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Why Do You Need To Pay That Much on Car Insurance?


Some people are paying as little as $400 a year for their car insurance; others pay a thousand more. While it is true that most insurance companies will look at your driving record and coverage amount, these do not complete the equation.

Using the Actuarial Tables

You may have heard about actuarial tables when you purchased your life insurance. Basically, it is a statistical table that indicates the life expectancy as it relates to the age, sex or occupation of the policyholder. Actuarial tables are rather set of complicated equations mainly used to determine probabilities. Applying the same concepts to auto insurance, insurers can determine how likely and to what extent the damages would be as it relates to the age, car model and experience of the driver.

Actuarial tables are not crystal balls used by fortunetellers or a computer program oracle. It is a set of proven mathematical formula resulting from years and years of testing. These tables are here to stay until something more accurate could replace it.

Identifying the Factors That Influenced Insurance Rates

The age and gender are two of the key elements used by insurers to determine the driver’s insurance rates. As you may or may not know, the ages between 16 and 25 will likely to suffer the most serious accidents. Risky behaviors such as speeding, drunk and reckless driving is almost present whenever these collisions happen. However, not all teenagers will grieve with the high insurance costs, as most insurance companies will gladly drop few a hundred dollars off for those students who have good grades in school. Oftentimes, these students are not only responsible on their schooling but on the road as well.

Next factor is the car itself. When you request for an insurance quote, the insurance company will most likely to ask for your car’s model, make and year. A new car will cost more if we talk about replacing its parts as compared with older cars. With regard to liability, the car’s size is also a part of the equation. Obviously, a massive GMC Denali will cause more harm than a Mini Cooper.

If you are driving a 2-seater sports car such as BMW Z4 or the Mazda Miata, expect to pay high premium rates. It is a bit confusing why insurance companies continue to hammer sport’s car owners with high rates. Again, if we are to look at the statistics, drivers of the said vehicles often engaged in over speeding and never-racking stunts.

You might have looked at few selected Porsche models released in the market today, which have a tiny jump seat at the back transforming it into a “four-seater” model. This is purely an attempt of the car manufacturers for the sole purpose of reducing the premiums. 

Why Credit Scores Matter?

Students who managed to maintain good grades are considered as responsible drivers, so to speak. The same ideology is applied for people who are good in managing their finances. According to the actuarial tables, drivers with low or unacceptable credit ratings are assumed as “irresponsible” drivers. However, most policyholders consider such policy as being unfair and unjust on their parts. Legislators are yet to see how this practice are being carried out as more and more groups are speaking against this issue.