May 11, 2010

Experience Rating and What It Means for Your Auto Insurance Premiums

Finding good auto insurance can be difficult, and finding excellent car insurance can sometimes be an almost insurmountable challenge. Even when consumers find a company with a clean record, great customer service and coverage that gives them the security they need, there is always the matter of the premium. Often, the premium offered in an auto insurance quote seems disproportionate to the vehicle or driver being insured, or may seem to be far too much in relation to the amount of coverage being offered. Insurance companies use a number of methods to determine what each client should pay for premiums, and the most common of these is the concept of risk. The higher the risk of payout, the higher the premium charged. Risk can come from any number of factors, but most importantly from the customer themselves. Consumers are assessed by their auto insurance company individually, and each one is given an experience rating, which determines exactly what they will pay.

Experience rating is a term that many consumers are unaware of when it comes to how their auto insurance premiums are calculated. It is not something that companies advertise or typically mention on a website or during a phone consultation, but it is a quantitative formula that is used to determine what category of payment a client will fall into. The rating is based on a number of factors, including age, sex, driving history and vehicle driven, in addition to a great deal of other factors about how the customer has driven, and how, based on statistics, they will likely drive in the future. The greater the possibility that insuring a driver will result in a claim, the higher the monthly premium will be.

This can be frustrating for consumers as they are often unaware of how their previous driving history, as well as their potential driving future, can affect their insurance. There are several ways that consumers can help to keep their experience rating reasonable, starting with driving in as safe and sensible a manner as possible. Although there are some things that clients cannot control, such as their age or sex, limiting other factors that contribute to an experience rating can go a long way to decreasing their monthly premiums.

Although many states have enacted laws limiting the ways in which auto insurance companies can raise rates without justifiable cause, high premiums are still a common sight on many insurance websites. The two best ways that consumers can combat the drain of high auto insurance premiums on their bank accounts are to drive safely and make sure to shop around for their coverage before committing to any quote. Experience rating influences auto insurance premiums, but is not the final word.