While the precise method of calculation may differ between coverage providers, auto insurers generally use the same types of information when determining their car insurance rates. A given customer’s rates are generally determined based on statistics and analysis of the likelihood that the driver will get into an accident and file a claim. As a result, characteristics associated with safer driving tend to mean lower rates. According to the Insurance Information Institute, the average American pays about $850 per year for coverage.
Policies can provide different levels of coverage, and the different varieties of auto insurance apply to different situations. For example, bodily injury liability coverage kicks in if the insured driver injures someone else, while comprehensive coverage applies to damage from natural disasters and other non-collision damages. These different coverages may be priced separately.
Age and gender play a significant part. Teen drivers are generally more likely to be in an accident, so they can commonly expect slightly higher car insurance rates to compensate for that probability.
Many insurers use credit information when assessing customers and assigning rates, since it correlates statistically with claim filings and claim sizes. Paying mortgages, loans and credit cards on time improves credit, and may qualify drivers for better rates depending on the insurer.
An individual’s driving record is a major factor. Tickets, fines, violations and accidents will mean higher premiums, whereas a consistently clean driving record will have the opposite effect. A single accident may or may not make a large difference, depending on the insurer, the accident and possibly the drivers other characteristics.
The type of vehicle being insured can have a major impact on the rates for a number of reasons. Some cars are more expensive than others, or may be more likely to be involved in collisions, in which case they will be more costly to insure.
A vehicle’s overall safety record and repair costs will also factor in, as will theft statistics and similar data. As with driver information, insurers estimate the level of risk based on statistical information.
Location and miscellaneous factors
Where a driver and vehicle are can make a huge difference. Some areas see more traffic and more accidents than others, and have correspondingly higher insurance rates as a result. In addition to the chance of accidents, data on an area’s thefts, lawsuits and claim filings may influence the auto insurance rates. Medical care and vehicle repair costs may also be higher or lower in a given region.
Insurers also base their determinations on how much time a given driver spends on the road. Someone who travels very little by car is far less likely to find him or herself in an accident than a daily commuter or other individual who drives regularly. Mileage below the average could result in lower rates, and extra hours behind the wheel in higher rates.