HOW YOUR RATE IS DETERMINED
Your application for a policy will be submitted to the Underwriting Department of the insurance company. An Underwriter will be assigned to review your application and determine a rate to charge you based on company guidelines. Each insurance company has different guidelines, which is why the same person will often be charged different rates. Read also: About Auto Insurance.
The age and sex of the insured will be considered. Young people are charged much higher rates than middle age applicants. Other drivers in the household will also be evaluated, especially if they do not have their own automobiles. It would then be assumed that they would be sharing your car. All potential drivers will have their driving history verified and the number of tickets or accidents will be considered when arriving at your rate. Accidents and claims are considered “occurrences” even if there was no payout, and too many will have a negative impact on your rate, possibly even raising you to a “risk” level where premiums are considerably higher.
The type of car you are insuring is also a factor in your rate determination. A small car is often given a lower rate because it will do less property damage if in an accident. The cost of repairs on a particular make and model is considered, along with the loss experience the insurance companies have had with this make and model automobile. Some cars are very high on the “theft” list and stolen regularly. Others are not so popular with thieves. Read also: What are the differences in auto insurance between states?
Some autos are prone to having more damage than another type of car, and this would be indicated in its rating. Always be sure you have an automobile with air bags, even if it is an older car. This can protect you and your family and also provide a discount on your cost. These are the types of risk taken into consideration when calculating a premium.
The insurance companies also evaluate your credit score and history. Statistics have shown that good drivers are generally financially responsible people and although your credit history alone will not keep you from being approved, it is definitely a consideration by the Underwriter.
The number of miles annually driven will also be weighed. Obviously, the more the automobile is on the road, the greater the likelihood of an accident. Insurance companies also take the area you live in into consideration as they have much higher loss experiences in certain locations. Read also: Is it wise to accept the maximum deductible to get cheap auto insurance?
When all of these have been verified, the Underwriter will calculate the rate of your premium based on both this information and the policy coverages and financial limits being purchased. The Underwriter will then advise your insurance professional of the rate you should be charged.