Factors That Effect Car Insurance Rates

Each insurance company has its own unique algorithm that is used to calculate a consumer's insurance risk. This calculation has many variables that are taken into account when determining your car insurance premium rates. Because each insurance provider will weight these factors differently in the calculations, when shopping for insurance it is important to shop around to find the best policy and rates for your specific circumstances.

Type of Vehicle

• The make, model and year of your vehicle are all important factors in determining car insurance rates. Historical data provides statistics on which types of vehicles are stolen most often, have the best safety ratings and are most likely to be involved in traffic violations and accidents.

Use of Vehicle

• The number of miles a vehicle is driven daily as well as the use of the vehicle are important aspects of determining auto insurance rates. Driving long distances or in rush hour traffic in a major city will cause higher rates than recreational driving in a rural area.

Driving Record

• Your past driving history is a major factor in determining a policy rate for insuring your vehicle. Moving violations, accidents, driving while under the influence charges and past numbers of insurance claims will cause an increase in rate. Defensive driving courses and safe driving will often qualify you for discounts on your insurance rates from one year to the next.

Credit

• Most insurance companies will check your credit history and factor your ability to make on-time payments into your car insurance rate. While most insurers will offer auto insurance to people with poor credit ratings, the policy will often be more costly than for those with above-average credit.

Types of Coverage

• While most states require a minimum amount of liability insurance, additional insurance coverage will increase your policy rate. Understanding the various types of insurance and choosing those which best fit your needs will help keep your policy affordable.

Deductibles

• A deductible is the amount of out-of-pocket expense you will incur in the event you need to make an insurance claim. As a general rule, the higher you set your policy deductible, the less expensive the insurance policy will be. While raising the deductible is often the fastest way to see a decrease in your rate quote, it is important to not set the deductible higher than what you can afford to pay if you need to file a claim.

Other Household Drivers

• Other people who reside in your home and are over the age of 16 can affect your car insurance rates. Some insurers will require all drivers be listed on your policy to ensure coverage should one of these drivers operate your vehicle. It may be possible to exclude drivers from your policy to help keep your rates low.

Life Changes

• Insurance companies assume certain life-changing events will make for safer drivers. Some insurers will provide discounts based on age, marital status or having a child.