Finding Out What Car Insurance is Based On

What car insurance is based on depends on the insurance company. Typically, auto insurance is based on your age, gender, and driving record as well as the kind of car you drive, where you live, and your previous claims history. Enter your ZIP code below to get free insurance quotes and see how these factors impact your car insurance rates.

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent

UPDATED: Oct 30, 2020

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Car insurance costs are factored by carriers based upon your individual risk, or likelihood that you would file an auto insurance claim. Such factors include who is on the policy, such as drivers in your household and their individual risk factors too.

The process of buying insurance begins when you reach out to an individual broker or agent and put in for an auto insurance quote. You may request quotes for free online, or on the telephone. The advantages of searching online are efficiency and time effectiveness.

Basically, an online quotes system returns back estimates for car insurance from many different carriers at the same time. The old way was to contact separate insurance carriers and wait a couple days for a reply.

You may also reach out to an insurance broker, who generally has more experience than an insurance company’s agent.

The advantages of a broker are that they can work on your behalf to find insurance quotes for you.

However, that often comes at a premium, which is factored into your insurance policy pricing.

Compare that with the convenience of do-it-yourself quotes online, and you might see why shopping online is so popular. Use our FREE quote tool above to get started!

Either way, when you put in for a quote, your information is evaluated by the carriers to provide pricing estimates. You may wonder how they return quotes at 2 a.m. on a Saturday so quickly. Well, basically, they have the demographics and associated risk stored away in databases.

The Alabama Department of Insurance delineates the details that the underwriters evaluate when they decide how much to charge applicants for coverage. In some cases, the risks are so great that they deny individuals auto insurance.

  1. Where You Live
  2. Annual Mileage
  3. Where You Drive
  4. Age
  5. Marital Status
  6. Gender
  7. Credit Score
  8. Territory, or how people in your region drive, and how often they file claims
  9. Prior Insurance Coverage
  10. Driving Record
  11. Make and Model of Insured Vehicles

The truth is that the more you drive, the more you are increasing the risk exposure for an accident. Where you live may make the difference between having your car stolen or broken into and never having any events occur. In some cases, weather is the greatest threat to an auto owner.

If you live in the city, there is a greater likelihood of an accident or any type of incident because there are more cars around you.

In addition, younger and senior drivers pose the greatest risk.

Young drivers, under 25, are less experienced and perhaps more distracted. Meanwhile, drivers over 65 have experience, but their reaction times start lagging, and they may be contending with more physical limitations and illnesses that impair their driving skills.

In some regions, people drive expensive cars, and may be more likely to file the most costly claims. People as a whole in such places pay higher rates. Even if you are a more pragmatic car owner, and drive an old beater, it is more likely that if you are in an accident, insurance is going to have to cover the risk of the expensive vehicles on the road.

Married couples are more likely to pay the bill, simply because they generally have two incomes.

In addition, they may be less likely to rely upon insurance claims to fix their vehicles, again because they have the means to pay out of pocket. Surely, more serious accidents require insurance claims, and carry greater risk. However, most accidents are not big and not too serious.

People with lower credit scores, however, are typically more likely to file claims. The reason is that they rely upon the insurance to carry the brunt of financial responsibility to make auto repairs following an incident.

Comprehensive and Collision

One such example of this is comprehensive and collision coverage.

Both of these are required if you have a loan or are leasing your vehicle. Once you own the vehicle outright, you may begin wondering when you can drop collision and comprehensive.

Collision pays for your vehicle if you are involved in a crash, with other drivers or objects. Comprehensive deals with anything else that can happen to your car, as specified in your policy documents.

What happens is that at some point the coverage premium and deductible cost more than the value of your vehicle, if it were to be totaled out by your insurance carrier.

Many people drop collision and comprehensive at that point. However, if you have had a rough time financially, you may opt to carry the coverage because you maybe have no other choice.

For instance, if you had to go out and buy a vehicle in an instant, you would be unable to do so.

Other people, who have higher credit scores, more stable and lucrative employment, and savings, would be able to pay with cash or finance a new vehicle if needed. That’s basically the relationship that the carriers’s underwriting makes when evaluating credit scores.

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Lowering Car Insurance Costs

Now that you know how car insurance rates may go up, learn about how to level out those costs. For one, shop around for quotes. The idea is that some carriers charge more than others, and you want to get great coverage at the lowest cost possible. Comparing quotes is the way to save a substantial amount of money on car insurance.

In addition, you may find that in addition to shopping around, requesting higher deductibles may also help.

Again, if you have savings, are a relatively safe driver, and would rather save on premiums, increase deductibles. Just know that if you are in multiple accidents, you will have to come up with the deductible every time you need to file a claim.

Go for multiple line insurance discounts by purchasing your vehicle insurance, boat, motorcycle, homeowners, and umbrella insurance policies from the same carrier.

If you do not drive very much, consider getting the low mileage discounts as well.

Understanding how car insurance carriers determine your premiums is the first step in saving money. From there, comparing quotes and coverage options make the way for you to reduce costs.

Use the FREE tool below by entering your ZIP code now!

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