InsuranceThought — Blogs About Insurance

Auto Insurance Rates Are Based on a Number of Factors

Do you own a car? If so, you most likely pay to have it insured. Most of us, though, do not understand why the rates vary so much with individual drivers. Many of us don’t even ask why we pay a certain amount!

Auto insurance rates are based on the following factors:

• Vehicle’s cost/value
• Vehicle’s characteristics/safety features
• Vehicle usage
• Type of coverage selected
• Driver profile/record

Your coverage, first of all, is based on how much it will cost the insurance company to replace your vehicle, therefore, certain models will be costlier to insure. However, it also depends on the type of vehicle you choose to drive. Certain types of vehicles will indicate riskier (i.e. a sports car or motorcycle) or safer (mid-size “family” cars, vans) driver behavior, so companies base some of the costs associated with coverage on this factor as well.

A driver’s profile – age, sex, marital status, driving record – also contribute to determining the rates a company will charge. Statistically, the accident rate is higher for drivers under 25 – especially males – so 16 to 25 year olds will generally have the highest auto insurance premiums. If you have a student driver you must cover, you should check with your insurance company about a “good grade discount.” This can alleviate some of the costs if you have a good student who is otherwise costly to insure.

Driver training courses can also be a way to take advantage of additional discounts for younger drivers. And, of course, keeping a clean driving record will make your coverage less expensive as well.

Another area companies look at is how often and how far you drive your vehicle. Those who drive their cars only to run errands or visit nearby friends and family will be charged lower rates than those who must commute long distances on a daily basis.

The other portion of auto insurance that can affect your rates is how much coverage you elect on each portion of your policy. You may or may not need as much coverage as you carry, so be sure to take a look at this so you won’t be paying for coverage you will never need or use.

It’s always a good idea to evaluate each of these areas about once a year to determine if you have enough or too much coverage; you don’t want to be over- or under-insured, so be sure you speak with your agent and take a close look at your auto insurance policy together to determine if you need to make any changes for the upcoming year.