Free auto insurance quote – With so many coverage providers out there to choose from and each one offering different rates to each applicant, a common question may be, “How do insurers calculate rates?” The rate that a motorist can expect to pay has a lot to do with many factors regarding the drivers and automobiles to be insured and the actual insurer as well. It is for this very reason that while one carrier may be able to offer a great deal to one specific driver, the same may not apply for another; this is what makes taking the time to compare rates from various insurers that much more important.

Practically all auto insurance companies use the same formula to determine how much they will be charging an individual for a policy; when applying for coverage an applicant will be asked to provide information regarding the drivers and vehicles that will be included on the policy which will then be evaluated in order to determine the risk involved in insuring the motorists as well as the vehicle. The rate will be based on how risky of a potential loss that the applicant poses and may also be affected by a company’s prior profits and losses with similar customers; for instance, if a company has been profitable with insuring certain individuals then future customers with similar criteria may be offered cheaper rates. On the other hand, a company who has suffered a number of losses with particular motorists may file for a rate change with their governing agency in order to increase premiums to help compensate for the loss they have incurred.

Factors Used by car insurance Companies to Calculate Rates

One of the most influential factors that impact rates is the driver; insurers view a driver’s age, gender, driving history, marital status and place of residence to determine the prices of policies. Providers use these items along with their own personal profits and losses to calculate a rate.

For instance, statistically, motorists between the ages of 16 and 25 are far more likely to be involved in a traffic accident than any other age group, drivers in their teens are more likely to be involved in accidents than those 20 years of age and older and 16 year olds have 3 times of a higher risk of having an involvement in a collision than 18 and 19 year olds. In addition, males are also involved in more accidents than females; therefore, a single young male will probably end up paying more for coverage than a mature married female; statistically, married couples have fewer accidents than singles.

A driver’s history is used to evaluate the driving habits that an individual practices; motorists with a history of tickets and accidents are viewed by insurers as riskier to insure than those who have a clean driving record and may pay more for coverage. Additionally, the length of time a driver has been licensed also comes into account; once a motorist has been licensed for 3 years and has a clean history behind the wheel, some auto insurance companies will offer a good driver discount which can be as high as 20%.

Place of residence is used for a number of reasons; individuals who live in areas that are heavily populated will usually pay more compared to those who reside in rural areas due to the fact that there will be more cars on the road which raises the likelihood of a loss. Areas which have a high crime rate may have inflated premiums for Comprehensive coverage because of the risk of suffering losses caused by theft or vandalism.

The amount of miles driven by a motorist is also used when determining rates; this is simply because the more time that a person spends on the road, the higher the chances are that they will be involved in a collision. An individual who drives 60 miles each way to work on a freeway 5 times a week is much more at risk of having an accident than a stay at home mom that only uses the vehicle to pick up the kids from school and go to the market.

Automobiles play a big factor on the cost of policies and depending on the type of coverage desired, can affect premiums in many more ways than one. Sports cars are shown to be far more likely to be in an accident than a mini-van or family sedan; therefore, the cost of Liability and Collision will probably be more expensive compared to more practical autos. Vehicles which are commonly targeted for theft will also be costlier to insure and Comprehensive rates will be affected if needed; rates are raised on these automobiles to cover the higher chances of losses.

Depending on the state’s laws, credit scores may also be used to determines rates as well as whether or not a company will accept an applicant or renew an existing policy. This is commonly referred to a “Insurance Scoring” and many providers believe that the credit history of a consumer has a direct correlation with their responsibility level as well as their likelihood of filing a claim. The New Jersey Department of Banking and Insurance provides a detailed guide to the way carriers use credit for insuring purposes.