How Auto Insurance Companies Determine Your Rates

The question how auto insurance companies determine your rates is a complex one, perhaps as complex as how Google determines your site’s rankings. The answer is not so easy, but there are certainly some guidelines that can help you understand how auto insurance companies determine your rates.

A vanilla mix of factors influences how auto insurance companies determine your rates, but overall the level of risk perception is very important. In other words, if the auto insurance company views you as a high risk driver, you will be charged a higher premium and vice versa.

Here are some criteria that play a critical role in determining how auto insurance companies determine your rates:

1. Driving record. That was an easy one. Your driving record certainly dictates your level of riskiness and that in turn would guide auto insurance companies in deducing a specific amount to charge. A stellar driving record will certainly save you on auto insurance rates and vice versa.

2. Your vehicle make. The make and size your vehicle can certainly play a critical role in determining risk and in turn influence how much the auto insurance company would charge you. Overall, the car’s safety features, capacity and horsepower, and other vehicle-related factors can raise or lower your auto insurance costs.

3. Coverage package. Whether you are opting for basic liability insurance or a more comprehensive package can certainly have an impact on how much your car insurance costs. The overall package can and does influence how much car insurance costs.

4. Your physical location. A high accident zone will certainly increase your auto insurance rates, while an area where the number of accidents are much lower can lower your auto insurance rates further down.

5. Personal and demographic characteristics. In addition to the above factors your age, marital status, education, and other personal and demographic factors will also determine how auto insurance companies determine your rates. Generally, younger drivers may have to pay more than more experienced drivers.

Overall, it is how risky you appear to the auto insurance company that determines your rates. If you can do a good job of portraying “low risk” profile, your auto insurance rates will be much lower.

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