Reader’s Question:
I was wondering how car insurance is calculated by insurers and if you think it would be possible to know your rate based on the information to determine how much or how little a rate may be for a certain individual?
Marion
Philadelphia, PA
Car insurance companies base their calculation on statistics regarding your likelihood to get involved in an accident. These data are acquired by your carrier from government and private sources. Companies will usually classify your risk as:
Preferred: you are least likely to meet a road accident or other incidents that result to damages on your vehicle.
Standard: while you aren’t the safest motorist in town, you are not that awful either.
Non-standard: this tells you to be more cautious with your car because you are very likely to file a claim, something that nobody really wants.
So now you are wondering how come your company thinks you are prone to vehicular accidents. Take a look at the factors below that affect your car insurance rating:
Age
All insurance carriers charge teens higher than more experienced drivers. Statistically, drivers above 25 years old have less accident records than drivers under that age. Drivers aged 50 to 65 are rated the cheapest in relation to age. It is unfortunate that car crashes are the top cause of death for teenagers, especially 16 year-olds.They are three times more likely to engage in a fatal accidents.
Gender
Car insurance carriers are not gender biased-it’s pure statistics. Female drivers meet lesser accidents than male, plainly because males drive 60%-65% more.
Marital Status
Married drivers are granted lower rates because they have lesser claim statistics.
Geography
Car insurers do look into police records, or at least not literally. They charge higher to customers who reside in areas that are prone to theft, fire, and other non-collision related damages.
Vehicle Usage
Cars used for business, e.g. product delivery, are given more expensive rates. The opposite is true for cars used solely for leisure. This is because they are least used and the probability for accident is lesser. Therefore, your work will affect your rating.
Other variables for your car insurance premium are:
- Vehicle type, make, and model: more expensive means higher rates
- Education: its pays to take advance driving courses
- Distance from home to work
- Years of driving experience
- Credit record: pays to have a clean one
