Insurance rates – Not a ‘one size fits all’ concept


I bet you’re thinking about how you and the insufferably smug neighbor own the same kind of car and so both of you probably pay the same auto insurance rates, right? Wrong. Nothing could be further from the truth. Insurance rates are calculated on the basis of complex inter-play between several factors. Understanding how these factors work will help you select wisely. Though the main factors are common to all insurance companies, the rates offered are often different. The following inputs are taken into account before calculating an applicant’s auto insurance rates:

  1. Age: Drivers between the ages of 17 and 25 are considered more risky than older drivers. The tendency to be brash and ‘cool’ to their pals encourages younger drivers to cause more accidents than drivers of other ages. The 26 to 55 years age groups of drivers are considered the safest. Again, very elderly drivers might need to pay higher insurance rates as their driving reflexes are considered slower.
  2. Gender: Women are considered safer drivers than men who will tend to speed. All these surmises are based on statistical evidence. So if accident cases have more men drivers involved, the automatic conclusion is that women are better drivers. So women get offered marginally lower rates than men.
  3. Education: Better educated individuals are offered lower rates. The logic that works here is that higher education might result in better credit rating.
  4. Car type: Standard car models will attract lower rates than expensive and exclusive cars. So if you want to buy that snazzy make, be prepared to shell out higher insurance rates.
  5. Age of the car: The older the car, the less is the insurance rate as the value of the car depreciates over time. New cars attract higher rates as they are in good shape.
  6. Driving record: A colorful driving record liberally decorated with tickets and fines all over it will directly spike insurance rates. On the other hand, a clean driving record indicates a careful, trustworthy driver and lower rates are offered. The quality of the driving record has a strong influence on insurance rates.
  7. Geographic location: Not everyone can change their homes according to their choice. If due to sheer bad luck, you happen to live in a theft-prone neighborhood, chances are that your car insurance rates will be higher as risks involved are higher. Similarly if the area is prone to deadly traffic snarls, then insurance rates go up as chances of having an accident is more. If you live in a quiet neighborhood, with little or no traffic, rates will be comparatively lower.
  8. Credit rating: A decent credit rating makes a good impression on insurers who always make it a point to check credit ratings of applicants. The better the credit rating, the lower is the rate.

So do what you have to do to change the factors which you can change to get lower rates.