It is not rocket science to understand how insurance rates work and what is the logic applied by insurance companies when they determine the premium you will have to pay. The simplest way to put it is that the insurance companies charge a greater premium for those cases where the risk of claims is higher. In other words, safer the car, lower is the premium. It can also be extended to say that safer the driver, lower is the premium.
Even before we find out about the factors contributing to risk, it is good to know that insurance rate is brought down by having higher deductible irrespective of the risk profile. If you are confident of yourself and are willing to pay more when the accident or theft or any other damage actually happens, you get a lesser premium to pay. Interestingly, the mileage of your vehicle determines the insurance rate to a large extent. This is simple given that the chances of an accident or theft are more when the vehicle is used more or the distance travelled is longer. Hence, to save on your premium you need to use your vehicle less every day.
If you are a working guy, who needs to get to office everyday in the vehicle, your insurance rate will be higher than the cost of the same coverage for someone like a housewife who wouldn’t use the vehicle as much. Even senior citizens and students are likely to get a discount because their overall usage is going to be far less than the usage of a middle aged person, thus reducing their chances of an accident. The geography of the region too will affect the insurance rates. The chances of accidents and other damages are higher if you drive more in populated urban areas with high density traffic. If the locality you stay in is relatively quiet and has a low rate of accidents, you are very likely to get a lower insurance rate. This is one factor you cannot affect much. Yet you can avail the discount if you are on the right side of this logic.
Your track record will also determine the insurance rate. If you haven’t made a single accidental damage claim in years, you will be considered as a low risk policy holder which will encourage the company to charge you less insurance rates than someone who frequently gets involved with accidents. The risk profile makes a big difference to your insurance rate. This is also the reason why a simple anti-theft alarm in your vehicle can bring down the insurance rates.
The coverage you choose to take will also affect the insurance rates. Greater is the coverage you want, more will be the insurance rate that you will have to cough up. This is why many people with a health insurance and a vehicle that is old and doesn’t carry a lot of worth, avoid going for the comprehensive damage coverage against natural disasters, theft, fires etc. Having such an exhaustive coverage can increase the insurance rates steeply. Similarly, bells and whistles like towing coverage enhance the insurance rates. You can do away with such extra features to bring down the insurance rates. Your education, your grades and your occupation will also affect the insurance rates significantly.