November 5, 2010

What Factors Determine Your Auto Insurance Rates

Contrary to what many people believe, auto insurance rates are different for everyone. You will not pay the same premium as your parents, siblings, coworkers, or friends pay. This is because car insurance companies use a variety of factors to determine a final premium that each person will pay. The cheapest car insurance quote that you receive will be determined by combining all of these aspects and assessing the type of risk you pose to an insurance company.

Perhaps the most determining factor with auto insurance rates is the driving record of the individual who is applying for insurance. Auto insurance companies base their business on risk. The higher the risk of accident a person filing for insurance has, the higher the premiums will be. A person who has held a drivers license for 30 plus years will naturally pay lower premiums than one who obtained their license only a week ago. This is because they have more driving experience than a new driver. Additionally the number of speeding tickets, at fault accidents, suspensions, and major driving infractions, such as DUIs, have a huge impact on auto insurance rates. A person with several of these violations is more likely to pose a high risk to the insurance company.

The type of vehicle that you drive also influences the auto premiums. Some vehicles are more likely to be stolen than others, some are vandalized more often and some cost more to repair. These vehicles are charged higher premiums to offset the possible high cost of future claims.

The area that a person lives in can also have an effect on car insurance rates. Larger cities often have higher crime rates and higher numbers of motor vehicle collisions. As a result, insurance companies will increase rates for drivers in these areas.

Insurance companies also take into consideration how often a driver is behind the wheel and what the vehicle is used for. The further a person has to drive to get to and from work, the more chance they have of being involved in an accident. A person who only uses their vehicle to run occasional errands will pay less in premium than a person who uses their vehicle for business purposes. More exposure on the road means a higher risk, and again, insurance companies base their business on risk assessment.

Some of these factors can be changed and some are set in stone. If you find that you are having trouble obtaining the cheapest car insurance quote possible, you may want to sit down with your insurance agent to determine what you can do to help lower these premiums.