When you are shopping around for auto insurance, it pays to understand how insurance companies work. Having an insight into how they evaluate applications to come up with price quotes will make it easier for you to figure out where you stand and be realistic about the price range of your policy.
All insurance companies, even cheap insurance companies, rely on statistics to determine risk. Risk proposition is what insurance companies deal in. The riskier a given individual or vehicle, the more it will cost to insure that person or vehicle, and the lower the perceived risk, the lower the price of the policy.
So how is risk determined? Insurance companies perform through statistical analyses to determine which age groups, vehicles and drivers are at the greatest risk of filing a claim. Keep in mind that filing a claim and getting into an accident are not the same thing. If you own a nice car and you live in a high-crime area, you will be judged to be a greater risk, even if you have never been in a car crash or filed a previous claim.
The major factors that affect insurance quotes include:
- Age. Older drivers have more experienced, and are seen as less of a risk.
- Sex. Statistically speaking, females have lower crash rates than males.
- Driving record. If you have a clean record, you will get cheaper insurance. If you have been in accidents, have speeding tickets or have been convicted of a DUI, your insurance will cost more.
- Location. Safer neighborhoods are less risky in the eyes of insurers, and if you live in one, you will get a cheaper insurance policy.
- Vehicle type. Sports cars and commercial vehicles are involved in more accidents, statistically speaking, than safer cars like economy models and sedans.
Also, keep in mind that if you have ever had an insurance policy canceled for non-payment of your premiums in the past, you will be charged more for future insurance policies. However, your credit rating should have no real impact on your auto insurance application and you will not be asked to provide a credit score by a reputable insurer.
There are a few, but they are usually small, mtauul companies in rural areas and their premiums for a car parked and used elsewhere may not be competitive at all.Be honest, tell your agent you have some dings in your credit. You will be penalized more for accidents and DUI convictions than bankruptcies or late pays.Also give the direct marketers a try, like GEICO. They have underwriting standards set on a more broad set of variables than many national insurance carriers. -- Erma