Why do some car owners pay more or less premiums than others? Each insurer sets its own formula for calculating premiums. A car owner may pay from $500 to $2,000 for an insurance policy with similar coverage. Though the weight placed by individual insurers to each rate indicator varies significantly, there are common factors considered by the industry when computing for auto insurance rates.
Type of vehicle
Insurance premiums are mainly based on the price of a vehicle. Costs of maintenance and repair are also factors. New and more expensive cars may be more expensive to repair or replace, and thus cost more to insure.
Some insurers also consider the risk of theft. The top ten most frequently stolen car models as of 2007, courtesy of the U.S. National Insurance Car Bureau, are 1995 Honda Civic, 1995 Honda Accord, 1989 Toyota Camry, 1997 Ford F-150 Series Pickup, 1994 Chevrolet C/K 1500 Pickup, 1994 Acura Integra, 2004 Dodge Ram Pickup, 1994 Nissan Sentra, 1988 Toyota Pickup, and 2007 Toyota Corolla. If you want to insure one of the above models, expect higher premiums.
Insurance for sports-utility vehicles or high-performing cars normally costs two or three times more than ordinary models. SUVs cost more to insure since they are frequently stolen and more expensive than mid-sized cars.
Personal Circumstances and Demographic Factors
Auto insurance rates are partly tied to gender, age and driving records of car owners. Men below 25 get the highest premium. Habitual traffic violators are usually charged higher premiums regardless of age.
In some states, insurance rates are partly tied to zip codes. For instance, insurance rates are higher in big cities like Chicago or Los Angeles than in suburbs. Car owners in rural areas also pay lesser premiums than their urban counterparts. Insurance rates may also be higher in regions where theft statistics are high.
Primary purpose of vehicles
Do you drive every day? Is the vehicle to be insured intended for recreational purposes? The less time you spend driving, the lower risk of accident and theft, as well as auto insurance rates.
Type of coverage
The amount of insurance coverage also affects premiums.
How many vehicles are insured with the same insurer? How much is the liability coverage and deductible limits? Does the policy cover car accident, theft, or both? Are there any endorsements or riders on policy? (Buyers may add riders to increase or even decrease the amount of insurance coverage under special conditions.)
Credit rating
Insurance-risk score is correlated with credit rating. Those who pay their credit cards and other bills on time are preferred by insurers above delinquent payers. The higher your credit standing, the lesser premiums you get.
