The insurance industry works mainly on the principle that the insurer takes over the risk of the policyholder, and gets paid for it. In case the insured individual or property gets involved in an accident or faces a mishap, the insurer compensates for the damages and losses. However, it’s evident that the insurers set up their business to earn profit.  They evaluate the risks before allowing insurance coverage to an applicant.

Why risk is evaluated?

Your risk is assessed by the insurer when you go out to buy a policy. The rates for your insurance coverage will also be set accordingly. A high-risk individual will have a high risk of being in an accident, and making an insurance claim.  Therefore, insurers charge more to provide him insurance protection.

Why history affects auto insurance coverage?

History of an individual reveals a lot about his disposition. The insurers dig up the history of an individual to determine how much of a responsible individual he is. If your insurance history indicates you to be a high risk individual, you’ll have to pay more for your coverage. Your past is reviewed in a thorough manner, when you go out to buy your auto insurance policy. Records are maintained which reveals every intricate details and financial mistakes that you might have done. Find out which records matter in the auto insurance industry so that you can step ahead with caution when you apply for your intended coverage.

  • The driving history
    Driving history matters a lot when it comes to auto insurance. A safe driver will apparently be able to get low rates on auto insurance policy. Now, how does an insurer determine whether or not a driver is safe? They check his/her driving records. A driver with a lot of traffic violations or speeding tickets will not be regarded as a responsible driver, and thereby will have to pay more for his auto insurance. Similarly, those with DUI or DWI charges on his driving records will be marked as high-risk individuals by the auto insurers. If your driving records show that you frequently get involved in accidents, insuring your vehicle might turn out to be a task.
  • The credit history
    The credit history of an individual reveals all about his financial mistakes. Missed payments, outstanding bills, debts, bankruptcy etc. on your credit reports will indicate that you’re not at all financially stable. One who misses out on his regular bills or debt payments will presumably miss out on the insurance premiums as well. The insurers thus either reject insurance applications from such individuals or set higher rates for them.
  • The vehicle history
    The vehicle history is reviewed to find out about the make, model and type of the car that is to be insured. The mileage of a car is determined from the odometer readings, which indicates for how many miles the car is driven each year. The insurer also checks whether the automobile had been involved in any accident before and how much damage had it been subjected to.  Insurance companies also dig up how the repair works were done, whether or not the vehicle was totaled etc. before extending auto insurance coverage to an applicant.

The past records are checked by the insurance underwriters at the initial stage only, when you approach an auto insurer. Negligent underwriting procedure and ignoring the history may result in insurance frauds which consequently costs the insurers.

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