I frequently tell my clients that insurance companies are not in the business of losing money. I say this to help clients understand why insurance cost what it does and to help clients come to terms with the protection value that the coverage offers. Auto insurance rates, just like life insurance and other forms of insurance, have factors that an insurance company will consider before offering you coverage. You may be surprised to know that you have control over many of these factors.
Here are the factors that insurance companies consider before offering a policy to cover your vehicle:
- Your driving record
- Marital Status
- Years of driving experience
- Geographical location
- Claims history
- Credit history
- Previous insurance coverage
- Vehicle type
- Vehicle use
- Coverages and deductibles
- Amount of miles driven in a year
While you certainly can’t control your age, gender, and marital status, you do have some control over the other factors mentioned. I’ll touch on a few of them below.
The most controversial of these factors tends to be credit history. There have been studies conducted, such as this one in 2004 from the Texas Insurance Department, that show a direct correlation between low credit scores and insurance claims. Of course, if there is a higher propensity for claims to be filed, insurance companies will charge more to insure people how fall into specific categories. While individually, someone with a low credit score may not have any claims, insurance companies base rates on larger group statistics and the claims rate in the lower credit score category tend to be higher. Check your credit report regularly, clear up discrepancies, pay off debt, and consider timing your purchases when credit scoring is used. Also, when an insurance company checks your credit report, it is important to know that is a soft hit that won’t affect your credit score.
Your driving record provides insurance companies with information pertaining to your negative driving habits. Insurance companies pull motor vehicle reports (MVR) from the Department of Motor Vehicles (DMV) to learn more about information that would have been reported by law enforcement officials. You can obtain your own MVR report by visiting your local DMV website and check for discrepancies. Be sure to discuss these discrepancies with your insurance agent or insurance company if the issue is affecting your insurance rates. Speeding, accidents, and other violations can be found on your MVR. Abiding by the speed limit, paying attention to the road, avoid drinking and driving, and keeping your vehicle in good working condition are some of the things that can certainly help you keep a clean driving record. Most violations will drop off of your record after three years, however, this may not always be the case.
Living in a densely populated area can affect the rates you pay for insurance as well. Insurance companies consider accidents, car thefts, etc., reported from your geographic location (your zip code) to determine the likelihood of you having a claim. If the likelihood is high, you’ll pay more for your auto insurance. There is not much you can do to control this factor except to carefully consider where you would like to live.
The type of vehicle that you drive is considered as well. If your vehicle happens to be targeted by thieves more so than others, insurance companies will take that into consideration when determining your rates. Take a look at this September 18, 2018 article by Jim Gorzelany on Forbes.com. The article discusses the top 10 new and used most stolen cars in the U.S. Is you car on the list?
Take reasonable efforts to protect the amount you pay for your auto insurance coverage. If you’re a greater risk for the insurance company to insure, it will be reflected in the amount you pay for coverage. Also, many insurance companies also offer discounts if you have taken safe driving courses, if you have more than one policy with the same company such as homeowners insurance and life insurance, etc. Be sure to discuss potential discounts with your agent to make sure you’re receiving the best rate possible. Also, compare rates from different companies since not all insurance companies are alike and consider some risks differently.
Please feel free to leave a comment or contact The DL Moore Agency directly at email@example.com or call (404) 662-3301.
*Some states have restrictions on using some of the factors mentioned to determine the amount you pay for car insurance.