How Your Rate Is Determined
The business of insuring vehicles is based on statistics and probabilities. There are seven factors taken into consideration by an insurer.
Geographic Environment -Rates are based on the geographic area in which you live. Statistics have shown that most accidents occur within 25 miles (40km) of your residence. No matter where an insured person has an accident, if he is at fault or if a claim is paid, it is statistically recorded in the area in which he resides. The territories are rated high or low depending on the experience of the company with drivers living in the territory. If your territory has a high accident record, high medical costs, or high repair costs, your insurance will probably cost more.
Who Uses the Vehicle -The age of the persons driving the vehicle will affect the amount of the premium. Drivers under the age of 24 are involved in 25% of all accidents and are therefore higher risks. The statistics also reveal that male drivers are involved in accidents more than female drivers are and that married males under 30 and married females under 25 are less likely to be involved in an accident than their single counterparts.
How the Vehicle is Used -You will usually be charged a higher premium if you drive your vehicle more than 10 miles (16km) to work, less if it is used for pleasure purposes only. Vehicles not driven to and from work are usually subject to lower premiums.
Driving Record -Statistics prove that the drivers who have had accidents previously or who have been convicted of serious traffic violations are more likely to be involved in an accident than drivers with clean records. Many companies surcharge traffic violations and "at-fault" accidents within the last three years.
Type of Vehicle The make, model, and engine size are prime rate-determining factors. Studies by the Insurance Institute for Highway Safety show that:
- (Within each size group, 2-door models have more injury claims than 4-door models.
- Sports and specialty vehicles have the highest injury claims.
- (Subcompacts have the highest percentage of collision claims. Among vehicles of the same size, sports and specialty models have larger collision claims than other models, and 2-door models frequently have larger claims than 4-door models.
Cost of each claim -Vehicle repair charges, hospital bills, and financial awards vary greatly from area to area. Inflation in the costs of body parts, hospital costs, and repair costs, result in higher premiums.
Discounts -Most companies will offer discounts to young drivers who have successfully completed a driver education course, owners of compact vehicles, and families with more than one vehicle (on the theory that each vehicle is driven less)
Premiums.
