When you are shopping for car insurance, the important question to keep in mind is not “how much should I pay for car insurance?” but rather “how much am I willing to pay for car insurance?” The rate that you get is determined by calculating several factors that insurance companies factor in when they assess your overall risk. It is the compilation of data that puts you in a statistically determined risk category, and it’s the likelihood that you will be involved in an accident or will file a claim that determines your car insurance rate.
No Two Insurers Evaluate Risk the Exact Same Way
There are no two insurance companies who will evaluate risk exactly the same, but they do take into account many of the same factors. Keep in mind that insurance is on the vehicle and the rate is determined by the driver and the combination of all the key risk factors. Take a look at the primary factors that are used by most insurance companies to determine your rate. When getting free instant quotes online, it is important to keep in mind that companies assess risk differently, which is part of the reason why you get different prices offered to you.
It is a common understanding that your driving record weighs heavily on your insurance rate. The length of time that you have been driving is the foundation from which your driving history is viewed. A newly licensed, young driver is placed in the highest risk category because they have minimal driving experience and statistically are more likely to become involved in an accident. In any case, a driving record that shows a history of violations, speeding tickets and accidents is clearly indicative of a higher risk and likely to receive a much higher rate.
What Factors Are Taken Into Account?
Right along with age, your gender and marital status are considered as factors by the insurance companies. Gender has the greatest effect on young males under the age of 25 because they are generally more aggressive and statistically more likely to be involved in a collision than females of the same age. Once a male driver reaches the age of 25 they move out of that higher risk category and can look forward to lower rates. Married persons are often quoted lower rates than their single colleagues, possibly because marriage is associated with settling down and increased stability and maturity.
The type of car that you will be driving strongly affects your overall premium. Statistically, certain types of vehicles are more likely to be involved in accidents than others. Cars that are considered to be sports cars generally will pose a higher risk than a mini-van for example, and insurance rates reflect that type of difference accordingly. These statistics will affect the amount of money to pay for car insurance policies based on you as an individual.
How Frequently Do You Drive?
The amount that you drive is also a big consideration. The time you spend driving and distances traveled are directly proportionate to the increased probability of being involved in an accident. Anyone who has ever commuted to work by driving can attest to that.
You may find it surprising that insurance companies also take where you live into consideration. They want to know what the driving patterns are like and where your vehicle will be parked while you are at home. People who live in bigger cities generally drive in heavier traffic and often park in an open lot or on the street and are at greater risk of being involved in a collision or having to file a claim for damages or vandalism.
New Risk Categories Assessed by Insurance Companies
A relatively new and questionable risk category is the use of your credit history as a basis for determining insurance rates. Insurance companies will take that into consideration because they feel that a persons credit history is indicative to their overall level of responsibility, and that the likelihood of someone with bad credit filing a false or fraudulent claim is greater than with someone with good credit. The use of credit scores as an indicator of risk may not seem fair, but more and more insurance companies are making that a part of their underwriting criteria.
These are not the only factors that are considered by insurance companies, but certainly the most predominant ones. Comparison shopping for the best rates is always recommended because you may find special discounts that are only available through one insurance company. Quite often insurance companies will offer discounts for groups that you may be affiliated with such as alumni associations, unions, military (i.e. cheap car insurance for veterans) or non-profit organizations.
How Much to Pay for Car Insurance?
It’s up to you to determine how much you pay for your auto insurance policy. It may be tougher to get a lower rate on things like car insurance for drivers with medical conditions. Although not every company has a “choose your own price option” like Progressive, most are flexible to your financial needs. Not everyone is rich and the insurance companies understand that. Obviously though, if you are buying high performance car insurance or looking to get car insurance for young men, it is probably going to be more costly than standard policies.
However, the bottom line is that car insurance is mandatory if you drive in the United States. All it takes is one violation of getting caught without insurance for you to get into some very serious trouble. Do yourself a favor and make sure that you get a comprehensive car insurance policy that you feel safe with on the road so that you don’t end up with serious legal problems later on. Remember, don’t ask “how much should I pay for auto insurance?” rather think about how much you are willing to pay for a quality policy.