang with a 100hp 4 cylinder engine differently than if it has a Shelby Cobra Mustang with 375hp V8 engine. Accident risk increases with an increase in performance.

Value.

Even though it’s not as significant as people think, it’s still reasonable to assume that a loss of $100,000 for a 2010 Mercedes will result in a higher vehicle’s collision and comprehensive coverage costs.

Safety features.

Most cars with higher safety standards are more modern. Insurance companies consider this important because the more injuries that the occupants sustain, the less money they will have to spend on medical claims. Insurance companies offer discounts for safer cars, including the uninsured motorist and medial portions.

Although every car is unique, the risk factors that determine the likelihood of a crash are the same. They can be summarized as follows: How much money does it cost to fix the car? What is the cost to repair the car’s people? What damage could this car cause to others in their cars? These questions allow insurance companies to price the risk they will take when insuring your vehicle.

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