Premium charges, depending on the jurisdiction, can either be decided by the insurance companies of by the government itself. This computation of premium cost is derived from the data gathered on you, the insured, and how that data will affect future costs of claims you will make.
These companies are basically computing how often you might get into an automobile related accident (or how many times you’ll have to claim insurance), and how bad your accidents may be (or how much will the company have to pay). While these may seem to be callous terms, insurance is designed to furnish you with necessary finances when you can’t shell out anymore. They’re dealing with money and risk, factors that are important to both the insured and the insurer, which is why their data gathering is this extensive and, at times, callous. Here are the factors that go into computing your basic premium charge:
Gender plays a role in this equation. Statistically, male drivers drive more than female drivers. While this may seem sexist at first, the fact is that driving is a dangerous mode of transportation. The more time you spend on the road, the more likely you’ll get into an accident. Males are more high risk than females, when it comes to automobile insurance.
Age also must be taken into account. Teenagers are more likely to incur accidents than the 25 to 65 curve. Teenagers with no driving experience are expected to have a higher premium, but this can be lowered by taking safety driving courses. Also, citizens 65 and above are higher risk individuals because of their physiological limitations: poor eyesight, low reaction time, physical failure leading to mechanical failure, etc.
Being married is a factor. Financial stability is a way for insurance companies to lower your premium. That’s one factor. Some companies even cite responsibility for your house and family as factors that can lower calculable risk.
Geography is also a factor. Taking residence in an area congested with vehicles certainly raises calculable risk. Driving is considered one of the dangerous modes of transportation, more so when it is done in a congested environment. Of course, living in a less congested area will likely lessen your risk.
And of course, you’re driving history is taken into account when computing your premium charge. Moving violations such as speeding, reckless driving, running red lights, etc. will all place you at a higher risk calculation.