What Influences Car Insurance Rates And Why?
Even if two individuals drive the same vehicle models that also happen to be the same color and year, they may still be likely to receive the different insurance rates. There are actually a few carefully-designed reasons as to why they will not receive the same insurance rates. Car insurance companies look at a variety of things, stopping short of an interview, to figure out what kind of driver they will be providing insurance to. By considering multiple factors, car insurance companies can somewhat determine how much of a risk a customer will be. Insurance companies look to insure less risky drivers, as these drivers are less likely to need to make a claim. Insurance companies will provide a customer with a rate they would like for the customer to pay based on their perceived risk to the company.
Start reading to learn about some of the factors that play into a decision such as this.
Marital Status
A customer's marital status gives some insight as to how much of a risk they might be to the insurance company. Married couples are typically viewed as safer drivers who are less likely to file an insurance claim. If someone who is married does get into an accident, studies have shown married individuals tend to sustain fewer injuries during an accident.
In all states but Massachusetts, married couples can receive a variety of discounts through combining insurance plans or bundling. Combing multiple auto policies, or home and auto, or additional vehicles allows insurance providers to offer cheaper rates to married couples.
Continue reading to learn about the influence of age on insurance.
Impact of Age
As one can imagine, an older and more seasoned driver is less likely to have a car accident than someone who has only been driving for a few months. This is the ideology many insurance companies believe when insuring drivers across multiple age groups and determining the impact of age. Younger drivers are seen as more risky customers than drivers who have been driving for a few years. Therefore, insurance is more expensive for younger drivers, and for most drivers, insurance premiums don't begin to decrease until they turn twenty-five years old. However, elderly drivers also pay higher insurance rates due to their physical limitations, as these can restrict them from driving properly or reacting as quickly.
As far as for younger drivers, many studies have shown younger drivers tend to be distracted much easier when driving. This leads to more accidents among younger age groups, particularly when combined with inexperience. As a result, younger drivers file more insurance claims, so insurance companies raise the premium to compensate. However, it is crucial to note insurance companies cannot distinguish customers based on age in California, Hawaii, and Massachusetts.
Continue reading to discover how gender may influence insurance rates.
Gender
Males, on average, have far more accidents than females according to a variety of statistics and studies. It is due to a variety of reasons, such as an increased frequency of driving while intoxicated. Additionally, accidents involving male drivers tend to be more serious than accidents involving female drivers, and male drivers have more accidents resulting in fatalities than female drivers.
As with rates depending on age, as males age, their rates become lower, and at certain ages, this rate can be lower than a female of the same age. Furthermore, many states do not allow insurance companies to use gender as a factor in distinguishing customers. These states include Hawaii, Michigan, Montana, Pennsylvania, North Carolina, and Massachusetts.
Continue reading to reveal the impact an individual's credit score can have on the insurance premium they must pay.
Credit Score
Although thought of by some as a myth, a customer's credit history does play a role in determining their insurance premium; the practice began in the 1990s. Customers with lower scores are seen as more likely to file claims or exaggerate claims to receive more money from their insurance companies. According to research, a customer's credit history can affect their insurance rate even if they have a clean driving record with no tickets or accidents. However, insurers cannot legally use your credit scores, to determine your rate, in California, Hawaii, and Massachusetts.
Legally, an insurance company is not obligated to show you the score they use to determine your insurance rate. This determined score may not only affect your rate but can affect your ability to be insured by certain insurance companies or how you pay for your insurance. Some companies may require you to pay for your coverage upfront if you have a low credit score.
Continue reading to reveal more information on how location can influence insurance premiums.
Location
Location is one of the largest factors in how an insurance company determines your rate, and different areas have different rates due to geographical risks associated with certain areas. Urban areas, for example, have more congestion and traffic, meaning the risk of a customer getting into an accident and needing to file a claim is much higher. Areas that experience hurricanes or floods are also high-risk areas due to the chance of a customer experiencing a total loss during a storm and needing a replacement after the storm has passed. Some areas are notorious for car theft, so it is important for insurance companies to take that into factor as well.
Though no states prohibit insurance companies from utilizing a customer's location to determine their insurance rates, some states require insurance companies examine other factors before considering the area as a factor.