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How are Auto Insurance Rates Determined?

Auto insurance rates are determined by a number of factors. In some of the states, the state’s insurance commission that regulates the auto insurance carriers set the insurance rates. In other states, there are various factors that influence the insurance rates for your auto. When shopping for auto insurance, it’s best to compare rates offered by different car insurances carriers so that you are in a position to settle for a good deal. A good deal means the auto insurance policy should provide adequate coverage and do justice to the amount you shell out as premium.

Factors that determines auto insurance rates are as follows:
  • Model of the car
    If you are driving a vehicle that is very expensive, you have to pay more as premium. If your expense involved in repairing your car is astronomical, your auto insurance premium will also be higher.

  • Gender
    Male drivers have to pay more insurance premiums as compared to female drivers because females are less prone to accidents.

  • How do you use your car?
    The more you use the car, the higher will be the insurance premium that you will have to pay for your auto.

  • Drivers’ age
    If you are below 25 years and above 65 years, you are more prone to accidents and this makes your premiums escalate.

  • Driving record
    You must have a sound driving record and have less number of speeding tickets to your credit. You must have also violated driving rules less. Under such circumstances, you can demand lesser premiums.

  • Previous claims
    Your auto insurance carrier will find out whether you have made any claims before. If it is found that you have made claims before and you were responsible for the accidents, you will be considered as a high risk driver. As such, your auto insurance premium rates goes higher.

  • Place where you reside
    If you reside in a congested area or at a place where crime rate is high, chances of theft becomes higher. As such the amount you pay as premium also increases manifold.

  • Type of car insurance coverage
    It is mandatory to have liability coverage but if you want to avail more coverage than this, you will have to pay more. Collision, fire, theft, vandalism etc are some of the options you can avail.

  • Deductibles
    Paying higher deductibles will ensure that you pay less in auto insurance premium.
Following the credit crunch, a lot of anomalous activities have been reported in the auto insurance industry. The incidence of barbecuing a bearer, a common form of insurance fraud has increased over the months. In this the owner of the vehicle intentionally sets the vehicle on fire to claim the compensation.

Reports also suggest that owing to the credit crisis, more and more people are compromising on car insurance coverage to save costs. This in turn is extending inadequate coverage to the auto insurance policyholders.

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