How are premiums determined?

An insurance company takes many factors into consideration when determining your insurance prices (premiums).  Some factors may seem unfair. For example, drivers with higher education or who are married will generally receive better rates than a driver with a similar driving record. Below are the major factors affecting rates

  • Driving record and accidents. Moving violations, DUIs, and accident claims trigger higher rates.
  • Credit score. Bad credit scores trigger higher rates (check more here).
  • Miles driven.  Drive less, pay less.
  • Occupation. Jobs involving driving or heavy commutes may trigger higher rates.
  • Location. Higher crime rates in your neighborhood or a density of population (cities) will cause rates to rise.
  • Age. Drivers under 25 pay more; drivers between 50 and 65 pay less.
  • Gender and marital status. Women have fewer accidents and pay less than men. A married person is considered more stable and will receive a lower rate than a driver with a similar record.
  • Type of car. The more powerful or expensive, the higher premium because high performance cars attract riskier drivers and expensive cars are more costly to repair.
  • If you don’t have your insurance packaged you are likely not getting packaged discounts.  An insurer can spread it’s risk if they have more than one line.

Insurance companies analyze all sorts of data and use many factors to determine risk and what to price for the risk.  They would be out of business if they didn’t tier and rate risks or all drivers would pay more – which wouldn’t be fair to those who are careful drivers or risks or promote safe driving

Some carriers have determined only certain risks are profitable for them and some may have too many in a certain area or pool.  So, it’s wise to work with an independent agent who represents many companies and will know which insurance companies would be best for you, in your area, your specific needs and situation.