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Why and how do premiums vary for different drivers?

Insurance companies charge greater premiums from people who are more likely to cause damage to the insured vehicle. Such people can cause a substantial loss to the company when they claim for the damage. Policy holders differ a lot from one another on the basis of the potential risk each one carries.

They are grouped in the following way:

• Age - People under 30 are believed to be involved in accidents more than the aged people.
• Gender– Women are less likely to cause accidents than men.
• Marital Status – Married persons drive more carefully. So companies consider them safe.
• Previous record – A good driving record matters a lot if you want to go for a low rate.
• Purpose of driving – If you use your vehicle daily for office purpose, you may drive in a hurry. But if you drive only on weekends, that means you are out for a holiday and will drive cautiously. This affects your policy likewise.
• The age and type of vehicle – Very old cars require more premiums, because they are not supposed to be safe. Same is the case with the expensive ones also because the cost of repairing them and replacing the parts may be too high.

The cost of your policy collectively depends on all the above factors. For example, if you are a 22 year old man and you compare yourself with a 35 year old woman. You will find that you are paying more premium than she is.