What are the main factors affecting the premium rate?
The car insurance company is in the business of assessing the risk you will be involved in an accident or your vehicle will be lost or stolen. To do this, the insurer employs actuaries who collect data on all reported accidents and work out the probability of it happening to you. This means looking at the following factors.
Who are you?
You are the one getting behind the wheel so your track record is the best starting point. The statistics show that inexperienced drivers are the most likely to be involved in an accident. In fact, drivers up to the age of 24 years, have the highest rate of accidents. But as you age, you can show a good record, i.e. no accidents, no tickets and no claims. The more experienced you are and the better your driving record, the lower the premium rate.
How do you drive?
If you only drive for short distances at off-peak times, the risk of an accident is small. But if you drive long distances at busy times every day, say, commuting to work, there’s a high chance of an accident. Equally, if you drive at night when there are more drivers affected by alcohol and drugs, you are at a higher risk. You can impress the insurer by taking an approved course in defensive driving.
What do you drive?
Some vehicles are small and underpowered. These tend to have good records. Others are designed for speed and are more often stolen or involved in accidents. Always check on the classification of a vehicle before buying.
Where do you live?
Some areas have a high crime rate for theft and vandalism, or there are frequent floods and other weather events causing damage to vehicles. Insurers routinely check your zip code for accident statistics.
What is your credit score?
Statistics show that people with low credit score tend to make more claims. In part this is because they cannot afford to repair and maintain their vehicles well.
Do you want to self-insure?
You will be entitled to a discount if you agree to a deductible, i.e. to pay the first percentage of any claim made against you. This can work well if you have a good driving record and enough cash to cover a run of bad luck, e.g. two accidents in a year requiring you to pay a deductible of, say, $500.