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Why rates for auto insurance vary from person to person


Similar limits of auto insurance coverage might be charged differently by the insurance companies. You don't need to be much bothered if your auto insurance rate is within your means. However, in case you have to pay more than your friend or neighbor, you start wondering about the inconsistency. Well, certain factors affect the auto insurance rates. When you submit an application for an auto insurance policy, it undergoes the insurance underwriting process. The underwriters evaluate the level of risk associated with you, and fix your rates accordingly. If you appear to be too risky for them to insure, your insurance application will be rejected.

How different factors affect the auto insurance rates

The following factors are considered by the underwriters when they decide upon your auto insurance rates. Know how they influence your premiums.
  1. Age of the driver - Teenage drivers are considered to more risky by the insurers. The insurers think that they have more chances of being involved in an accident. Thus, drivers below the age of 25 have to pay more for their auto insurance policy. Those who are above the age of 45-50, are considered to be responsible and safe drivers.
  2. Gender of the driver - Female drivers are considered more safe and responsible, than the male drivers. The rates for them are comparatively low as well.
  3. Driving records - Individuals who have more traffic violations marked on their driving records have to pay more for their auto insurance policy. Speeding tickets, accidents, DUI charges etc will affect your auto insurance rates since you'll be considered unsafe as a driver.
  4. Prior claims history - Your previous records of accidents and claim history will affect your rates. Even minor fender benders on your records will raise your auto insurance premiums.
  5. Efficiency of the driver - Driver's education courses or traffic school programs can lower your auto insurance rates. State approved or accredited driving programs teach the drivers about the traffic rules, and may sometimes help with ticket or point reduction. Such measures will give an impression to the insurer that the applicant has tried to improve his/her efficiency as a driver.
  6. Model, make and type of the vehicle - Sports cars and expensive cars cost more to insure. The insurance rates depend on how the cars are valued as risks by the insurers. The size of a car's engine also affects the insurance rates. If your vehicle has a high safety rating, your rates for auto insurance will be comparatively low. Besides, safety installations in the car can also help to lower your rates.
  7. Age of the vehicle - Antique cars are stored as treasured items, and need insurance since their values appreciate with time. Newer vehicles are more prone to theft and cost more to insure. Besides, if a new vehicle is totaled, its replacement cost will be much higher than an old vehicle. Older cars have more chances of being 'totaled' in an accident, since the cost for repair usually exceeds the car's worth.
  8. Mileage of the vehicle - The more you use your vehicle, the more are its chances of being in an accident. Wear and tear of the vehicle will also affect the condition of the car. Thus, the lower your annual mileage for the car, the cheaper your auto insurance is going to be.
  9. Location - The area where you live is taken into consideration by the auto insurance companies. Densely populated areas with more cars in the neighborhood indicate that you have more chances of being in an accident. Thus, auto insurance rates for the city dwellers are more, than those who live in rural areas.
  10. Purpose for which the vehicle is used - If you use the car for commercial purposes, the insurers are going to charge more for auto protection. If the car is used for delivery services, to fetch or supply goods, or if multiple persons drive the vehicle for business purposes, the insurers will mark it as increased risk, and charge more for auto insurance protection.
  11. How the vehicle is garaged - Storing your car in secured locations like in a garage, is deemed to be safer. The possibility of car damage from acts of vandalism or theft will be low, and so the insurers will also charge less for auto insurance protection.
  12. Choice of deductible, coverage limits and benefits - The more you agree to pay as deductible, the lower will be the rates charged for auto insurance policy. The extent of coverage and benefits you choose will also affect your rates.
  13. Auto insurance score - Auto insurance score is calculated by the insurers and reflects how much of a risk you are. It takes into account not only your credit score but also your past insurance history. The insurers check the applicant's credit records to determine the state of his finances. A poor credit score will create a negative impression about you, and the insurers may either deny you coverage or charge you high rates.
Apart from the above mentioned factors, the insurers also allow discounts for auto insurance. Discounts are allowed for various reasons like if you purchase all your policies from a single insurance company etc. But those are variable factors that might alter your auto insurance rates. Knowing about the factors which influence your rates will help you to stay prepared when you apply for your auto insurance policy.

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