How Auto Insurance Coverage Rates Are Decided
Insurance companies are a part of our nations economy
. Premium rates are just as susceptible to market changes as the price of avocadoes at the local fruit stand. Anything such as inflation, national emergencies and even international events can bump car insurance premium rates up or down like the changing of the weather. But the insurance companies do what they can to control pricing on their end as much as they can with strict formulas and guidelines.These formulas for premium rates are calculated based on household income reports, demographic fiscal information, unemployment percentages and more. From analyzing our nations general economic position, auto insurance companies may adjust their premium rates accordingly.
On an individual buyer level, car insurance premium rates are determined through examining the buyers personal information. Every insurance company is a little bit different. However, most of the top insurance companies derive their premiums using similar methods, and what the top companies do, the smaller ones tend to follow suit. Each quote is determined based on four main factors:
1.Where do you live? In 1970, they didn't need to ask that. Today, using the Internet, they do. And local demographics speak volumes on the tendencies of drivers in certain urban areas, suburbs, neighborhoods, and rural areas.
2.What kind of car are you going to insure*? Each car make, model and year has a level of risk associated with it. Given a choice, most drivers can figuratively shoot themselves in the foot when it comes to car buying.
3.What kind of driver are you? The Department of Motor Vehicles will work in tandem with car insurance companies to find out if you have any points against your driving record. If you have any problems in the past, you can expect it to show in your premium.
4.What is your age and gender? I'm sure it's no surprise to you that teenage drivers are four times more likely to get into an accident than older drivers. And males behind the wheel are statistically more dangerous than females.
Gathering this information from the perspective policyholder, the insurance company can find the number of claims filed by people of with similar information. From that, the insurance company can associate an overall risk factor and provide you with a reasonable quote.
*Quotes given online are honored even if the vehicles make and model isnt in their system. Once the VIN number of your vehicle is identified in their system, they will make a rate adjustment if need be without interrupting coverage.
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