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These Factors Influence the Cost of Auto Insurance

These Factors Influence The Cost Of Auto Insurance

The average annual rate for an auto insurance premium is $800. However, this number varies widely based on individual factors. Different risk factors that have been linked to accident statistics affect the final rate. These factors are often better at determining risks than analyzing individual driving records alone. While not all companies use every determining factor in this article to price an auto insurance premium, they use several. 

Driving Record


This is something used by every insurer to determine policy pricing. Those who have had multiple at-fault accidents in the past are more likely to be involved in an accident in the future. However, a person who has not had any prior accidents is a lower risk for insurers and enjoys a lower premium as a result. Tickets for speeding and other infractions affect insurance rates. An incident of driving without insurance will cause a person to have to pay a much higher rate for a year or more after the incident, and the individual cannot drop the special required coverage.

Driving Frequency


People who drive more face a greater risk of being involved in an accident. Those who commute long distances for work every day usually pay higher premiums. However, someone who works at home and drives once or twice per week would be considered a lower risk and may have a lower premium. Insurers often ask for mileage readings every year.

Vehicle Vulnerability


If a vehicle is parked outdoors on a street in a large city, it faces a higher risk of vandalism and is exposed to the elements. These risks may result in a slight increase in the cost of insurance. However, a vehicle that is parked in a garage in a small town where there is rarely severe weather might have a lower insurance premium with the same insurer. Some states also have higher rates of fraud, litigation, medical expenses and other premium-raising incidents. The cumulative cost of these incidents is passed down to policyholders.

Driver Age


Drivers who are under the age of 18 are considered a higher risk than those who are over the age of 18. Also, drivers under the age of 25 are in a higher risk category. As a rule, most drivers who maintain a good record see a noticeable drop in insurance costs after they turn 25. For younger drivers who earn good grades in high school and college while maintaining a clean driving record, some insurers offer special discounts.

Driver Gender


While many insurers do not use this as a major pricing factor, it is one to consider. As a rule, women are not involved in serious accidents as often as men. Also, men have higher rates of DUIs, which considerably impact the cost of insurance.

Type Of Vehicle


A vehicle's value, its likelihood of being stolen and its safety ratings affect insurance rates. The presence of certain safety features lowers insurance costs. Engine size, make, model and age are some additional factors considered by insurance companies. For example, a used hybrid sedan with several safety features would cost less to insure than a new Corvette.

Driver Credit


An individual credit score is not the sole determining factor with credit. Insurers use payment history, bankruptcies and other information from a credit report to create a special insurance credit score to help with premium pricing.

Coverage Provisions


Most insurers offer several types of coverage and some add-on bonuses such as roadside assistance or rental car coverage. These add-ons are usually several extra dollars per month. Some people choose comprehensive coverage, which includes a wide range of incidents such as vandalism, cracked windshields, body dents and more. Liability insurance covers medical care and property damage to another party if the insured driver causes an accident. Pricing varies based on the dollar limits for these policies. However, drivers must carry at least their state's minimum liability requirements for insurance. Comprehensive and add-on features are optional but recommended.

The best way to find out how much insurance costs is to request a free quote. To learn more about insurance and pricing factors, discuss concerns with an agent.

Mark Schmidt