Factors Determining the Cost of Auto Insurance

Many individuals have no idea what the price tag will be when they begin to shop around for car insurance policies and sometimes they are pleasantly surprised with the amount asked by insurers, but then there are others who find premiums to be shocking. While there is no set price for every driver, what a person will pay to cover themselves and their automobile will vary from person to person because insurers have a formula that they use to calculate the rates they will charge for coverage based on applicants and the vehicles to be insured; since everybody’s situation is unique, the cost of a policy can vary substantially with each insurer.

When looking to see how much does auto insurance cost it is important to understand what an insurer is analyzing to determine premiums. Probably the biggest factor used to calculate a premium is a driver’s record; this is a big indication of a motorist’s driving habits and their likelihood to be involved in a loss and ultimately cost the carrier monetarily. Therefore, if a driver has a history of tickets and accidents they will probably end up paying more in premiums than those that do not because they are viewed as a higher risk to insure due to their previous incidents.

Other Factors that Affect the Cost of Insurance

Aside from a driver’s record there are many additional factors that will reflect what a person will pay for their auto insurance. For instance, age plays a big part because the ages of motorists are broken down into groups and each group has a certain level of risk associated with them. Drivers under the age 25 are considered to be “younger motorists” and will likely pay more for coverage than mature drivers and this is especially true for teenagers; statistics show that motorists between the ages of 16 and 19 are four times more likely to be involved in a traffic accident than older drivers and 16 year olds are three times more at risk than 18 and 19 year olds.

In addition, another factor that plays a part in the cost of a premium includes gender which statistically show males more involved in collisions than females; mainly because they are more aggressive behind the wheel. Where a person resides can also affect rates due to the fact that if a person lives in an area where there are a lot of vehicles occupying the roadways, the chances of an accident increases; place of residence can also raise premiums if there are high crime rates. The automobile to be insured will also determine a rate; the main reason is because if a vehicle is more expensive to repair or replace it will cost more to insure.

Another factor that many states allow insurers to use to calculate prices and in some cases even deny coverage is a person’s credit score. Companies believe that a person’s habits when it comes to paying bills on time have a direct correlation with the chances of them being involved in an accident and have even gone so far as to have done research to support this belief. Not all states allow for this, but if you live in a state that does you should ask how it is allowed to be used. The Missouri Department of Insurance, Financial Institutions and Professional Registration shows which companies use credit and how.

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